Globalization and profitability of cross-border mergers & acquisitions
In: Discussion paper series 6102
In: Industrial organization
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In: Discussion paper series 6102
In: Industrial organization
In this paper, I investigate whether instead of strengthening home-based production, government R&D-subsidies can induce R&D-intensive firms to locate production abroad. Investigating firm-level data on Swedish MNEs, however, I find no evidence of such relocation. R&D subsidies rather tend to en courage export production at the expense of foreign production. The theory presented suggests that this is consistent with technology transfer costs, which outweigh trade costs for physical goods.
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In: IFN Working Paper No. 832
SSRN
Working paper
In: Journal of international economics, Volume 54, Issue 2, p. 449-469
ISSN: 0022-1996
In: Journal of development economics, Volume 65, Issue 1, p. 135-152
ISSN: 0304-3878
We provide facts showing that in service markets: (i) restrictions on foreign direct investment (FDI) are under reform, (ii) cross-border Mergers & Acquisitions dominate as the entry mode of FDI, and (iii) there is often a high market concentration. Based on these facts, we present a model for analyzing cross-border M&A policy in liberalized service markets taking into account efficiency and market power effects. Our findings suggest that a merger policy, but not a discriminatory policy towards foreigners, seems warranted. Moreover, policies ensuring competition for domestic target firms seem warranted. In this vein, harmonization of the EU takeover regulations may particularly benefit assets owners in countries with many target firms.
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In: Journal of international economics, Volume 72, Issue 2, p. 366-380
ISSN: 0022-1996
We show that, in the case when innovations are for sale, increased product market competition, captured by reduced product market profits, can increase the incentives for innovations. The reason is that the incentive to innovate depends on the acquisition price which, in turn, might increase despite firms in the market making lower profits. We also show that stricter, but not too strict, merger and cartel policies tend to increase the incentive for innovations for sale by ensuring the bidding competition for the innovation and by increasing the relative profitability of being the most efficient firm in the industry. Moreover, it is shown that increased intensity of competition can increase the relative profitability of innovation for sale, relative to innovation for entry.
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In: Economica, Volume 72, Issue 288, p. 635-653
ISSN: 1468-0335
This paper studies privatization policy in an international oligopoly. The argument that equal treatment of foreign investors will be detrimental to domestic welfare by shifting profits from domestic to foreign firms is shown to be less relevant in privatization auctions than for greenfield FDI. This is because such profit shifts are paid for in part by foreign firms in the bidding competition for the privatized firm in the auction. It is also shown that small local equity requirements are likely to be beneficial, but large ones are counterproductive, preventing welfare‐enhancing foreign acquisitions.
In: Journal of international economics, Volume 62, Issue 2, p. 409-416
ISSN: 0022-1996
This paper examines the restructuring of state assets in markets deregulated by privatizations and investment liberalizations. We show that the government has a stronger incentive to restructure than the buyer: A firm restructuring only takes into account how much its own profit will increase. The government internalizes that restructuring increases the sales price not only from the increase in the acquirer's profit, but also from a reduced profit for the non-acquirer, whose profits decrease due to its rival's restructuring. We also identify situations where a slow sale can significantly reduce the sales price because of strategic investment and product market effects.
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In: IFN Working Paper No. 1444
SSRN
In: CESifo Working Paper No. 11178
SSRN
In: The B.E. journal of economic analysis & policy, Volume 20, Issue 2
ISSN: 1935-1682
Abstract
Within the policy debate, there is a fear that large incumbent firms buy small firms' inventions to ensure that they are not used in the market. We show that such "acquisitions for sleep" can occur if and only if the quality of a process invention is small; otherwise, the entry profit will be higher than the entry-deterring value. We then show that the incentive for acquiring for the purpose of putting a patent to sleep decreases when the intellectual property law is stricter because the profit for the entrant then increases more than the entry-deterring value does.
In: CESifo Working Paper No. 8612
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Working paper