Impacts of Acquisitions of Japanese Companies by ChineseCompanies on Innovation Activities of Japanese Society- Empirical Analysis by Using Patent Data (*)
Research Fellow: YUAN, Yuan
In this study, we focus on the impact of acquisitions, human resources movement, spilloverand patent transfer by using engineer level data extracted from patent data. We analyze the impactof acquisitions of Japanese companies by Chinese companies on Japanese engineers. This study
obtained the following results. First, we find that invention age has an inverse U-shaped
relationship with the trend to transfer to Chinese companies. Second, the higher the quality of theapplication, or the fewer the number of applications, the more likely they are to transfer to theacquisition company from China. Third, engineers who had patents that are transferred to Chinesecompanies, or engineers who had patents that are forward cited by Chinese engineers prior to theacquisition, are more likely to transfer to the acquisition company from China. Fourth, although thenumber of patent applications for Japanese engineers transferring to Chinese companies becomes
smaller and the quality becomes lower, the number of Japanese engineers’ patents cited by Chinese
engineers increase. This result shows that the existing innovation achievements of Japaneseengineers are better utilized.

I. Introduction
In recent years, Japanese companies have been forced to select and concentrate their business.
Even if these companies sell low-profitable businesses or low-competitiveness businesses
effectively by utilizing existing technologies, there is a possibility that the research and development
capability in that field will decline over the long term. In particular, in the case of an acquiring
company from emerging markets, it is worried that technology outflow will impact on innovative
activities of Japanese engineers. Therefore, it is an important research issue to analyze the impacts ofacquisitions, especially the acquisitions of Japanese companies by overseas companies, in terms ofengineers’ mobility, technology spillover, the utilization of innovation achievements of Japaneseengineers, etc.
It is difficult for M&As among Japanese companies to succeed. It is even more difficult for M&As
between companies in various countries to succeed. Marks and Mirvis (2001) point out that failures
account for 60% of the total M&A. Bertrand and Zitouna (2008) and Moeller and Schlingemann(2005) argue that acquiring technology in particular brings a lot of losses to the acquiring side. In
addition, Hofstede (1991) pointed out that because of differences in cultures, treatment of(*) This is a summary of the report published under the 2017 Industrial Property Research Promotion Project entrusted by the Japan
Patent Office.

istudies, such as Seth et al. (2002) and Bremer et al. (2017), have pointed out that different countries
or different cultures have a huge impact on M&A activities.
Recently, M&A of Japanese companies by Chinese companies aiming to acquire strategic assets
such as know-how and technology has become active. For example, the acquisition of Sharp by
Foxconn, the acquisition of Toshiba Lifestyle by the Midea Group, and so on. Regarding the outflow
of Japanese engineers, we wonder that what kind of engineers Chinese companies have acquired
through acquisitions. We also wonder if Japanese engineers are effectively used after the acquisition,for example, whether it is the use of Japanese engineers for advanced technology research or the useof Japanese engineers to impart R&D experience; in other words, from the perspective of the use ofJapanese engineers, whether the acquisition of a Japanese company has been successful.
The prior literature on the impact of acquisitions on employees basically use firm level data, withvery few analyses using employee level data. In addition, few research focuses on the impact of
M&A on the achievements of Japanese engineers, especially the impact of M&A by Chinesecompanies on Japanese engineers. One major reason is that it is necessary to track changes in thecompany of each engineer, but it is difficult to obtain such data information. However, if our research
object is limited to engineers with patent applications, we can use the information of the researchersin patent data for analysis. In the patent data, not only the name and address of the applicant who
filed the patent, but also the engineers’ address (principally the address of the establishment) is stated.
Therefore, if the names of engineers are organized in time series order, we can grasp the state oftransfer of engineers affected by acquisitions. Such analyses have been started internationally inrecent years.
In previous studies, it is shown that M&A of Chinese companies aimed at acquiring strategic
assets, and it is suggested that Chinese companies effectively utilize it, and the innovation activitiesof acquired companies in industrialized countries are being promoted. However, in the case where
the acquired company is a Japanese company, there is little research accumulation other than study
by Yuan (2017) on Sanyo Electric Co., Ltd. and Haier. In this research, we focus on the impact ofacquisitions, human resources movement, spillover and rights transfer using engineer level data
extracted from patent data. Specifically, the following two questions are studied in this paper: (1)what characteristics the engineers who were obtained by a Chinese company have? (2) Has there
been any change in the performance of engineers after the acquisition?

II. The basic situation of Chinese companies' M&A of Japanese companies
Table 4 shows the acquisitions of Japanese companies by countries from 1996 to 2016. In terms ofthe number of acquisitions of Japanese companies, the U.S. companies take the largest share,iifollowed by England and China. Together with Hong Kong, China is ranked second, which cannot
be ignored for Japanese companies.

III. Previous studies and hypothesis
1. Previous studies on M&A and technology acquisition
Most studies on M&A activities of Japanese companies focus on acquisitions of Japanesecompanies or acquisitions of overseas companies by Japanese companies, and these studies analyze
the impact of changes of corporate governance on corporate value (Miyajima, 2007). Except
Yamauchi and Nagaoka (2010) and Shinbo and Nagaoka (2009), there is little accumulation ofresearch on the impact of acquisitions on innovation activities of Japanese companies. Yamauchi andNagaoka (2010) conducted an empirical analysis of M&A between Japanese companies during theperiod of 1984-2002. They found that the number of patent applications declined after M&A and thedecreasing effect become significant after 2 years of M&A. Their findings indicate that the majorityof the reduction effect is due to a decline in market share and a decrease in business assets. Shinbo
and Nagaoka (2009) have studied Mitsubishi Chemical's M&A and found that the number of patentapplications tends to decrease after the M&A.
Acquisition of Japanese companies by overseas companies have been rapidly increasing in recent
years, especially acquisitions by companies from developing countries with the aim of acquiring
technology. However, studies accumulated in related fields are very small. Studies on acquisition
characteristics and technology acquisition of overseas companies compared to domestic companies
can be categorized mainly into four as follows, though these studies did not focus on Japanesecompanies. First, it is a study focusing on cultural differences. Hofstede (1991) pointed out that
because of differences in cultures, treatment of uncertainties resulting from different nationalities ofcompanies also differs, and Seth et al. (2002) and Bremer et al. (2017) have pointed out thatdifferent countries or different cultures have a huge impact on M&A activities.
Second, many studies argue that it is difficult to acquire technology through acquisitions overseas.
For example, Bertrand and Zitouna (2008) and Moeller and Schlingemann (2005) argue that
acquisitions aimed at acquiring technology will bring a lot of losses to the acquiring side.
Third, studies indicate the disparity of technology and the relevance of technology have a great
influence on acquisition of technology through acquisitions. Zhao (2009) shows that acquirers withinferior innovation performance can improve the performance of innovation by acquiring innovative
companies. Cassiman et al. (2005) point out that the technical relevance and the relevance in themarket are important factors for determining the results of technology acquisition.

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Fourth, many studies have focused on the role of engineers who have a very important role inacquiring technology. Alnuaimi et al. (2012) and Hoisl (2007) argue that engineers are responsiblefor innovative activities of companies, so how acquirers use these engineers from acquiredcompanies is very important.
As mentioned earlier, mergers and acquisitions of Chinese companies in Japan have increased
rapidly since 2000. The main purpose of such M&A is to expand overseas markets and acquire
strategic assets such as technology. Based on these circumstances, it is very important to verify
Japanese companies' technology transfer to Chinese companies resulting from acquisitions and theimpact of acquisitions on Japanese companies' innovative capabilities. Recently, regarding foreigncompanies, especially Chinese companies, acquiring Japanese companies, Japanese society is very
worried about the impact of innovation on engineers and the technical losses caused by theseengineers. Therefore, it is necessary to conduct a rigorous empirical analysis; however, there arevery few related studies.
Yuan (2017) analyzed the impact of Haier's acquisition of Sanyo Electric, using data from Sanyo
engineers. She found that Haier tends to gain R&D experience by acquiring Sanyo veteran inventors.
However, Sanyo Electric may not be able to represent all Chinese companies to acquire Japanesecompanies. Therefore, we need to analyze all Japanese companies acquired by Chinese companies
under a unified framework to grasp the impact of acquisitions on innovation.
In addition, recent studies have reported the results of research by controlling selected bias (forexample, Alhenawi and Krishnaswami, 2015), but many existing studies did not sufficiently identify
the causal relation of the acquisition. In this paper, we analyze research issues after sufficiently
identifying the causal relation of the acquisition.
2. Hypothesis
First, this paper analyzes from the perspective of what the aim of Chinese companies is in
obtaining Japanese engineers through acquisitions. Previous literature on Chinese companies’
overseas acquisitions pointed out that the purpose of Chinese enterprises' acquisition is to obtain
resources (Ramasamy et al. (2012)), markets (Boateng et al. (2008), Deng (2009)), know-how andtechnology etc. (Boateng et al. (2008)).
Although these prior studies point out that the acquisition of strategic assets is the aim of Chinesecompanies, they have not shown in detail what kinds of purposes the strategic assets are acquired for.
This research focuses on the detailed purposes of acquiring Japanese engineers by Chinesecompanies and sets hypotheses IA and IB.

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Hypothesis IA: Chinese companies obtain Japanese engineers aiming for catch-up rather thanacquisition of state-of-the-art technology
Hypothesis IB: Chinese companies obtain Japanese engineers to acquire state-of-the-art technology
Next, we analyze whether Japanese engineers are effectively utilized, focusing on changes in the
research performance of Japanese engineers before and after acquisition. Cohen and Levinthal(1990) point out that the effective utilization of strategic assets and technology transfer depends on
the innovation capacity of the acquiring company. For this reason, it was generally thought that
Chinese companies with inferior innovation abilities had difficulty in making effective use ofJapanese engineers.
Previous studies on the outcomes of Chinese companies' external M&A have shown thatknowledge transfer is going smoothly (Tan and Mathews (2014)), technological catch-up has beenrealized (Wu, Su (2014)), and Chinese companies have the ability to integrate with the acquiredcompany (Deng (2010)). In other words, there are many studies that make an argument that
Chinese companies use strategic assets effectively.
Regarding the impact on the acquired developed countries’ companies, it is considered thatdeveloped countries’ companies can access the growth market of China more easily, reinvesting the
profits obtained from the Chinese market into innovative activities, so the innovative performance ofacquired companies of developed countries tends to increase. In other words, some studies point out
that there is a positive impact on the innovative activities of engineers from acquired companies indeveloped countries. Therefore, this research focuses on changes in the innovative performance ofJapanese engineers after the acquisition, and sets hypothesis Ⅱ.
Hypothesis Ⅱ: After acquisition, Chinese companies effectively utilize engineers from former
Japanese companies

IV. Data and observations
In this study, we use the following databases: IIP Patent Database (Period: 1990-2016), StateIntellectual Property Office (SIPO) Patent Transfer Database (Period: 1990-2016), the SIPO
Citation Database (Period: 1990-2016), and the RECOF M&A Database (Period: 1996-2017).
First of all, we will use the RECOF M&A database to extract Japanese companies acquired by
Chinese companies and pick up the application status of these Japanese companies from the IIP
patent database. Specifically, the analysis target is extracted based on the following three
conditions.

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Condition 1: Japanese company bought by a Chinese company
Condition 2: Acquired companies are located in Japan (Acquisition of overseas subsidiaries ofJapanese companies is not subject to this paper.)Condition 3: Acquired companies have patent applications
In the end, there were 35 companies that will be studied. We first extract the names of theengineers of the former 35 Japanese companies. Then, we make a database by using the extracted
names of the engineers of the former Japanese company, and by picking up the application statusfrom the IIP patent database and confirming the affiliation change from the address of theapplicants and inventors. Furthermore, we connect the patent transfer data of SIPO and patent cited
data of SIPO with this database.

V. Empirical Analysis
1. What kind of characteristic Japanese engineer will transfer to a Chinese company?
First, we will analyze what kind of characteristics Japanese engineers who transferred to a Chinesecompany have by using a Logit model. The explained variable is a dummy variable of whether
he/she has transferred to the Chinese company of the acquiring side or not. Then, we use invention
age and the square of invention age, which are indicators showing the career period as an engineer.
There is no data on the actual age of the engineers, so we use the data of invention age instead of
actual age in this paper. The age of invention is the filing year of his/her first invention subtracted
from the filing year of an invention.
Then, we use quantitative indicators and qualitative indicators as indicators to measure theperformance of engineers. As the quantitative index, the number of patent applications in theprevious year, the number of patent applications in the previous year (partial), and the number ofhead applications in the previous year are used. As qualitative indicators, the number of claims per
application in the previous year, the number of back citations per application in the previous year, thenumber of forward citations per application in the previous year, and the number of forward citations
as reason for refusal per application in the previous year are used.
In addition, in order to analyze whether the engineers are in the technical fields needed by Chinesecompanies, we use variables that indicate technology spillover effects. One is a patent transfer
virtual product, and the other is a forward citation by a Chinese engineer.
It may be considered that it is simply due to differences in companies that the quantity and the qualityof engineers’ performance are different. For example, an engineer who was in a company with a low
propensity to apply would have a relatively small number of applications before transfer, even if thevi

engineers’ productivity is high after acquisition. In order to take into consideration individual effects likesuch companies, a company dummy was added to the analysis as a control variable. Besides that,technical field dummies and annual dummies were added to the analysis as control variables.
Figure 14 shows details of the main variables. The inventor does not necessarily have a patentapplication every year, and it is possible that the inventor did not apply one year before the company
was acquired. Therefore, in order to confirm the robustness of the results, this analysis not only uses
1-lagged but also 3-lagged for the above main variable.
2. How did the transfer affect the performance of the engineers?
Next, we analyze the impact of transfer to Chinese companies on Japanese engineers. We compare
the performances of engineers before and after transfer, and consider the difference as the effect oftransfer. For example, prior to transfer, an engineer applied for three patents every year. After transfer,
he/she filed five patents every year. Can we say that the difference is the effects of the acquisition? Or,even without transfer, has the number of applications increased due to the country's promotion
policies for patent application? In such a case, the number of applications of this engineer is often
beginning to increase from before the transfer. In this case, we will use the difference in difference(DID) to eliminate the influence of such policy and to measure the effect of transfer.
There are two groups. One is the treatment group (in this article, an engineer who transferred to a
Chinese company through acquisition), and the other is the control group (in this paper, a engineer
who did not transfer to a Chinese company by acquisition). We focus on the difference in thechange of the two groups. In this study, we focus on the difference of 10 years before and after
acquisition. There are two differences. The first difference is a comparison before and after theacquisition. The second difference is the comparison between the treatment group and the control
group. In other words, the difference before and after the acquisition of the transferred engineers
subtracted from the difference before and after the acquisition of the engineers who did not transfer
is the effect of transferring on the engineer.
There are two analysis methods of DID used in this paper. The first method uses regression
analysis. For the engineers i = 1, ..., N, period t, the following fixed effects model is assumed.
ln 𝑝𝑒𝑟𝑓𝑜𝑟𝑚𝑎𝑛𝑐𝑒𝛽𝛽 𝑡𝑟𝑎𝑛𝑠𝑓𝑒𝑟𝑑𝑢𝑚𝑚𝑦⋅ 𝑎𝑐𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛𝑑𝑢𝑚𝑚𝑦

𝛽 𝑎𝑐𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛𝑑𝑢𝑚𝑚𝑦

𝛽 𝑡𝑟𝑎𝑛𝑠𝑓𝑒𝑟𝑑𝑢𝑚𝑚𝑦

𝜀
（１）

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Here, as variables related to performance, quantitative indicators (the number of applications, thenumber of head applications), qualitative indicators (the number of claims, the number of backward
citations, the number of forward citations, the number of forward citations as reason for refusal), andthe spillover indicators (forward citation by Chinese engineers) are used. transferdummy is 1 if theengineer is transferred to a Chinese company, otherwise it is 0. acquisitiondummy is 1 if the period isafter the acquisition, otherwise it is 0. 𝜀 is the error term of the mean zero. In this model, the sample
average performance of untransferred engineers is 𝛽 , the sample average performance of𝛽 , the performance of non-transferred engineerstransferred engineers before the acquisition is𝛽
after acquisition is 𝛽𝛽𝛽𝛽𝛽 , and the performance of the transferred engineers after the acquisition is

𝛽 . As a result, the average treatment effect on the performance of the engineerstransferred to the Chinese company in the DID estimate is
𝐷𝐼𝐷

𝐸 𝑝𝑒𝑟𝑓𝑜𝑟𝑚𝑎𝑛𝑐𝑒|𝑡𝑟𝑎𝑛𝑠𝑓𝑒𝑟𝑑𝑢𝑚𝑚𝑦

1, 𝑎𝑐𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛𝑑𝑢𝑚𝑚𝑦

1

𝐸 𝑝𝑒𝑟𝑓𝑜𝑟𝑚𝑎𝑛𝑐𝑒|𝑡𝑟𝑎𝑛𝑠𝑓𝑒𝑟𝑑𝑢𝑚𝑚𝑦

1, 𝑎𝑐𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛𝑑𝑢𝑚𝑚𝑦0

𝐸 𝑝𝑒𝑟𝑓𝑜𝑟𝑚𝑎𝑛𝑐𝑒|𝑡𝑟𝑎𝑛𝑠𝑓𝑒𝑟𝑑𝑢𝑚𝑚𝑦

0, 𝑎𝑐𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛𝑑𝑢𝑚𝑚𝑦

1

𝐸 𝑝𝑒𝑟𝑓𝑜𝑟𝑚𝑎𝑛𝑐𝑒|𝑡𝑟𝑎𝑛𝑠𝑓𝑒𝑟𝑑𝑢𝑚𝑚𝑦

0, 𝑎𝑐𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛𝑑𝑢𝑚𝑚𝑦

0

𝛽
（２）

According to the data in this study, there is a possibility that the treatment group and the control
group will respond differently to corporate factor, age of invention, patent right transfer and so on.
So, we should pay attention to the result of DID estimation. Therefore, we conduct regression
analysis including covariates as a second method.
ln 𝑝𝑒𝑟𝑓𝑜𝑟𝑚𝑎𝑛𝑐𝑒𝛽𝛽 𝑡𝑟𝑎𝑛𝑠𝑓𝑒𝑟𝑑𝑢𝑚𝑚𝑦⋅ 𝑎𝑐𝑞𝑢𝑖𝑠𝑡𝑖𝑜𝑛𝑑𝑢𝑚𝑚𝑦𝛾𝑋𝛽 𝑎𝑐𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛𝑑𝑢𝑚𝑚𝑦𝛾 𝑎𝛽 𝑡𝑟𝑎𝑛𝑠𝑓𝑒𝑟𝑑𝑢𝑚𝑚𝑦𝜀（３）Where, 𝑎 is an individual effect, and 𝑋 is a vector of covariates. 𝑎 is an individual corporate
dummy, technical field dummy, and year dummy. 𝑋 is the age of invention, the dummy of patenttransfer before acquisition.

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VI. Empirical results
1. Statistics results
Chart 15 shows descriptive statistics on the age and performance of engineers transferred toChinese companies, and Chart 16 shows descriptive statistics for engineers who did not transfer.
Chart 15 and Chart 16 show that the invention ages of engineers transferred to Chinesecompanies are higher than those who did not transfer. Regarding the quantitative indicators such as
the number of applications, the number of head applications and the number of applications(partial), it is shown that they are fewer for transferred engineers than the engineers who did nottransfer. Regarding the number of forward citations, the number of forward citations (reasons forrefusal), the number of backward citations, and the number of claims, it shows that they are more
for the transferred engineer than the engineer who did not transfer. For the variables that indicate
the spillover of technology, such as the dummy of patent transfer and dummy of forward citation by
the Chinese engineers, higher values are shown for the transferred engineers. This result means thatan engineer having a patent forward cited by the Chinese side and an engineer having patents thatare transferred to the Chinese company have a trend to transfer to the Chinese company.
2. What kind of engineers will transfer to the Chinese company?
This section explains the results of the logit analysis on factors of transfer to Chinese companies.
Charts 17 to 19 show estimation results using 1-lagged explanatory variables.
Regarding the age of invention, there is a significant positive effect in transferring to a Chinesecompany, and the squared invention age has a significant negative effect on transfer to a Chinesecompany. In other words, there is an inverse U-shaped relationship between transfer and invention
age. When other values are kept constant, the peak invention age is 13, showing that the higher theage of invention is, the higher the possibility of transferring to a Chinese company until 13. On theother hand, when the age of invention is over 13, it indicates that the possibility of transfer to theChinese company has become lower. There is a significant negative effect on the number ofapplications, the number of applications (partial), and the number of head applications, which arevariables indicating the quantitative index of performance. However, the indexes of the quality of
performance, such as the number of forward citations, the number of forward citations (reasons forrefusal), the number of claims, and the number of backward citations, are significantly positive. The
dummy of technology transfer before acquisition and the dummy forward citation by Chinese
researchers before the acquisition are significantly positive.

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To summarize the above analysis results, it is shown that engineers with smaller numbers ofapplications but with higher quality of applications tend to transfer to Chinese companies. Also, it isfound that engineers who have the technology that is needed by Chinese companies before theacquisition tend to transfer to Chinese companies.
In order to confirm the robustness of the estimation results, we also conduct the analysis by using
3-lagged main explanatory variables (Charts 20 to 22). The results are similar to those of Charts 17
to 19, with the result that the quantitative index is significantly negative, the qualitative index issignificantly positive, and the age of invention has an inverted U-shaped relationship with transfer.
Also, the dummy of technology transfer before acquisition and the dummy forward citation by
Chinese engineers before the acquisition are significantly positive.
So why are engineers who have a smaller number of applications but higher quality applicationstransferred to Chinese companies? First, since the invention age has an inverted U-shaped
relationship with the transfer, the engineer who transferred to a Chinese company is considered to bea middle-tier group in terms of invention age. Next, the Chinese company may really want to acquire
engineers who have large application quantity and high quality of application. However, in terms ofthe cost, it is considered that Chinese companies prefer to obtain engineers with higher quality of
applications rather than engineers with a larger quantity of applications.
In addition, it is considered that middle-class engineers with higher quality but lower quantity of
applications may manage research management projects (for example, they are in a management
position for difficult and important invention projects), so they are the target of Chinese companies,
because acquiring know-how and experience in R&D may be the aim of Chinese companies.
Furthermore, since the dummy of technology transfer before acquisition and the dummy forward
citation by Chinese engineers before the acquisition are significantly positive, it indicates that
Chinese companies acquire engineers in the needed technical fields. Based on the above, it isobvious that Chinese companies obtain engineers who are in the technical field that Chinesecompanies need and middle-ranking engineers who have sufficient experience (including
management experience) and knowledge of R&D.
3. Impact of transfer to Chinese companies on technological development performance ofengineers
Next, in order to clarify the impact of transfer to Chinese companies on the engineers’
performance, we use DID analysis. In this section, we show the results of DID analysis and provide
explanations. Chart 23 shows estimation results without covariates. When comparing in 10 years
before and after the acquisition, it was found that the number of applications and the number ofxhead applications of Japanese engineers who transferred to the Chinese companies after acquisition
have decreased significantly. At the same time, in terms of the number of backward citations, thenumber of forward citations, the number of forward citations (reasons for refusal), and the numberof claims, the transferred Japanese engineers also showed a significant decline. However, thenumber of forward citations by Chinese engineers is significantly positive, suggesting that Chinesecompanies are utilizing the accumulation of know-how and knowledge of Japanese engineers after
acquisition.
Chart 24 shows the results of DID analysis with covariates (invention age, technology transfer
dummy, company dummy, technical field dummy, and year dummy). The results are consistent withthose without covariates. Therefore, even after the transfer to a Chinese company, although thequantity and quality of patent applications of Japanese engineers have declined, the accumulation of
know-how and knowledge of Japanese engineers is utilized by engineers in Chinese companies.
We summarize the above results. First of all, regarding what kind of engineers have transferred to
the Chinese companies, our results show that engineers who have a smaller number of patentapplications but higher quality of application tend to transfer to Chinese companies. We also showthat engineers who have forward citations by Chinese companies before the acquisition, or engineers
who have a patent that has been transferred to Chinese companies, tend to transfer to Chinesecompanies. With respect to the age of invention, there is inverse U-shaped relationship between theinvention age and the transfer to a Chinese company and the peak value is 13. In other words, theolder the invention age is, the more the tendency to transfer, if the invention age is before 13.
However, once the invention age of 13 is exceeded, the older they are, the less likely they are totransfer to a Chinese company. In short, engineers with high abilities, engaged in research project
management, tend to transfer to Chinese companies. Hypothesis IA is supported and hypothesis IB is
not supported.
Next, we analyzed whether the transfer to a Chinese company affected the innovative
performance of engineers. From the viewpoint of both quantitative indexes and qualitative indexes
aspects, the transfer to Chinese companies had negative effects on innovative performance. However,after transfer, the accumulation of innovation by Japanese engineers has been used more by other
Chinese engineers in Chinese companies. Therefore, it suggests that hypothesis Ⅱ is supported.
It is wondered why engineers with higher quality innovation performance and management
experience tend to transfer, why the innovation performance declines after the transfer, and why
Chinese engineers make full use of the innovative experience and knowledge of Japanese engineers.
I would like to introduce an example below. In Onishi (2014), there was an interview with a former
Sanyo engineer who transferred to Haier. The engineer joined Sanyo in 1986 and joined Haier in the
25th year of his work. From the post-transfer engineer’s interview, it can be seen that he was engagedxi

in a research environment not as good as before transfer, engaged in global activities, and imparted
his experience and knowledge to Chinese engineers. Based on this interview, we can conclude thatthe goal of Chinese companies is to obtain the expertise and management experience of Japaneseengineers.

VII. Conclusion
In this research, using the IIP patent database, RECOF M&A database, the SIPO patent transfer
database, and the SIPO patent citation database, we focused on the invention age and innovation
performance of the former Japanese engineers whose companies were acquired by Chinesecompanies. Using engineer level data, I analyzed what characteristic engineers were transferred toChinese companies, and the change of innovation performance of transferred engineers. From theanalysis results of this study, we found that the age of invention was in a reverse U-shaped relation
to the transfer to Chinese companies. Until the age of invention came to be 13, the higher the age,
the higher the tendency to transfer to a Chinese company, and when the age of invention exceeds 13,
it turns out that the tendency to transfer to Chinese companies decreased. Next, although engineers
with fewer applications tend to transfer to Chinese companies, at the same time, engineers withhigher quality of application have a tendency to transfer to Chinese companies. In addition, it turns
out that there is a tendency to transfer to Chinese companies for engineers who have forward
citations by Chinese engineers, or engineers who have patents transferred to Chinese companies.
Next, regarding the effects of transfer to a Chinese company on the innovation performance ofengineers, a negative effect is found on innovative performance both quantitatively and qualitatively.
However, after transfer, the accumulation of experience and know-how of Japanese engineers wasused by Chinese engineers more than before.
From the analysis results of this research, Chinese companies have acquired experienced Japaneseengineers for short-term purposes such as analysis of existing products and addition of added value,rather than the long-term purpose of cutting edge technology development. It indicates that Chinesecompanies require Japanese engineers to teach their experience and know-how in innovation. The
analysis results of this study highlight that Chinese companies are still in the process of catching up,
and also show it is the acquiring technology strategy to obtain knowledge and experience ininnovation from developed countries.
The experience and knowledge acquisition of such innovative activities should continue to be a
driving force for Chinese companies' rapid catch-up. After Chinese companies have caught up to acertain level of Japanese companies, they will prefer to obtain engineers with the long-term objectiveof improving advanced technology, rather than acquiring engineers aimed at short-term businessxii

objectives. Therefore, if Japanese companies do not focus on the most advanced technology
development, price competition with Chinese companies is inevitable in the near future.
At the same time, it is necessary to delay competitors’ catch-up. Specifically, for example, it isnecessary to prevent leakage of technology and invention experience held by an engineer due to theflow of engineers caused by M&As. In this case, in order to deal with the leakage of technology, it isnecessary to establish a legal system related to M&As and improve the treatment of Japaneseengineers.
This research includes some problems which have not been solved. For example, is thecharacteristic of acquiring such engineers a unique characteristic of Chinese companies, or is there adifference compared with other developing countries? I would like to discuss these issues in the
future.

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