Alexander Hijzen (GEP, University of Nottingham), Holger Görg (GEP, University of Nottingham and DIW Berlin) and Miriam Manchin (Tinbergen Institute, Rotterdam University)
(European Economy. Economic Papers. 242. February 2006.
Brussels. 33pp. Tab. Free.)
KC-AI-06-242-EN-C ISBN: 92-79-01183-9 ISSN: 1725-3187
Cross-border mergers and acquisitions (M&Amp;As) have increased dramatically over the last two decades. This paper analyses the role of trade costs in explaining the increase in both the number and the value of cross-border mergers and acquisitions. In particular, we distinguish horizontal and non-horizontal M&Amp;As and investigate whether distance and trade policy barriers affect these two types of mergers differently. We analyse this question using industry data for 23 OECD countries for the period 1990-2001. Our findings suggest that while in the aggregate trade costs affect cross-border merger activity negatively its impact differs importantly across horizontal and non-horizontal mergers. The impact of trade costs is less negative for horizontal mergers, which is consistent with the tariff-jumping argument.