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Foreign acquisition and internal organization

Author

Listed:
  • Paulo Bastos

    (Development Research Group, World Bank, MC3-303, 1818 H Street NW,Washington DC, 20433, United States)

  • Natália P. Monteiro

    (Department of Economics/NIPE, University of Minho)

  • Odd Rune Straume

    (Department of Economics/NIPE, School of Economics and Management, University of Minho and Department of Economics, University of Bergen)

Abstract

We study the effect of foreign takeovers on firm organization. Using a comprehensive data set of Portuguese firms and workers spanning two decades, we find that foreign acquisitions lead to: (1) an expansion in the scale of operations; (2) a higher number of hierarchical layers; and (3) higher wage inequality between the top and bottom layers. These results accord with a theory of knowledge-based hierarchies in which foreign takeovers lead to improved productivity, higher demand, or reduced internal communication costs, and thereby induce the acquired firms to reorganize. Evidence from auxiliary survey data reveals that acquired firms are more likely to use information technologies that reduce internal communication costs.

Suggested Citation

  • Paulo Bastos & Natália P. Monteiro & Odd Rune Straume, 2017. "Foreign acquisition and internal organization," GEE Papers 0085, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Nov 2017.
    • Handle: RePEc:mde:wpaper:0085
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    Cited by:

    1. is not listed on IDEAS
    2. Lovo,Stefania & Varela,Gonzalo J., 2020. "Internationally Linked Firms, Integration Reforms and Productivity : Evidence from Pakistan," Policy Research Working Paper Series 9349, The World Bank.
    3. Gehrke, Britta & Maug, Ernst & Obernberger, Stefan & Schneider, Christoph, 2021. "Post-merger Restructuring of the Labor Force," IZA Discussion Papers 14409, Institute of Labor Economics (IZA).
    4. Jahn, Elke & Egger, Hartmut & Kornitzky, Stefan, 2021. "Does the Position in Business Group Hierarchies Affect Workers' Wages?," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242374, Verein für Socialpolitik / German Economic Association.
    5. Paulo Bastos & Stefania Lovo & Gonzalo Varela & Jan Hagemejer, 2023. "Economic integration, industrial structure, and catch‐up growth: Firm‐level evidence from Poland," Review of International Economics, Wiley Blackwell, vol. 31(1), pages 106-140, February.
    6. Spanos, Grigorios, 2022. "Organization & density-related differences in within-firm wage disparities," Regional Science and Urban Economics, Elsevier, vol. 95(C).
    7. Hartmut Egger & Elke Jahn & Stefan Kornitzky, 2021. "How Does the Position in Business Group Hierarchies Affect Workers’ Wages?," Working Papers 213, Bavarian Graduate Program in Economics (BGPE).
    8. Egger, Hartmut & Jahn, Elke & Kornitzky, Stefan, 2022. "How does the position in business group hierarchies affect workers’ wages?," Journal of Economic Behavior & Organization, Elsevier, vol. 194(C), pages 244-263.
    9. Anna Bernard & Rahim Lila & Joana Silva, 2023. "Employment versus Efficiency: Which Firms Should R&D Tax Credits Target?," GEE Papers 0176, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Jul 2023.
    10. Marcus Rösch & Michiel Gerritse & Bas Karreman & Frank van Oort & Bart Loog, 2022. "Do firms or workers drive the foreign acquisition wage premium?," Tinbergen Institute Discussion Papers 22-014/V, Tinbergen Institute.
    11. Santiago Bonilla & Sašo Polanec, 2021. "Organizational Hierarchies in the Slovenian Manufacturing Sector," Eastern European Economics, Taylor & Francis Journals, vol. 59(6), pages 571-596, November.
    12. Catão, Luis A. V. & de Faria, Pedro & Martins, António & Portela, Miguel, 2023. "Globalization and Firm Performance," IZA Discussion Papers 15903, Institute of Labor Economics (IZA).

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    Keywords

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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