Cross-Border Mergers and National Champions in an Integrating Economy

Jens Suedekum

No 2220, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We introduce a simple oligopolistic trade model with international transportation costs, and analyze the profitability and the social desirability of national vs. international mergers in relation to three different issues, (i) the level of trade freeness, (ii) the possibility of rent appropriation on world markets, and (iii) direct “synergy” effects of mergers. Cross-border M&A is privately and socially more attractive than domestic mergers. National competition policy may be too permissive towards M&A, because it does not take into account the negative impact of decreasing competition on world consumer surplus. We also discuss the normative implications of “national champions”. The promotion of national mergers can be in the interest of individual countries if rent extraction possibilities are strong enough, but global welfare is adversely affected.

Keywords: economic integration; mergers; national champions; international trade (search for similar items in EconPapers)
JEL-codes: F12 F23 L13 L52 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2006-07
New Economics Papers: this item is included in nep-com and nep-int
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Citations: View citations in EconPapers (2)

Published - published in: Journal of Institutional and Theoretical Economics, 2008, 164 (3), 477-508

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Journal Article: Cross-Border Mergers and National Champions in an Integrating Economy (2008)
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