Research
Risky Business: How Politics is Reshaping M&A Strategies
The Value of Networks: Does Network Position Really Enhance Innovation?
HKBU School of Business Leads 30th Guangdong-Hong Kong-Macao Greater Bay Area Pay and Benefits Survey with Dual-City Symposium and AI-Driven HR Innovation
Research
Chen, X., Shi, H., Zhou, G., & Zhu, X. (2024). Dance with wolves: Firm-level political risk and mergers and acquisitions. Review of Quantitative Finance and Accounting, 63(2), 715–752. https://doi. org/10.1007/s11156-024-01274-4
Donald TRUMP’s return to the White House is a wake-up call for global markets. After years of deferring to the Washington Consensus—where globalisation ruled and markets set the agenda—power is shifting back to governments. For firms weighing major moves like mergers and acquisitions (“M&As”), political risk is now impossible to ignore—just ask Tik-Tok. But how do political considerations shape acquisition decisions? A recent paper sheds light on the way political forces impact finance and offers valuable clues to dealmakers about how to deal with them.
From interest rates and supply chain disruptions to tech shifts and labour disputes, companies are juggling multiple layers of risk. Political uncertainty has long influenced corporate decisions—from investments to capital expenditures—but it’s often treated as a onesize-fits-all challenge. Yet, elections and economy-wide indicators don’t affect every firm equally, and political risk is anything but uniform, especially when it comes to M&A. While broad political instability tends to suppress dealmaking, firms are using different strategies to hedge against it. Overseas M&As help mitigate systemic risks like domestic political turmoil, while firm-specific risks can sometimes be addressed through domestic deals. But can M&As be a tool for firms to systematically manage risks tied to their own unique political exposure?
Analysing thousands of M&A deals closed between 2003 and 2016, the study combines accounting data, stock prices, and returns to assess how political risk shapes
dealmaking. Looking beyond financial constraints and free cash flow, it factors in non-financial elements like lobbying, government contracts, and corporate social responsibility—often seen as a hedge against political risk. The takeaway? The more politically exposed a firm is, the less likely it is to pursue M&A deals after controlling for broader economy-wide political risk. Just a moderate increase in firm-specific political risk results in a 1.21% drop in deal activity—equivalent to a nearly 6% decline relative to typical M&A activity. Even after accounting for broader policy uncertainty, it is clear that firm-specific political risk represents a major hurdle
for dealmakers. Meanwhile, companies with weaker financial positions are more likely to delay acquisitions in the face of political uncertainty, while firms with strong government ties or stellar reputations are less affected.
That said, firms aren’t without tools to manage this risk. Unlike economy-wide political uncertainty, firmspecific risks can be managed. Some firms use lobbying and political connections to navigate uncertainty, while acquisitive firms facing high political risk may target companies with lower political and financial risks or opt for vertical integration to improve their prospects.
The rewards for savvy dealmakers are clear: post-M&A performance of firms improves, but only when they acquire low-risk targets, so corporate financiers and investment bankers should choose their targets wisely.
As dealmakers search for inspiration, they could do worse than refresh their knowledge of The Art of the Deal—especially since we’ll be living in a TRUMP world, at least for the next few years!
Prof. Gaoguang ZHOU Associate Professor Department of Accountancy, Economics and Finance
Hernandez, E., Lee, J. K., & Shaver, J. M. (2024). Toward an improved causal test of network effects: Does alliance network position enhance firm innovation? Strategic Management Journal. Advance online publication. https://doi.org/10.1002/ smj.3679
“Innovate or die.” The phrase, often attributed to management guru Peter DRUCKER, has never been more relevant. While innovation is crucial, in high-tech industries where radical changes happen so often, no single firm can survive with only internal capabilities or knowledge. Thus, collaboration among firms is common and the locus of innovation is often found in inter-organizational relationships. In this regard, alliance network provides access to knowledge and resources that are internally unavailable for firms. A recent study explores deeply into how much a network position contributes to innovation.
Question remains regarding which comes first: does a firm’s position in its alliance network drive innovation, or is it a mere reflection of the firm’s inherent qualities, such as its resources, capabilities, or strategy? In other words, it can be that a firm is innovative because of its superior network position. On the other hand, a firm’s superior network position (e.g., have many partners or occupy a brokerage position) could be a result of its superior ability to innovate.
This research explores this question by examining network changes outside a firm’s control. Researchers
analysed data from the biotechnology industry, tracking corporate actions (i.e., alliance formations and terminations, and acquisitions) between 1995 and 2007 and patenting outcomes through 2012. They examined the effects of network changes— formed through alliances or acquisitions—driven by two sources: a focal firm’s own actions or other companies’. Categorising these network changes as self-driven and other-driven, their findings suggest that a firm’s network position improves innovation when the network position achieved through selfdriven changes, but not through other-driven ones.
In other words, they find that bridging disconnected partners (structural holes) enhances innovation, but only when firms actively create these positions and not when these positions result from others’ actions.
The findings suggest that network position alone is not sufficient to drive innovation. Network positions do matter—but only when firms actively leverage them. Companies that deliberately shape their networks through acquisitions or alliances can utilise its network position to drive innovation. Simply occupying a good position isn’t enough; what matters is how a firm uses it.
Intel’s legendary former CEO, Andrew GROVE once famously said that, “Only the paranoid survive.” Perhaps that maxim should be updated to Only the proactive paranoids do!
Prof. Jason K W LEE Assistant Professor Department of Management, Marketing and Information Systems
The HKBU School of Business (the School) has taken the lead in launching the 30th Guangdong-Hong Kong-Macao Greater Bay Area Pay and Benefits Survey with a dual-city symposium, reinforcing its role as a regional thought leader in artificial intelligence, human resource research and digital transformation.
Organised in collaboration with the University and key partners — the Guangdong Human Resource Management Association, the Guangdong-HK-Macao Bay Area Entrepreneurs Alliance, the Shenzhen Association of Enterprises with Foreign Investment, and the Guangzhou Foreign Investment Enterprises Chamber of Commerce — the School co-hosted the event on 15 and 18 August 2025 in Shenzhen and Guangzhou, respectively. Serving as the kickoff event to the Survey, the dual- city symposium drew nearly 600 participants. It featured the practicum lecture titled
“AI-Driven HR Revolution: Building a New Talent Ecosystem in the Digital Age”. This collaboration broadened cross-sector networks in the Greater Bay Area and strengthened the School’s capacity to deliver applied, evidence -based research for evolving business needs.
In line with the national “Digital China” strategy — the School positioned artificial intelligence at the heart of the inaugural dual-city symposium. The event featured a keynote themed “AI: The Future of HR Management” and a panel discussion on corporate digital transformation in the Greater Bay Area, exemplifying the integration of technology and business from the academia.
Prof. Xu HUANG, Associate Dean (Research & Impact), HKBU School of Business, remarked, “Artificial intelligence is fundamentally transforming corporate human resource practices. At HKBU, we are dedicated to establishing a robust platform that integrates industry, academia, and research. Through this series of events, we aim to leverage academic insights to empower business practices and collaboratively shape the future of human resource management in the region.”
The symposiums also showcased the School’s upgraded in-house developed AI-powered tool, “My AI Salary Consultant”. This innovative system identifies pay gaps and talent retention challenges by cross-validating data with economic indicators such as regional GDP and industry growth, delivering actionable insights for small and medium-sized enterprises. In 2024, more than 200 SMEs benefited from complimentary customised consulting services powered by the tool to support their optimisation of compensation strategies.
The complete survey report, set for release in October 2025, will provide an in-depth analysis on salary adjustments, compensation trends in emerging industries, and patterns of talent mobility. The event is a testament of the School’s involvement in trending research in technology and talent development, and active academic collaboration in the Greater Bay Area.
Dr. Yang DUAN
Senior Lecturer Department of Accountancy, Economics and Finance
Impact of Technical Support and Information Provision on Patient No-show Behavior
Production and Operations Management
https://doi.org/10.1177/10591478241276135
Prof. Xu HUANG
Chair Professor Department of Management, Marketing and Information Systems
The Power of Calling: How Founder CEOs Drive Ambidexterity and Innovation in Firms
Journal of Management Studies
https://doi.org/10.1111/joms.13144
Date
Speaker
Topic
Centre for Business Analytics and the Digital Economy
5 December 2025
09:00-10:30
Zoom
Co-hosted with NTU, NYU-Shanghai, and Sinica
26 November 2025
16:00-17:30
Zoom
Co-hosted with CEIBS, NTU, NUS, and Sinica
7 November 2025
09:00-10:30
Zoom
Co-hosted with NTU, NYU-Shanghai, and Sinica
Prof. Briana CHANG
Hong Kong University of Science and Technology
Impact Trickles Down: Exit, Engagement and Firm-Stakeholder Relationships
Prof. Carl Benedikt FREY University of Oxford
How Progress Ends: Technology, Innovation and the Fate of Nations
Prof. Gregory PHELAN William College
The Slope of the Phillips Curve and the Mandate of the Central Bank
The Research Espresso, a bimonthly e-publication covering everything you need to know about the latest research developments at the HKBU School of Business, focuses on four key areas: Research Insights (the main research topic of the month), Research Excellence (recognition of faculty members’ research achievements), News (research-related updates), and Seminars (sharing research skills and knowledge).
The idea is to provide business practitioners with the most recent research findings from the School‘s faculty. We want to build links between research and practice and to ensure that the School's research has business and societal impact.
Enjoy reading, and your feedback and input are always welcome!
