Theoretical Basis of Trust and Innovation Mechanism in M&A of China’s SOEs

State-owned sector and mixed economy theory, new institutional economics theory, strategic M&A theory, contract economics theory, information economics theory, informal institutional theory, corporate capability theory, trust theory and innovation theory together constitute the theoretical basis of this article. Public ownership plays a dominant role in the development of China’s national economy, and mixed ownership is an important means to realize China’s basic economic system, which provides an opportunity for the reform, transformation and upgrading of SOEs. This article will take reform of SOEs as an entry point to explore the value created by M&A of SOEs by following the theoretical basis of state-owned sector and mixed economy. In essence, the M&A of SOEs is strategic M&A taken by SOEs to achieve specific development strategies and value increase of the enterprises, and the ultimate goal is to obtain core competitiveness. Innovation capability is an integral part of the core competitiveness of an enterprise, which determines that the SOEs M&As are inseparable from the theory of enterprise capabilities. New institutional economics is a theory that focuses on the study of transaction costs and the structure and arrangement of the system itself. The integration of corporate culture and the choice of organizational forms after M&A require the guidance of new institutional economics. Informal institutions put emphasis on the research on environmental, cognitive and cultural sphere, and have great impacts on the free flow of man-related production factors in the organization, and the efficiency and business performance of the organization. The guiding role of informal institutions in resources integration and value creation after M&A cannot be ignored. Human exchange activities, the development of enterprises and society are inseparable from trust. Innovation can be the core competitiveness of enterprises, and the integration of trust and innovation in SOEs’ M&A cannot succeed without the guidance of innovation theory and trust theory. Designing trust and innovation mechanisms under incomplete contract theory can explore the specific influencing path and effects of trust and innovation on the value created by the M&A of SOEs.