Growing Lemons or Cherries? Pre and Post‐Acquisition Performance of Foreign‐Acquired Firms in New EU Member States

22 Pages Posted: 17 Apr 2015

See all articles by Jože P. Damijan

Jože P. Damijan

University of Ljubljana, Slovenia - Department of International Economics

Črt Kostevc

University of Ljubljana - Faculty of Economics

Matija Rojec

University of Ljubljana - Faculty of Social Sciences

Date Written: April 2015

Abstract

Foreign acquisitions are an increasingly important mode of FDI in the new EU member states (NMS). Using firm‐level data and a common estimation framework for seven NMS, we study pre‐ and post‐acquisition performance of acquired firms. This paper, to the best of our knowledge, represents the first comprehensive study of the pre‐ and post‐acquisition performance of foreign‐acquired firms in NMS. Distinguishing between the impact of target selection and post‐acquisition improvements on performance, we find that, on average, foreign investors are targeting ‘lemons’ with growth potential rather than ‘picking cherries’. Regardless of targeting ‘cherries’ or ‘lemons’, performance of acquired firms improved after the acquisition, whereby the boost in productivity is not achieved by reducing employment but mostly by increased efficiency in the use of production factors especially labour.

Suggested Citation

Damijan, Joze P. and Kostevc, Crt and Rojec, Matija, Growing Lemons or Cherries? Pre and Post‐Acquisition Performance of Foreign‐Acquired Firms in New EU Member States (April 2015). The World Economy, Vol. 38, Issue 4, pp. 751-772, 2015. Available at SSRN: https://ssrn.com/abstract=2595425 or http://dx.doi.org/10.1111/twec.12176

Joze P. Damijan (Contact Author)

University of Ljubljana, Slovenia - Department of International Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia
+386 61 189 24 00 (Phone)
+386 61 189 26 98 (Fax)

Crt Kostevc

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Matija Rojec

University of Ljubljana - Faculty of Social Sciences ( email )

Kardeljeva ploscad 5
Ljubljana, 1000
Slovenia

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