Abstract

Topics such as entry of Multinational Corporations （MNCs），merging and acquiring State Owned Enterprises （SOEs） by Foreign Direct Investment （FDI），which are challenges to our national economy security，have not only interested guild and academe，but also attracted attentions of central government’s senior leaders. On one hand，our nation must persist in introducing FDI，including M & A which can give us great opportunities to reorganize SOEs and upgrade their competition ability by making full use of it. On the other hand，we must not ignore the hidden troubles that cross-border M & A may bring to our national economy security.

Recently，MNCs have launched a new wave of M & A. With an even larger covering，MNCs have acquired enterprises from the fields of common industry and commerce to the fields of some particular industries such as finance，insurance，energy sources，and some vital manufacturing industries，which have a common feature of technology denseness. They purchase the high quality assets，proprietary brand，core technology and manufacturing ability of key SOEs at an easy rate. These actions make a set of independent intellectual property rights disappear，which have been accumulated for many years by the SOEs. Yet，MNCs have been hardly controlling the technology transfer and closing off core technology. These new trends have weakened our nation’s R & D platform，blocked our nation’s technology from improving，and further threatened our national economy security.

Presently，the essence of international competition abilityexists in the technology competition. There are many channels to improve technology，among which the technology spillover from MNCs is important. And many developing countries become interested in introducing FDI to obtaining technology spillover.

At the condition of newopening periods，we must insist in not only introducing FDI actively，including cross-border Merge and Acquisition，but also the policy of independence and self-helping. Hence，it makes sense to systematically and thoroughly research the influence of cross-border M & A to technology spillover and the method to improve our nation’s industry profits and social welfare in order to protect our national economy security.

First of all，this paper provides a literature review on the cross-border M & A and national economy security. It lays a foundation of theory and direction for further analyzing the factors which can influence the cross-border M & A and choosing the index of national economy security.

Secondly，the paper looks into the main channels of technology spillover which MNCs have taken to developing countries. Along the clue of “sectional data → panel data → spillover channel”，the empirical researches at different periods，with different data samples and different econometric plans are compared. It comes to the result that the backward relationship between up-river domestic enterprises and down-river MNCs is a reliable spillover channel.

Thirdly，under the hypotheses of un-tradable intermediate inputs and increasing income brought by acquisition，the paper uses three-stage backward induction and Shapley Value to qualitatively analyze the effects of improving intermediate inputs producing technology on preventing MNCs from vicious merging our up-river domestic leading enterprise by alliance of up-river and down-river enterprises. A model of bilaterally monopolistic industries is constructed. It lays a foundation for further analysis on how to get the maximal technology spillovers from down-river MNCs through backward linkages，on the condition of changing of market structure by acquisition.

Fourthly，by analyzing the bilaterally monopolistic industries，the paper reveals the importance of improving intermediate inputs producing techonolgy when protecting leading enterprise from merged. The model of bilaterally monopolistic industries then is extended to the model of bilaterally oligopolistic industries，and the balancedness of game with coalitions to the negotiation of intermediate inputs price between up- and down-river industries，which can make profits distribution among enterprises have character of Shapley Value，is introduced to qualitatively analyze the mechanism of MNCs’ vertical acquisition and the effects from down-river MNCs on host country’s social welfare and industrial profits which are regarded as the indices of national economy security，under the condition of cross-border acquisition and choice of two intermediate inputs producing technologies. The result is that when the domestic enterprises and MNCs have equal market shares，host country’s industrial profits and social welfare benefit from backward technology spillovers can reach the maximum level，where the effects of backward technology spillovers are the biggest，and the national economy security can be farthest protected.

Fifthly，withthe results of the qualitative analysis，the paper uses a panel data，which includes China input-output tables in 2002 years and index of 38 industries from 1999-2006，to construct a index between up-river domestic enterprises and down-river MNCs，which can represent the backward technology spillovers. The empirical test proves that when the domestic enterprises and MNCs have equal market shares，the backward effects are the biggest and it is distinct in statistics. Further，the sub-sample’ test shows that the bigger the technology gap between up-river domestic enterprises and down-river MNCs，the higher centralization of down-river MNCs，the stronger the competition between domestic and foreign enterprises in up-river industry，the larger the scale of up-river domestic enterprises，the more likely the effects of backward technology spillover happen.

Finally，Based on the conclusions from qualitative and quantitative analysis above，some policies，such as domestic down-river enterprise alliance with up-river enterprise，optimizing state owned economy，perfecting oriented mechanism of macro-economy policy，are suggested to make full use of the backward technology spillovers from MNCs to upgrade our country’s technology level and ensure our national economy security under new opening periods and reciprocal institution.

This paper’s academic merit is putting the cross-border M & A，technology spillover and national economy security into a uniform analysis frame，by constructing the model of bilaterally oligopolistic industries and introducing the balancedness to negotiation of intermediate inputs price，to get the conclusions on mechanism of vertical acquisition，the importance of intermediate inputs producing technology in anti-vicious acquisition and how to realize the maximal backward technology spillovers，which supplies the theoretic support to how to build and perfect harmonious and reciprocal opening institution in new periods. The paper’s practical merits are empirically testing the backward technology spillovers taking place in our country and the factors，which can provide some advices on adjusting of introducing FDI，deepening reform of SOEs，re-operating of exchange between market and foreign technology. On one hand，it can better guide our domestic enterprises’ combination of production and investment. On the other hand，it can help to advance the working-out and implementing of our national macro-economy policy，improving its effectiveness.