Globalization and profitability of cross-border mergers and acquisitions (Q926212)

The aim of this paper is to study how the surplus generated by the globalization process is divided between the multinational enterprises (MNEs) and owners of domestic assets and how this division depends on how the entry into the domestic market takes place. Then it is shown that, in equilibrium, a high complementarity between domestic and foreign assets is indeed conducive to acquisitions. It is also shown that acquisition entry may be more risky than greenfield entry due to a market risk. The paper can also be seen as a contribution to the literature on the interplay between mergers and other firm investments in concentrated markets.