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Foreign acquisition and internal organization

Paulo Bastos (), Natália Monteiro () and Odd Rune Straume ()

No 5/2016, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: We study the effect of foreign takeovers on firm organization. Using a comprehensive data set of Portuguese firms and workers spanning two decades, we find that foreign acquisitions lead to: (1) an expansion in the scale of operations; (2) a higher number of hierarchical layers; (3) increased span of control among top managers; and (4) increased wage inequality across layers. These results accord with a theory of knowledge-based hierarchies in which foreign takeovers improve management practices and reduce communication costs within the acquired firms. Evidence from auxiliary survey data provides support to this mechanism by suggesting that acquired firms are more likely to use information technologies that reduce internal communication costs.

Keywords: Foreign direct investment; internal organization; wage inequality; information technologies. (search for similar items in EconPapers)
JEL-codes: D24 E23 F23 M10 M16 O30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cse, nep-int and nep-mac
Date: 2016
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Related works:
Journal Article: Foreign acquisition and internal organization (2018) Downloads
Working Paper: Foreign acquisition and internal organization (2017) Downloads
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