Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86870
Authors: 
Brakman, Steven
Garretsen, Harry
van Marrewijk, Charles
Year of Publication: 
2007
Series/Report no.: 
Tinbergen Institute Discussion Paper 08-013/2
Abstract: 
By combining two large data sets (on international trade flows and cross-border mergers and acquisitions – M&As), we test two implications of Neary’s (2003, 2007) general oligopolistic equilibrium (GOLE) model (incorporating strategic interaction between firms in a general equilibrium setting). In terms of economic importance, the dominant merger wave variable is a positive global-all effect, indicating that M&A waves are an economy-wide, global phenomenon. Country-specific merger wave variables are of secundary importance. In accordance with the bilateral GOLE model as specified by Neary, we find strong evidence that acquiring firms operate in strong sectors. However, we also find (less pronounced) evidence that target firms are active in strong, not weak sectors, which we label the ‘target paradox’. We show how a multi-country extension of the GOLE model that allows for firm heterogeneity can explain this target paradox.
Subjects: 
Comparative Advantage
Cross-border Mergers and Acquisitions
Merger Waves
General Oligopolistic Equilibrium Trade Model
JEL: 
F10
F12
L13
Document Type: 
Working Paper

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