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Cross-border mergers and domestic-firm wages: Integrating ‘spillover effects’ and ‘bargaining effects’

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  • Clougherty, Joseph A.
  • Gugler, Klaus Peter
  • Sørgard, Lars
  • Szücs, Florian

Abstract

Two literatures exist concerning cross-border merger activity’s impact on domestic wages: one focusing on spillover-effects; the other focusing on 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, we predict that ‘bargaining’ (‘spillover’) effects are relatively more dominant under high (low) unionization rates and under high (low) degrees of 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 best characterized as related.

Suggested Citation

  • Clougherty, Joseph A. & Gugler, Klaus Peter & Sørgard, Lars & Szücs, Florian, 2014. "Cross-border mergers and domestic-firm wages: Integrating ‘spillover effects’ and ‘bargaining effects’," CEPR Discussion Papers 9863, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9863
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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. Cao, Jiyun & Mukherjee, Arijit, 2018. "Foreign direct investment, unionised labour markets and welfare," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 330-339.
    3. Amit Soni & Avinash Chandra & Sumati Varma, 2020. "Impact of M&As on Employment in the Indian Information Technology (IT) Industry," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 63(2), pages 311-329, June.
    4. Duygun, Meryem & Huang, Bihong & Qian, Xiaolin & Tam, Lewis H.K., 2018. "Corporate pension plans and investment choices: Bargaining or conforming?," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 519-537.
    5. Sourafel Girma & Holger Görg & Erasmus Kersting, 2019. "Which boats are lifted by a foreign tide? Direct and indirect wage effects of foreign ownership," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(6), pages 923-947, August.

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    More about this item

    Keywords

    bargaining; Cross-Border Mergers; FDI; spillovers; wages;
    All these keywords.

    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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