IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v52y2008i5p849-866.html
   My bibliography  Save this article

Cross-border mergers and acquisitions and the role of trade costs

Author

Listed:
  • Hijzen, Alexander
  • Görg, Holger
  • Manchin, Miriam

Abstract

Cross-border mergers and acquisitions (M&As) have increased dramatically over the last two decades. This paper analyses the role of trade costs in explaining the increase in the number of cross-border M&As. In particular, we distinguish horizontal and non-horizontal M&As and investigate whether trade costs affect these two types of mergers differently. We analyse this question using industry data for 23 OECD countries for the period 1990-2001. Our findings suggest that while in the aggregate trade costs affect cross-border merger activity negatively its impact differs importantly across horizontal and non-horizontal mergers. The impact of trade costs is less negative for horizontal mergers, which is consistent with the tariff-jumping argument.

Suggested Citation

  • Hijzen, Alexander & Görg, Holger & Manchin, Miriam, 2008. "Cross-border mergers and acquisitions and the role of trade costs," European Economic Review, Elsevier, vol. 52(5), pages 849-866, July.
  • Handle: RePEc:eee:eecrev:v:52:y:2008:i:5:p:849-866
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014-2921(07)00107-9
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gabriel J Felbermayr & Wilhelm Kohler, 2014. "Exploring the Intensive and Extensive Margins of World Trade," World Scientific Book Chapters, in: European Economic Integration, WTO Membership, Immigration and Offshoring, chapter 4, pages 115-148, World Scientific Publishing Co. Pte. Ltd..
    2. Portes, Richard & Rey, Helene, 2005. "The determinants of cross-border equity flows," Journal of International Economics, Elsevier, vol. 65(2), pages 269-296, March.
    3. Olivier Bertrand & Jean-Louis Mucchielli & Habib Zitouna, 2004. "Location Choices Of Multinational Firms: The Case Of Mergers And Acquisitions," Royal Economic Society Annual Conference 2004 124, Royal Economic Society.
    4. Bruce A. Blonigen & Ronald B. Davies & Keith Head, 2003. "Estimating the Knowledge-Capital Model of the Multinational Enterprise: Comment," American Economic Review, American Economic Association, vol. 93(3), pages 980-994, June.
    5. Paulo Guimarães & Octávio Figueirdo & Douglas Woodward, 2003. "A Tractable Approach to the Firm Location Decision Problem," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 201-204, February.
    6. Olivier Bertrand & Habib Zitouna, 2006. "Trade Liberalization and Industrial Restructuring: The Role of Cross‐Border Mergers and Acquisitions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 479-515, June.
    7. Martin, Philippe & Rey, Helene, 2004. "Financial super-markets: size matters for asset trade," Journal of International Economics, Elsevier, vol. 64(2), pages 335-361, December.
    8. David L. Carr & James R. Markusen & Keith E. Maskus, 2021. "Estimating The Knowledge-Capital Model of the Multinational Enterprise," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 5, pages 95-110, World Scientific Publishing Co. Pte. Ltd..
    9. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    10. Volker Nocke & Stephen Yeaple, 2008. "An Assignment Theory of Foreign Direct Investment," Review of Economic Studies, Oxford University Press, vol. 75(2), pages 529-557.
    11. Assaf Razin & Yona Rubinstein & Efraim Sadka, 2003. "Which Countries Export FDI, and How Much?," NBER Working Papers 10145, National Bureau of Economic Research, Inc.
    12. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, December.
    13. Karolina Ekholm & Rikard Forslid & James R. Markusen, 2021. "Export-Platform Foreign Direct Investment," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 6, pages 111-130, World Scientific Publishing Co. Pte. Ltd..
    14. Breinlich, Holger, 2008. "Trade liberalization and industrial restructuring through mergers and acquisitions," Journal of International Economics, Elsevier, vol. 76(2), pages 254-266, December.
    15. Gugler, Klaus & Mueller, Dennis C. & Yurtoglu, B. Burcin & Zulehner, Christine, 2003. "The effects of mergers: an international comparison," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 625-653, May.
    16. Motta, Massimo, 1992. "Multinational firms and the tariff-jumping argument : A game theoretic analysis with some unconventional conclusions," European Economic Review, Elsevier, vol. 36(8), pages 1557-1571, December.
    17. Bjorvatn, Kjetil, 2004. "Economic integration and the profitability of cross-border mergers and acquisitions," European Economic Review, Elsevier, vol. 48(6), pages 1211-1226, December.
    18. 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.
    19. Norback, Pehr-Johan & Persson, Lars, 2004. "Privatization and foreign competition," Journal of International Economics, Elsevier, vol. 62(2), pages 409-416, March.
    20. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-333, March.
    21. Girma, Sourafel, 2002. "The Process of European Integration and the Determinants of Entry by Non-EU Multinationals in UK Manufacturing," Manchester School, University of Manchester, vol. 70(3), pages 315-335, June.
    22. di Giovanni, Julian, 2005. "What drives capital flows? The case of cross-border M&A activity and financial deepening," Journal of International Economics, Elsevier, vol. 65(1), pages 127-149, January.
    23. Head, Keith & Ries, John, 2005. "Judging Japan's FDI: The verdict from a dartboard model," Journal of the Japanese and International Economies, Elsevier, vol. 19(2), pages 215-232, June.
    24. Bertrand, Olivier & Mucchielli , Jean-Louis, 2007. "Location Choices of Multinational Firms: The Case of Mergers and Acquisitions," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 22, pages 181-209.
    25. Horn, Henrik & Persson, Lars, 2001. "The equilibrium ownership of an international oligopoly," Journal of International Economics, Elsevier, vol. 53(2), pages 307-333, April.
    26. Antoine Bouët & Yvan Decreux & Lionel Fontagné & Sébastien Jean & David Laborde, 2004. "A Consistent, Ad-Valorem Equivalent Measure of Applied Protection Across the World: The MAcMap-HS6 Database," Working Papers 2004-22, CEPII research center.
    27. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
    28. Portes, Richard & Rey, Helene & Oh, Yonghyup, 2001. "Information and capital flows: The determinants of transactions in financial assets," European Economic Review, Elsevier, vol. 45(4-6), pages 783-796, May.
    29. List, John A., 2001. "US county-level determinants of inbound FDI: evidence from a two-step modified count data model," International Journal of Industrial Organization, Elsevier, vol. 19(6), pages 953-973, May.
    30. Miriam Manchin, 2004. "Determinants of European cross-border mergers and acquisitions," European Economy - Economic Papers 2008 - 2015 212, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alexander Hijzen & Holger Görg & Miriam Manchin, 2006. "Cross-border mergers and acquisitions and the role of trade costs," European Economy - Economic Papers 2008 - 2015 242, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Tekin-Koru, Ayça, 2012. "Asymmetric effects of trade costs on entry modes: Firm level evidence," European Economic Review, Elsevier, vol. 56(2), pages 277-294.
    3. Amrita Ray Chaudhuri, 2014. "Cross-Border Mergers and Market Segmentation," Journal of Industrial Economics, Wiley Blackwell, vol. 62(2), pages 229-257, June.
    4. Head, Keith & Ries, John, 2008. "FDI as an outcome of the market for corporate control: Theory and evidence," Journal of International Economics, Elsevier, vol. 74(1), pages 2-20, January.
    5. Philipp Harms & Pierre-Guillaume Méon, 2013. "The Composition of FDI in the MENA Region and Other Countries: Econometric Investigation and Implications for MENA Countries," Working Papers 793, Economic Research Forum, revised Nov 2013.
    6. Stiebale, Joel, 2016. "Cross-border M&As and innovative activity of acquiring and target firms," Journal of International Economics, Elsevier, vol. 99(C), pages 1-15.
    7. Neary, J. Peter, 2009. "Trade costs and foreign direct investment," International Review of Economics & Finance, Elsevier, vol. 18(2), pages 207-218, March.
    8. Bertrand, Olivier & Ivaldi, Marc, 2006. "European Competition Policy in International Markets," IDEI Working Papers 419, Institut d'Économie Industrielle (IDEI), Toulouse.
    9. Ray Chaudhuri, A., 2014. "Acquisitions by Multinationals and Trade Liberalization," Discussion Paper 2014-006, Tilburg University, Center for Economic Research.
    10. Breinlich, Holger, 2008. "Trade liberalization and industrial restructuring through mergers and acquisitions," Journal of International Economics, Elsevier, vol. 76(2), pages 254-266, December.
    11. Caleb Stroup, 2017. "International Deal Experience And Cross-Border Acquisitions," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 73-97, January.
    12. Arulampalam, Wiji & Devereux, Michael P. & Liberini, Federica, 2019. "Taxes and the location of targets," Journal of Public Economics, Elsevier, vol. 176(C), pages 161-178.
    13. 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.
    14. Stiebale, Joel & Vencappa, Dev, 2018. "Acquisitions, markups, efficiency, and product quality: Evidence from India," Journal of International Economics, Elsevier, vol. 112(C), pages 70-87.
    15. Bertrand, Olivier & Nilsson Hakkala, Katariina & Norbäck, Pehr-Johan & Persson, Lars, 2008. "Should R&D Champions be Protected from Foreign Takeovers?," Working Paper Series 772, Research Institute of Industrial Economics.
    16. Stiebale, Joel & Reize, Frank, 2011. "The impact of FDI through mergers and acquisitions on innovation in target firms," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 155-167, March.
    17. Nicolas Coeurdacier & Roberto A. de Santis & Antonin Aviat, 2009. "Cross-border mergers and acquisitions and European integration," Post-Print hal-01022660, HAL.
    18. Antrà s, Pol & Yeaple, Stephen R., 2014. "Multinational Firms and the Structure of International Trade," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 55-130, Elsevier.
    19. Ray Chaudhuri, A., 2014. "Acquisitions by Multinationals and Trade Liberalization," Other publications TiSEM 9dbb83b3-8647-4b5f-952b-3, Tilburg University, School of Economics and Management.
    20. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g70aj72cl is not listed on IDEAS
    21. Ray Chaudhuri, A., 2011. "Cross-Border Mergers and Market Segmentation (Replaces CentER DP 2010-096)," Discussion Paper 2011-112, Tilburg University, Center for Economic Research.

    More about this item

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:52:y:2008:i:5:p:849-866. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.elsevier.com/locate/eer .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eer .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.