Multinational M&A in Upstream Industry and Organizational Change
36 Pages Posted: 2 Jul 2018
Date Written: June 19, 2018
This study explores the boundary response of domestic firms faced with increased openness to new foreign multinational M&A in an intermediate-input market in a host country. We develop a theoretical framework to study the impact of new foreign multinational M&A on the wholesale price of intermediate inputs as a key market condition in the host country and explore how the intermediate-input prices affect the organizational choice of domestic firms between domestic vertical integration and outsourcing. We find that new foreign multinational M&A raises the intermediate-input prices and facilitates the firms' choice of domestic vertical integration.
Keywords: Foreign M&A; Upstream Industry; Outsourcing; Vertical integration
JEL Classification: F23; L22; L23; L42
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