2012

Should Countries Block Foreign Takeovers of R&D Champions and Promote Greenfield Entry?

Reprint No. 2012:34

Author(s): Oliver Bertrand, Katariina Nilsson Hakkala, Pehr-Johan Norbäck and Lars PerssonYear: 2012 Title: Canadian Journal of Economics Volume (No.): 45 (3) Pages: 1083–1124
Online article (restrictions may apply)
Preliminary version


In R&D intensive industries, governments promote greenfield foreign investments, while being sceptical towards foreign acquisitions of domestic high-quality firms. We develop a theoretical model that shows that foreign acquisitions are conducive to high-quality targets because of strategic effects on the sales price. However, foreign firms ‘cherry pick’ high-quality targets to expand R&D rather than to downsize. Otherwise, rivals expand R&D, making the acquisition unprofitable. Thus, our model predicts that acquired affiliates invest more in R&D than greenfield affiliates. Using affiliate data, we find evidence that acquired affiliates have a higher level of sequential R&D intensity than greenfield affiliates.


Reference:
Bertrand, Oliver, Katariina Nilsson Hakkala, Pehr-Johan Norbäck and Lars Persson (2012), "Should Countries Block Foreign Takeovers of R&D Champions and Promote Greenfield Entry?". Canadian Journal of Economics 45(3), 1083–1124.

Pehr-Johan Norbäck

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Ph: +46 8 665 4522
Mob: +46 73 547 3379
pehr-johan.norback@if...

Lars Persson

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Ph: +46 8 665 4504
lars.persson@ifn.se

Sick of Inequality?

An Introduction to the Relationship between Inequality and Health

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In this book Andreas Bergh, Therese Nilsson, IFN and Lund University, and Daniel Waldenström, IFN and Paris School of Economics, France, review the latest research on the relationship between inequality and health. What does inequality mean for our health? Does increasing income inequality affect outcomes such as obesity, life expectancy and subjective well-being?

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