Cross-Border Mergers and National Champions in an Integrating Economy
AbstractWe 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.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2220.
Length: 22 pages
Date of creation: Jul 2006
Date of revision:
Publication status: published in: Journal of Institutional and Theoretical Economics, 2008, 164 (3), 477-508
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Other versions of this item:
- Jens Südekum, 2008. "Cross-Border Mergers and National Champions in an Integrating Economy," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(3), pages 477-508, September.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-12 (All new papers)
- NEP-COM-2006-08-12 (Industrial Competition)
- NEP-INT-2006-08-12 (International Trade)
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- Andreas Haufler & Christian Schulte, 2011. "Merger policy and tax competition: the role of foreign firm ownership," International Tax and Public Finance, Springer, vol. 18(2), pages 121-145, April.
- Luís Santos-Pinto, 2009.
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Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP)
09.06, Université de Lausanne, Faculté des HEC, DEEP.
- Santos-Pinto, Luís, 2009. "The Impact of Firm Size and Market Size Asymmetries on National Mergers in a Three-Country Model," MPRA Paper 17166, University Library of Munich, Germany.
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"Merger Policy and Tax Competition,"
CESifo Working Paper Series
2157, CESifo Group Munich.
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- Santos-Pinto, Luís, 2010. "The impact of firm cost and market size asymmetries on national mergers in a three-country model," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 682-694, November.
- Lommerud, Kjell Erik & Olsen, Trond E. & Straume, Odd Rune, 2006. "Cross border mergers and strategic trade policy with two-part taxation: is international policy coordination beneficial?," Discussion Papers, Research Unit: Market Processes and Governance SP II 2006-24, Social Science Research Center Berlin (WZB).
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