China-EU Economic Relations: Where to Go? Implications from a Longitudinal Case Study of International Acquisition

This chapter examines the impact of the changing China-EU relations from a comparatively micro-level analysis - a longitudinal study of an international acquisition of a European company by a Chinese company. We investigate the collaboration and value creation dynamics of these two parties, and the evolution and interaction of their country- and firm-specific (dis)advantages following their merger. The findings suggest that: 1) the firm-specific (dis)advantages of these two companies perfectly complement each other, while the influence of country-specific (dis)advantages on their cooperation is channeled through firm-specific (dis)advantages. 2) Previously existing firm-specific (dis)advantages of two companies are significantly improved during the collaboration through several key elements: maintained autonomy of specialities, gradual and moderate resource reconfiguration, trust-building over time, and mutual understanding, mutual learning, and compromising. 3) Synergic benefits are mainly created and reaped after several years’ efforts of the Chinese acquirer on bias reduction and trust-building. Since firms can be the beneficiaries or victims of government regulations and interstate linkages, policymakers should consider the lessons learned from firm-level international cooperation when creating foreign economic policies and establishing interstate relations. This case study firmly indicates that there is a reciprocal relationship between sound China-EU relations at the macro international level and fruitful business interactions between Chinese and EU companies at the micro-level. However, these relations can only be achieved through bias reduction, trust-building, and mutual accommodation.