Air pollution, technology seeking and firms' cross-border M&A

Motivated by China's broad air pollution and increasing outward investment during the 2010s, we establish that air pollution exposure with its labor erosion drives capital reallocation through outward M&A. We develop a theoretical framework proving that exposure increases outward M&A probability, with a higher technology seeking motive for advanced economies. Leveraging granular PM2.5 data and listed company records, we identify robust exposure effects at both broad and hyperlocal metrics validated by IV and spatial gradients. Crucially, pollution-exposed firms target developed economies for IP and green technologies, generate post-M&A foreign patents, and show amplified responses in labor-intensive sectors and asset-targeted transactions. Our findings reposition environmental constraints as catalysts for globalization through adaptive knowledge acquisition.