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Cross-border mergers and domestic-firm wages: Integrating “spillover effects” and “bargaining effects”

Author

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  • Joseph A Clougherty

    (1] University of Illinois at Urbana-Champaign, Champaign, USA[2] CEPR, London, UK)

  • Klaus Gugler

    (WU Vienna University of Economics and Business, Vienna, Austria)

  • Lars Sørgard

    (Norwegian School of Economics, Bergen, Norway)

  • Florian W Szücs

    (DIW, Berlin, Germany)

Abstract

Two literatures exist concerning cross-border merger activity’s impact on domestic wages: one focusing on positive spillover effects; the other focusing on negative bargaining effects. Motivated by scarce theoretical scholarship spanning these literatures, we nest both mechanisms in a single conceptual framework. Considering the separate phenomena of inward and outward cross-border merger activity, our theoretical model generates three formal propositions: cross-border mergers can lead to wage increases via positive spillover effects; and negative bargaining effects are relatively more dominant when union market power is high, and when merging firms exhibit relatedness. Employing US firm-level panel data on wages combined with industry-level data on unionization and merger activity (covering 1989–2001), we find support for our propositions as inward and outward cross-border merger activity generate positive spillovers to wages, but are more likely to generate firm-level wage decreases when unionization rates are high and when cross-border merger activity is characterized as horizontal. Accordingly, future research on how cross-border mergers affect domestic wages should be mindful that both spillover and bargaining effects are at play, and that the degree of union market power and the relatedness of cross-border merger activity are critical in determining which effect dominates.

Suggested Citation

  • Joseph A Clougherty & Klaus Gugler & Lars Sørgard & Florian W Szücs, 2014. "Cross-border mergers and domestic-firm wages: Integrating “spillover effects” and “bargaining effects”," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(4), pages 450-470, May.
  • Handle: RePEc:pal:jintbs:v:45:y:2014:i:4:p:450-470
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    References listed on IDEAS

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    Cited by:

    1. Luc Renneboog & Peter G. Szilagyi & Cara Vansteenkiste, 2017. "Creditor rights, claims enforcement, and bond performance in mergers and acquisitions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(2), pages 174-194, February.
    2. repec:eee:reveco:v:58:y:2018:i:c:p:330-339 is not listed on IDEAS
    3. repec:eee:corfin:v:50:y:2018:i:c:p:519-537 is not listed on IDEAS
    4. repec:pal:jintbs:v:50:y:2019:i:6:d:10.1057_s41267-019-00248-2 is not listed on IDEAS

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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