National Champion versus Foreign Takeover
AbstractWe analyze an oligopolistic market where a domestic and a foreign firm are engaged in a takeover battle for a domestic competitor. Any merger or acquisition (M&A) must be approved by a welfare maximizing domestic competition agency which may or may not be prone to “economic patriotism”. A patriotic government does not (fully) count wealth of domestic shareholders as relevant producer surplus if this wealth has been generated by selling a domestic firm abroad. We show that globalization (decreasing transport costs) has a different impact on the equilibrium ownership structure of that industry, depending on the type of government. With an unbiased competition agency we find that the foreign takeover is more likely to occur the higher the level of trade openness is. However, when the domestic government is biased we find that globalization reinforces the case for promoting national champions. This may explain why some countries have recently spent considerable effort to deter foreign attempts to acquire domestic firms.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2960.
Length: 36 pages
Date of creation: Jul 2007
Date of revision:
Publication status: published in: Canadian Journal of Economics / Revue canadienne d'économique, 2010, 43 (1), 204-231
Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Other versions of this item:
- 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-2007-09-02 (All new papers)
- NEP-COM-2007-09-02 (Industrial Competition)
- NEP-INT-2007-09-02 (International Trade)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- J. Peter Neary, 2007.
"Cross-Border Mergers as Instruments of Comparative Advantage,"
Review of Economic Studies,
Oxford University Press, vol. 74(4), pages 1229-1257.
- Neary, J Peter, 2004. "Cross-Border Mergers as Instruments of Comparative Advantage," CEPR Discussion Papers 4325, C.E.P.R. Discussion Papers.
- Neary, J. Peter, 2004. "Cross-Border Mergers as Instruments of Comparative Advantage," Center for European, Governance and Economic Development Research Discussion Papers 34, University of Goettingen, Department of Economics.
- J Peter Neary, 2004. "Cross-Border Mergers as Instruments of Comparative Advantage," Working Papers 200404, School Of Economics, University College Dublin.
- Norbäck, Pehr-Johan & Persson, Lars, 2005.
"Investment Liberalization - Why a Restrictive Cross-Border Merger Policy can be Counterproductive,"
Working Paper Series
644, Research Institute of Industrial Economics.
- Norback, Pehr-Johan & Persson, Lars, 2007. "Investment liberalization -- Why a restrictive cross-border merger policy can be counterproductive," Journal of International Economics, Elsevier, vol. 72(2), pages 366-380, July.
- Norbäck, Pehr-Johan & Persson, Lars, 2006. "Investment Lilberalization - Why a Restrictive Cross-Border Merger Policy can be Counterproductive," Working Paper Series 666, Research Institute of Industrial Economics.
- Nocke, Volker & Yeaple, Stephen, 2007. "Cross-border mergers and acquisitions vs. greenfield foreign direct investment: The role of firm heterogeneity," Journal of International Economics, Elsevier, vol. 72(2), pages 336-365, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).
If references are entirely missing, you can add them using this form.