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Multinationals, Technology Networks and International Takeovers

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Author Info
M. Àngels Oliva
Luis Rivera-Bátiz

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Abstract

We formulate a knowlegde--based model of direct investment through mergers and acquisitions. M&As are realized to create comparative advantages by exploiting international synergies and appropriating local technology spillovers requiring geographical proximity, but can also represent a strategic response to the presence of a multinational rival. The takeover fee paid tends to increase with the strength of local spillovers which can thus work against multinationalization. Seller's bargaining power increases the takeover fee, but does not influence the investment decision. We characterize losers and winners from multinationalization, and show that foreign investment stimulates research but could result in a synergy trap reducing multinationals' profits.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/231.pdf
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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 231.

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Date of creation: Sep 1997
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Handle: RePEc:upf:upfgen:231

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Web page: http://www.econ.upf.edu/

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Related research
Keywords: multinationals; spillovers; networks; mergers and acquisitions;

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Find related papers by JEL classification:
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D

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  7. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December. [Downloadable!] (restricted)
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  12. Rivera-Batiz, Luis A & Romer, Paul M, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 531-55, May. [Downloadable!] (restricted)
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  13. Edward M. Graham, 1995. "Foreign Direct Investment in the World Economy," IMF Working Papers 95/59, International Monetary Fund.
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  15. Maria E. Muniagurria & Nirvikar Singh, 1994. "Foreign Technology, Spillovers and R&D Policy," Development and Comp Systems 9411001, EconWPA. [Downloadable!]
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  16. Findlay, Ronald, 1978. "Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model," The Quarterly Journal of Economics, MIT Press, vol. 92(1), pages 1-16, February. [Downloadable!] (restricted)
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  18. Ethier, Wilfred J. & Markusen, James R., 1996. "Multinational firms, technology diffusion and trade," Journal of International Economics, Elsevier, vol. 41(1-2), pages 1-28, August. [Downloadable!] (restricted)
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  19. Mansfield, Edwin & Romeo, Anthony, 1980. "Technology Transfer to Overseas Subsidiaries by U.S.-Based Firms," The Quarterly Journal of Economics, MIT Press, vol. 95(4), pages 737-50, December. [Downloadable!] (restricted)
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