Mergers and the Composition of International Commerce
41 Pages Posted: 16 Apr 2004 Last revised: 8 Dec 2022
Date Written: April 2004
Abstract
In this paper, we develop a novel theory of cross-border mergers and acquisitions. Firms can choose between different modes of foreign market access: exporting, greenfield FDI, and cross-border M&A. Our theory is based on three key ideas. First is heterogeneity in firms' capabilities. Second, these capabilities differ in their degree of international mobility. Third, capabilities are traded in a merger market. We address two questions: (1) what are the characteristics of firms that choose the various modes of foreign market access, and (2) how does the composition of international commerce vary across industries and countries? We show that the degree to which firms differ in their mobile and non-mobile capabilities plays a crucial role for the composition of international commerce: depending on whether firms differ in their mobile or immobile capabilities, cross-border mergers may involve the most or the least efficient active firms. A similar dichotomy obtains when analyzing the effects of country and industry characteristics on the distribution of firms' efficiencies.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Merger Policies and Trade Liberalization
By Henrik Horn and James A. Levinsohn
-
Cross-Border Mergers as Instruments of Comparative Advantage
-
FDI as an Outcome of the Market for Corporate Control: Theory and Evidence
By Keith Head and John C. Ries
-
National Versus International Mergers in Unionised Oligopoly
By Kjell Erik Lommerud, Odd Rune Straume, ...
-
Privatization and Foreign Competition
By Pehr-johan Norbäck and Lars Persson
-
Strategic Trade Policy and Merger Profitability
By Steffen Huck and Kai A. Konrad