Summary:
The Twentieth Central Committee of the Communist Party of China adopted a resolution on further comprehensively deepening reform to advance Chinese modernization at its Third Plenary Session. The resolution outlines plans for “strengthening antitrust and anti-unfair competition” and “stimulating internal motivation and innovative vitality throughout society”. This underscores the importance of anti-monopoly regulation and incentives for the innovation and development of the real economy. With the rapid growth of China's internet industry, many internet firms utilize mergers and acquisitions (M&A) as a strategic approach to cope with market competition and pursue innovation breakthroughs. However, the surge in M&A activities has raised concerns among regulatory agencies and society about capital expansion and potential formation of monopolies. The existing literature on mergers and acquisitions focuses on traditional industries such as manufacturing and medicine. As a representative sector of the new economy, the internet industry exhibits distinct technological characteristics, organizational structures and industrial organizations compared to traditional industries. These differences render traditional theories and extant empirical conclusions inadequate to fully explain emerging phenomena in the internet industry. Additionally, regulatory agencies face serious challenges due to limitations in cognitive understanding and technological support in such new areas. Therefore, deeply exploring the internal logic and development law of the internet industry holds theoretical and practical implications. In light of this, this paper takes the Chinese listed internet firms from 2010 to 2020 as samples, and empirically examines the impact of M&As on innovation investment of internet firms. It also explores the underlying mechanisms from the perspective of the unique hierarchical monopoly and competition structure in the internet industry. The analyses yield several findings. Firstly, there are significant long-term disparities in scale and market power between monopolistic and competitive firms in the internet industry. M&As of monopolistic firms demonstrate notable inhibitory effects on innovation, whereas M&As of competitive firms significantly enhance innovation. Secondly, mechanism analyses show that M&As of competitive firms can enhance innovation willingness, improve governance levels, and reduce financing costs, thereby promoting innovation. In contrast, monopolistic firms tend to reduce innovation incentives, increase agency costs, and tighten financing constraints after M&As. The effects of these two types of internet firms' M&A stem from their different motivations for M&As, which are influenced by the polarized market competition status. Thirdly, the impact of M&As on innovation is more pronounced for competitive firms located in the eastern region and those having vertical M&As. The inhibitory effects of monopolistic firms on innovation are primarily observed in firms located in the eastern region and those engaged in horizontal M&As. Furthermore, M&As exhibit substitutionary and complementary interactions with corporate information disclosure and the external supervisory environment respectively, regarding their impact on innovation conditions. Finally, M&A significantly elevate financial risks for monopolistic firms, while enhancing the value of competitive firms. Compared to existing research, the marginal contribution of this paper are as follows. Firstly, the paper adds new evidence regarding the economic impact of M&As. Most existing studies use mixed samples from multiple industries, lacking sufficient consideration of industry-specific characteristics. This research focuses specifically on the internet industry, and explores how M&As affect innovation investment from the perspective of strategic behaviors of internet firms in response to different market competition status. Secondly, this paper helps to supplement and enrich the research on the factors affecting innovation investments in the internet industry. The existing literature primarily analyzes changes in capital resources and costs after the M&A and their impact on innovation behaviors. This study innovatively incorporates the hierarchical monopoly and competition structure in the internet industry, making full use of its novel characteristics of “stable coexistence” and “dynamic adjustment” between monopoly and competition status. This integration links market structure, M&A activities, and innovation decisions, which facilitates to more accurately grasp the actual motivations driving internet firms' M&As and clarifies the internal mechanisms affecting innovation, viewed through the lens of market competition. Finally, this paper conducts a thorough assessment of the impact of M&As among monopolistic and competitive internet firms, exploring various aspects such as regional differences, competition status, and diverse M&A types. The findings offer valuable insights to facilitate the strategic and systematic progression of China's antitrust policies, ultimately promoting the sustainable growth of the internet industry in China.
李好, 李志生, 梁释. 互联网企业并购抑制了企业创新吗？——基于分层式垄断竞争结构的视角[J]. 金融研究, 2024, 529(7): 115-132.
LI Hao, LI Zhisheng, LIANG Shi. Do M&As Inhibit Innovation in the Internet Industry: Based on the Perspective of the Hierarchical Monopoly and Competition Structure. Journal of Financial Research, 2024, 529(7): 115-132.
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