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Cherries for Sale: The Incidence and Timing of Cross-Border M&A

Listed author(s):
  • Bruce A. Blonigen

    (NBER - The National Bureau of Economic research, University of Oregon [Eugene])

  • Lionel Fontagné

    ()

    (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, PSE - Paris School of Economics, Department of Economics - European University Institute, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Nicholas Sly

    (University of Oregon [Eugene], CESifo - CESifo - Munich)

  • Farid Toubal

    ()

    (ENS Cachan - École normale supérieure - Cachan)

This paper develops a dynamic model of cross-border M&A activity. We show that foreign firms will be relatively more attracted to targets in the domestic country that had high productivity levels several years prior to acquisition, but then suffered a negative productivity shock (i.e., cherries for sale). With high ex ante productivity levels, target firms are able to invest in large export networks that are valuable to foreign multinationals because of locational differences and trade costs. Subsequently, domestic firms that experience reductions in productivity no longer find their established network as valuable to serve independently, increasing the surplus generated by a foreign acquisition. From the theory we derive a dynamic panel binary choice empirical model that uses predetermined export activity and the evolution of target firm productivity over time to predict cross-border M&A activity. Administrative data from French firms across 1999-2006 provide strong evidence that both the established export networks and productivity losses among target firms promote takeover by foreign multinationals.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-01162226.

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Date of creation: Nov 2014
Publication status: Published in Journal of International Economics, Elsevier, 2014, 94 (2), pp.341-357. 〈10.1016/j.jinteco.2014.08.005〉
Handle: RePEc:hal:cesptp:hal-01162226
DOI: 10.1016/j.jinteco.2014.08.005
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01162226
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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