 Shutdown versus M&A: An empirical investigation of Slovenian incumbent firms’ responses to foreign competitionKatja Zajc Kejžar Economic Systems, 2016, vol. 40, issue 2, 247-259 Abstract: The paper investigates the shutdown and merger responses of heterogeneous incumbent firms to increased foreign competition. Foreign firm entry is confirmed to be significantly tougher than domestic firm entry in terms of its reallocation forces. Accounting for the competing nature of shutdown and merger risk, the results for Slovenian manufacturing firms during the later stage of Slovenia’s transition show that the entry of foreign firms via either FDI or exports increases the relative probability of incumbents deciding to shut down, while the incentive to react by merging is present only when foreign firms enter via a greenfield investment within the same region. While a shutdown decision is detected as the principal response in case of import competition, no predominance can be identified in incumbents’ reactions to FDI entry. Furthermore, firms with foreign owner(s) proved less likely to be a target of takeovers/mergers, although they tend to close down more easily than locally owned rivals. Keywords: Firm exit; M&A; Foreign direct investment; Imports; Competing risk model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:40:y:2016:i:2:p:247-259 DOI: 10.1016/j.ecosys.2015.09.005 Access Statistics for this article Economic Systems is currently edited by R. Frensch More articles in Economic Systems from Elsevier Contact information at EDIRC. |
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