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Journal of Economic Integration 2007 March;22(1) :181-209.
Location Choices of Multinational Firms: The Case of Mergers and Acquisitions

Olivier Bertrand Jean-Louis Mucchielli Habib Zitouna 

Toulouse School of Economics
University of Paris 1 Panthéon - Sorbonne
High School of Economic and Commercial Sciences
Copyright ©2007 Journal of Economic Integration

This article examines the location choices of cross-border Mergers and Acquisitions (M&A) between OECD members' firms in the 1990's. In addition to traditional determinants of FDI, we estimate the impact of specific factors affecting the M&A location pattern. Two distinct econometric methods are implemented: the conditional logit and the count model. We find that the supply of target firms constrains the location of M&A. However, it is not the only determinant of location: the market size, the labor cost, the market access and the financial openness play a positive and significant role in the M&A location. A bandwagon effect is also observed. In the opposite, the corporate tax rate and the productivity decrease the probability to attract M&A. Cultural and geographic distances as well as differences in legal rules exert a negative significant impact on M&A strategies too. Only the ownership structure has contrasted results.

JEL classification:F23, L1, R3

Keywords: Foreign Direct Investment | Merger and Acquisition | Location | Conditional Logit | Count Model
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3. Baldwin, J. and Gorecki, P. (1987), "Plant Creation Versus Plant Acquisition: The Entry Process in Canadian Manufacturing", International Journal of Industrial Organization, vol. 5: pp. 27-41.
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