Multinationals, Spillover Networks and International Takeovers
Posted: 10 Feb 1997
Date Written: Undated
This paper presents a synergy-based model of foreign investment and international takeovers in industrial countries. Takeovers of (or mergers with) firms abroad are used to appropriate local technology spillovers requiring geographical proximity, exploit intra-firm technology transfers, and respond strategically to a multinational rival. The takeover fee is a positive function of market size and seller's bargaining power, and tends to increase with the strength of local spillovers. With no greenfield investments, the distribution of bargaining power between sellers and buyers affects the gains' allocation but not the investment decision. Foreign investment stimulates research but could reduce multinationals' profits.
JEL Classification: C78, D43, F23, G34, O32
Suggested Citation: Suggested Citation