Multinationals, Technology Networks and International Takeovers

Universitat Pompeu Fabra Economics WP No. 231

Posted: 11 Feb 1998

See all articles by Luis A. Rivera-Batiz

Luis A. Rivera-Batiz

Universidad de Puerto Rico - Graduate School of Business Administration

Maria-Angels Oliva

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Abstract

We formulate a knowledge-based model of direct investment through mergers and acquisitions. M&As are realized to create comparative advantages by exploiting international synergies and appropriating local technology spillovers requiring geographical proximity, but can also represent a strategic response to the presence of a multinational rival.

The takeover fee paid tends to increase with the strength of local spillovers which can thus work against multinationalization. Seller's bargaining power increases the takeover fee but does not influence the investment decision. We characterize losers and winners from multinationalization and show that foreign investment stimulates research but could result in a synergy trap reducing multinationals' profits.

JEL Classification: C78, D43, F23, G34, O32

Suggested Citation

Rivera-Batiz, Luis A. and Oliva, Maria-Angels, Multinationals, Technology Networks and International Takeovers. Universitat Pompeu Fabra Economics WP No. 231. Available at SSRN: https://ssrn.com/abstract=58659

Luis A. Rivera-Batiz (Contact Author)

Universidad de Puerto Rico - Graduate School of Business Administration ( email )

Ponce De Leon Avenue
00931-3300
Puerto Rico

Maria-Angels Oliva

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

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