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Firm‐productivity and cross border merger
Author(s) -
Mukherjee Arijit,
Senalp Umut Erksan
Publication year - 2021
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12510
Subject(s) - productivity , economics , cournot competition , incentive , competition (biology) , foreign direct investment , empirical evidence , bertrand competition , monetary economics , microeconomics , oligopoly , macroeconomics , ecology , philosophy , epistemology , biology
We examine whether higher productivity of a foreign firm increases the incentive for a cross border merger, which is a dominant form of foreign direct investment in recent decades. In line with the empirical evidence, we show that the relationship between productivity of a foreign firm and cross border merger is mixed. We show that the market concentration effect plays an important role in determining the relationship and provides a rationale for a generally ignored empirical evidence showing a negative relationship between firm‐productivity and cross border merger. Our results hold under both Cournot and Bertrand competition.