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Cross-Border Mergers and Acquisitions: On Revealed Comparative Advantage and Merger Waves

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  • Steven Brakman
  • Harry Garretsen
  • Charles van Marrewijk

Abstract

By combining two large data sets (on international trade flows and on mergers and acquisitions – M&As), we are able to test two implications of Neary’s (2003, 2004a) recent theoretical work. Analyzing M&As in a General Oligopolistic Equilibrium (GOLE) model incorporating strategic interaction between firms in a general equilibrium setting, we argue that: (i) M&As follow revealed comparative advantage as measured by the Balassa index, and (ii) M&As come in waves. We find convincing support for both hypotheses, thus showing for the first time that there is an empirical connection between export performance and mergers and acquisitions.

Suggested Citation

  • Steven Brakman & Harry Garretsen & Charles van Marrewijk, 2005. "Cross-Border Mergers and Acquisitions: On Revealed Comparative Advantage and Merger Waves," CESifo Working Paper Series 1602, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1602
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. repec:oup:rfinst:v:30:y:2017:i:5:p:1539-1582. is not listed on IDEAS
    2. Ray Chaudhuri, A. & Benchekroun, H., 2008. "Welfare Effect of Mergers and Trade Liberalization," Discussion Paper 2008-009, Tilburg University, Tilburg Law and Economic Center.
    3. Nicolas Coeurdacier & Roberto A. De Santis & Antonin Aviat, 2009. "Cross-border mergers and acquisitions and European integration," Post-Print hal-01022660, HAL.
    4. Colacicco, Rudy, 2012. "Strategic Trade Policy in General Oligopolistic Equilibrium," MPRA Paper 38118, University Library of Munich, Germany.
    5. Neary, J. Peter, 2009. "Trade costs and foreign direct investment," International Review of Economics & Finance, Elsevier, vol. 18(2), pages 207-218, March.
    6. Steven Brakman & Harry Garretsen & Charles van Marrewijk, 2006. "Cross-Border Mergers & Acquisitions: The Facts as a Guide for International Economics," CESifo Working Paper Series 1823, CESifo Group Munich.
    7. Ray Chaudhuri, A., 2008. "A Dynamic Model of Endogenous Mergers and Trade Liberalization," Discussion Paper 2008-005, Tilburg University, Tilburg Law and Economic Center.
    8. Amrita Ray Chaudhuri & Hassan Benchekroun, 2012. "Welfare Effect of Mergers and Multilateral Trade Liberalization," Review of International Economics, Wiley Blackwell, vol. 20(1), pages 119-133, February.
    9. Laurent Frésard & Ulrich Hege & Gordon Phillips, 2017. "Extending Industry Specialization through Cross-Border Acquisitions," Review of Financial Studies, Society for Financial Studies, pages 1539-1582.

    More about this item

    Keywords

    comparative advantage; cross border mergers and acquisitions; merger waves; general oligopolistic equilibrium model;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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