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Location Choices Of Multinational Firms: The Case Of Mergers And Acquisitions

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  • Olivier Bertrand
  • Jean-Louis Mucchielli
  • Habib Zitouna

Abstract

This article examines the location choices of cross-border Mergers and Acquisitions (M&A) between OECD members´ firms in the 1990`s. In addition to traditional determinants of FDI, we estimate the impact of specific factors affecting the M&A location pattern. Two distinct econometric methods are implemented: the conditional logit and the count model (Poisson or negative binomial model). In spite of the use of alternative econometric methods, we find that the supply of target firms (captured by market capitalization and privatization activity) constrains the location of M&A. However, is it not the only determinant of location: market size, labor costs, market access and financial openness play a positive and significant role on the M&A location. A bandwagon effect is also observed. In the opposite, the corporate tax rate and the productivity decrease the probability to attract M&A. Cultural and geographic distances and differences in legal rules also exert a negative significant impact on M&A strategies. Only the ownership structure has contrasted results.
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Suggested Citation

  • 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.
  • Handle: RePEc:ecj:ac2004:124
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    Cited by:

    1. Bertrand, Olivier & Zuniga, Pluvia, 2006. "R&D and M&A: Are cross-border M&A different? An investigation on OECD countries," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 401-423, March.
    2. 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.
    3. Federica Liberini, 2014. "Corporate Taxes and the Growth of the Firm," KOF Working papers 14-354, KOF Swiss Economic Institute, ETH Zurich.
    4. Hideki Yamawaki, 2006. "The location of American and Japanese multinationals in Europe," International Economics and Economic Policy, Springer, vol. 3(2), pages 157-173, November.
    5. Liberini, Federica, 2014. "Corporate Taxes and the Growth of the Firm," The Warwick Economics Research Paper Series (TWERPS) 1042, University of Warwick, Department of Economics.
    6. Bertrand, Olivier & Ivaldi, Marc, 2006. "European Competition Policy in International Markets," IDEI Working Papers 419, Institut d'Économie Industrielle (IDEI), Toulouse.
    7. Raff, Horst & Ryan, Michael & Stähler, Frank, 2005. "Asset Ownership and Foreign-Market Entry," Economics Working Papers 2006-01, Christian-Albrechts-University of Kiel, Department of Economics.
    8. Wiji Arulampalam & Michael P. Devereux & Federica Liberini, 2012. "Taxes and the Location of Targets," Working Papers 1213, Oxford University Centre for Business Taxation.
    9. Fabienne Boudier & Julie Lochard, 2013. "How do Cross-Border Mergers and Acquisitions Answer to Deregulation in Services?," The World Economy, Wiley Blackwell, vol. 36(11), pages 1424-1441, November.
    10. 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.
    11. 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.
    12. Xie, En & Reddy, K.S. & Liang, Jie, 2017. "Country-specific determinants of cross-border mergers and acquisitions: A comprehensive review and future research directions," Journal of World Business, Elsevier, vol. 52(2), pages 127-183.

    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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