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Multinationals, technology networks and international takeovers

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  • M. Àngels Oliva
  • Luis Rivera-Bátiz

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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Bibliographic 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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Keywords: multinationals; spillovers; networks; mergers and acquisitions;

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  1. Blomström, Magnus & Kokko, Ari, 1996. "Multinational Corporations and Spillovers," Working Paper Series in Economics and Finance 99, Stockholm School of Economics.
  2. Eun, Cheol S. & Kolodny, Richard & Scheraga, Carl, 1996. "Cross-border acquisitions and shareholder wealth: Tests of the synergy and internalization hypotheses," Journal of Banking & Finance, Elsevier, vol. 20(9), pages 1559-1582, November.
  3. Wang, Jian-Ye & Blomstrom, Magnus, 1992. "Foreign investment and technology transfer : A simple model," European Economic Review, Elsevier, vol. 36(1), pages 137-155, January.
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  14. 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.
  15. Muniagurria, Maria E & Singh, Nirvikar, 1997. "Foreign Technology, Spillovers, and R&D Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 405-30, May.
  16. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Scholarly Articles 3445092, Harvard University Department of Economics.
  17. 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.
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