Cross-border mergers and acquisitions: Innovative capacity and national economic security

Based on capital accumulation and the capacity to innovate, we use an Edgeworth box and find that in a host country that lacks capital, if multinational corporations (MNCs) remit more profits back to their parent companies and invest less in the host country, the latter's R&D ability to innovate may decline. As a result, the host country's economic security could be threatened. An empirical test using Chinese data suggests that introducing foreign capital actively and promoting the innovation of small and medium-sized enterprises could help to maintain national economic security in cross-border M&A.