A Model of Heterogeneous Firm Matches in Cross-Border Mergers & Acquisitions

Arbeitspapier

In contrast to empirical evidence, recent theories of cross-border mergers and acquisitions (M&As) assume perfect knowledge transfers – from high to low productivity firms – between acquirer and target. Using the Melitz (2003) model of heterogeneous firms, we develop a matching model of cross-border M&As which allows for both perfect and imperfect knowledge transfers, where the latter leads to assortative matching on productivity for firms in cross-border M&As. This is in line with stylized facts (because M&As frequently occur between firms of similar productivity) and in contrast to the proximity-concentration trade-off (in which only the most productive firms have a physical presence in foreign markets). Allowing for M&As raises the firm viability cut-off level, average productivity and welfare in our model. The welfare benefits are weaker for more imperfect knowledge transfers.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 7083

Classification and Topics

• Classification: Wirtschaft ; International Factor Movements and International Business: General ; Market Structure, Firm Strategy, and Market Performance: General
• Subject: cross-border merger & acquisitions ; knowledge transfers ; productivity differences

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Brakman, Steven ; Garretsen, Harry ; Gerritse, Michiel ; van Marrewijk, Charles
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/180345
• Last update: 10.03.2025, 11:44 AM CET