Impact of M&A on Technological Innovation of Acquiring Firms in China : A Case Study of Midea’s Acquisition of Little Swan

This research investigates the effects of Midea’s acquisition of Little Swan on Midea’s technological innovation capabilities. Employing social network analysis, this study explores the citations between patents filed by Midea and the references cited within these patents to determine the extent to which Little Swan’s patented technologies were integrated into Midea’s innovation processes. The findings of this study are as follows: Initially, there was a marked decline in the number of patents filed by Midea subsequent to its complete acquisition of Little Swan in 2019. Contrarily, Little Swan maintained its prior level of innovation. Further, network analysis of the patent citations revealed that Little Swan’s technologies contributed minimally to Midea’s technological advancement efforts. It was observed that Midea predominantly cited its own pre-existing technologies, in addition to patents from foreign domestic appliance manufacturers and various domestic electrical and machinery firms. Additionally, an examination of the self citation ratio, which measures the frequency of Midea’s self citation indicated that alongside the notable reduction in patent filings post-acquisition, there was a substantial decrease in this ratio, nearing zero. In conclusion, the empirical evidence suggests that post-M&A, there was minimal transfer of technology from Little Swan to Midea, and a significant diminution in Midea’s capability to develop new technologies. This decline in the innovative performance of the acquiring firm post-M&A could potentially exert a deleterious effect on the broader industry’s development.