Cross-Border Mergers and Acquisitions: On Revealed Comparative Advantage and Merger Waves
33 Pages Posted: 15 Dec 2005
Date Written: November 2005
By combining two large data sets (on international trade flows and on mergers and acquisitions - M&As), we are able to test two implications of Neary's (2003, 2004a) recent theoretical work. Analyzing M&As in a General Oligopolistic Equilibrium (GOLE) model incorporating strategic interaction between firms in a general equilibrium setting, we argue that: (i) M&As follow revealed comparative advantage as measured by the Balassa index, and (ii) M&As come in waves. We find convincing support for both hypotheses, thus showing for the first time that there is an empirical connection between export performance and mergers and acquisitions.
Keywords: comparative advantage, cross border mergers and acquisitions, merger waves, general oligopolistic equilibrium model
JEL Classification: F10, F12, L13
Suggested Citation: Suggested Citation