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Foreign Entry into U.S. Manufacturing by Takeovers and the Creation of New Firms

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Author Info
Robert E. Lipsey
Zadia Feliciano

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Abstract

Using U.S. Bureau of Economic Analysis data for individual foreign acquisitions and new establishments in the U.S from 1988 to 1998, and aggregate data for 1980 to 1998, we find that acquisitions and establishments of new firms tend to occur in periods of high U.S. growth and take place mainly in industries in which the investing country has some comparative advantage in exporting. New establishments are largely in industries of U.S. comparative disadvantage, and the relation of U.S. comparative advantage to takeovers is also negative, but never significant. High U.S. stock prices, industry profitability, and industry growth discourage takeovers. High U.S interest rates and high investing country growth and currency values encourage takeovers. Direct investments in acquisitions and new establishments thus tend to flow in the same direction as trade. They originate in countries with comparative advantages in particular industries and flow to industries of U.S. comparative disadvantage.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9122.

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Date of creation: Aug 2002
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Handle: RePEc:nbr:nberwo:9122

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Find related papers by JEL classification:
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

References listed on IDEAS
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  1. Froot, Kenneth A & Stein, Jeremy C, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1191-217, November. [Downloadable!] (restricted)
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  2. Dewenter, Kathryn L, 1995. "Do Exchange Rate Changes Drive Foreign Direct Investment?," Journal of Business, University of Chicago Press, vol. 68(3), pages 405-33, July. [Downloadable!] (restricted)
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(explanations, 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.)

  1. Steven Globerman & Daniel Shapiro, 2004. "Assessing International Mergers And Acquisitions As A Mode Of Foreign Direct Investment," International Finance 0404009, EconWPA. [Downloadable!]
  2. Ebersberger, Bernd & Lööf, Hans, 2004. "Multinational Enterprises, Spillovers, Innovation and Productivity," Working Paper Series in Economics and Institutions of Innovation 22, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies. [Downloadable!]
  3. 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. [Downloadable!]
  4. Simon J. Evenett, 2003. "The Cross Border Mergers and Acquisitions Wave of the Late 1990s," NBER Working Papers 9655, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Obie G. Whichard, 2003. "Measuring Globalization: The Experience of the United States of America," BEA Papers 0020, Bureau of Economic Analysis. [Downloadable!]
  6. Barbara M. Roberts & Steve Thompson & Katarzyna Mikolajczyk, 2008. "Privatization, Foreign Acquisition and the Motives for FDI in Eastern Europe," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(3), pages 408-427, October. [Downloadable!] (restricted)
  7. Johansson, Börje & Lööf, Hans & Ebersberger, Bernd, 2008. "The Innovation and Productivity Effect of Foreign Take-Over of National Assets," Working Paper Series in Economics and Institutions of Innovation 141, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies. [Downloadable!]
  8. Alfons Palangkaraya & Andreas Waldkirch, 2006. "Relative Factor Abundance and FDI Factor Intensity in Developed Countries," Melbourne Institute Working Paper Series wp2006n12, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
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