From transaction to co-creation in Geely’s acquisition of Volvo Cars: impact on innovation output and market performance

The recent decade has witnessed numerous cross-border mergers and acquisitions (M&As) undertaken by emerging market multinational enterprises (EMNEs). Only few EMNEs manage to co-create with the acquired partner by mobilising and enhancing their knowledge resources. This paper aims to advance our knowledge about how post-M&A co-creation is achieved and what its impacts are for the innovation output and market performance of firms. It employs an in-depth longitudinal case study of the cross-border acquisition of Volvo Cars by Geely. In our investigation, we follow the process from the early stages of transaction and knowledge transfer to the more recent integration and co-creation phase. We link innovation and cross-border M&A literature to address the co-creation phenomenon of post-M&A. Findings show that the high level of freedom given to the acquired firm allowed it to preserve innovation capacity and, later, integrate it with the acquirer. The supplementary patent portfolio analysis demonstrated that the firms’ innovation outputs became more similar, indicating a successful knowledge integration by the EMNE. In the fast-developing industries, it is not enough to acquire knowledge, which soon becomes obsolete; what instead becomes essential is to design innovation processes that support knowledge integration and, in turn, the market performance of firms.