Mergers and the Composition of International Commerce

Volker Nocke and Stephen Yeaple

No 10405, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F12 F13 (search for similar items in EconPapers)
Date: 2004-04
New Economics Papers: this item is included in nep-com and nep-ifn
Note: ITI
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Citations: View citations in EconPapers (17)

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