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Mergers and the Composition of International Commerce

  • Volker Nocke
  • Stephen Yeaple

In this paper, we develop a novel theory of cross-border mergers and acquisitions. Firms can choose between different modes of foreign market access: exporting, greenfield FDI, and cross-border M&A. Our theory is based on three key ideas. First is heterogeneity in firms' capabilities. Second, these capabilities differ in their degree of international mobility. Third, capabilities are traded in a merger market. We address two questions: (1) what are the characteristics of firms that choose the various modes of foreign market access, and (2) how does the composition of international commerce vary across industries and countries? We show that the degree to which firms differ in their mobile and non-mobile capabilities plays a crucial role for the composition of international commerce: depending on whether firms differ in their mobile or immobile capabilities, cross-border mergers may involve the most or the least efficient active firms. A similar dichotomy obtains when analyzing the effects of country and industry characteristics on the distribution of firms' efficiencies.

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File URL: http://www.nber.org/papers/w10405.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10405.

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Date of creation: Apr 2004
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Handle: RePEc:nbr:nberwo:10405
Note: ITI
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  1. Marcus Asplund & Volker Nocke, 2003. "Firm Turnover in Imperfectly Competitive Markets," PIER Working Paper Archive 03-010, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  2. Andrew B Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and productivity in international trade," Working Papers 00-08, Center for Economic Studies, U.S. Census Bureau.
  3. Horn, Henrik & Persson, Lars, 2001. "The equilibrium ownership of an international oligopoly," Journal of International Economics, Elsevier, vol. 53(2), pages 307-333, April.
  4. Pol Antras & Elhanan Helpman, 2003. "Global Sourcing," Harvard Institute of Economic Research Working Papers 2005, Harvard - Institute of Economic Research.
  5. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  6. Boyan Jovanovic & Peter L. Rousseau, 2002. "The Q-Theory of Mergers," NBER Working Papers 8740, National Bureau of Economic Research, Inc.
  7. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  8. Keith Head & John Ries, 1997. "International Mergers and Welfare under Decentralized Competition Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1104-23, November.
  9. repec:rus:hseeco:122439 is not listed on IDEAS
  10. Volker Nocke, 2000. "Monopolisation and Industry Structure," Economics Series Working Papers 2000-W27, University of Oxford, Department of Economics.
  11. Morton I. Kamien & Israel Zang, 1987. "The Limits of Monopolization Through Acquisition," Discussion Papers 754, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Maurin, Eric & Thesmar, David & Thoenig, Mathias, 2002. "Globalization and the demand for skill: An Export Based Channel," CEPR Discussion Papers 3406, C.E.P.R. Discussion Papers.
  13. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December.
  14. Stephen Ross Yeaple, 2003. "The Role of Skill Endowments in the Structure of U.S. Outward Foreign Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 726-734, August.
  15. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
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