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Cross-Border Mergers and Acquisitions: On Revealed Comparative Advantage and Merger Waves

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  • Steven Brakman
  • Harry Garretsen
  • Charles van Marrewijk

Abstract

By combining two large data sets (on international trade flows and on mergers and acquisitions – M&As), we are able to test two implications of Neary’s (2003, 2004a) recent theoretical work. Analyzing M&As in a General Oligopolistic Equilibrium (GOLE) model incorporating strategic interaction between firms in a general equilibrium setting, we argue that: (i) M&As follow revealed comparative advantage as measured by the Balassa index, and (ii) M&As come in waves. We find convincing support for both hypotheses, thus showing for the first time that there is an empirical connection between export performance and mergers and acquisitions.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1602.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1602

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Keywords: comparative advantage; cross border mergers and acquisitions; merger waves; general oligopolistic equilibrium model;

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References

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  1. Robert C. Feenstra & Robert E. Lipsey & Haiyan Deng & Alyson C. Ma & Hengyong Mo, 2005. "World Trade Flows: 1962-2000," NBER Working Papers 11040, National Bureau of Economic Research, Inc.
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  23. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
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Citations

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Cited by:
  1. Ray Chaudhuri, A., 2008. "A Dynamic Model of Endogenous Mergers and Trade Liberalization," Discussion Paper 2008-005, Tilburg University, Tilburg Law and Economic Center.
  2. Colacicco, Rudy, 2012. "Strategic Trade Policy in General Oligopolistic Equilibrium," MPRA Paper 38118, University Library of Munich, Germany.
  3. Steven Brakman & Harry Garretsen & Charles van Marrewijk, 2006. "Comparative advantage, cross-border mergers and merger waves: International economics meets industrial organization," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 7(1), pages 22-26, 04.
  4. Neary, J. Peter, 2009. "Trade costs and foreign direct investment," International Review of Economics & Finance, Elsevier, vol. 18(2), pages 207-218, March.
  5. Ray Chaudhuri, A. & Benchekroun, H., 2008. "Welfare Effect of Mergers and Trade Liberalization," Discussion Paper 2008-19, Tilburg University, Center for Economic Research.
  6. Amrita Ray Chaudhuri & Hassan Benchekroun, 2012. "Welfare Effect of Mergers and Multilateral Trade Liberalization," Review of International Economics, Wiley Blackwell, vol. 20(1), pages 119-133, 02.
  7. Charles van Marrewijk & Gus Garita, 2008. "Countries of a Feather flock together," Tinbergen Institute Discussion Papers 08-067/2, Tinbergen Institute, revised 19 Sep 2008.
  8. Steven Brakman & Harry Garretsen & Charles van Marrewijk, 2006. "Cross-Border Mergers & Acquisitions: The Facts as a Guide for International Economics," CESifo Working Paper Series 1823, CESifo Group Munich.

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