This paper studies how the surplus generated by the globalization process is divided between MNEs and owners of domestic assets. We construct an oligopoly model where the equilibrium acquisition pattern, the acquisition price and ﬁrms’ greenﬁeld investments are endogenously determined. Acquisition entry is shown to be more likely when the complementarity between domestic and foreign assets is high. However, we show that such acquisitions might have a low proﬁtability, since the bidding competition over the domestic assets is then so ﬁerce that the ﬁrms involved would be better off not starting a bidding war. Risks associated with different entry modes are also examined.
Globalization and Profitability of Cross–border Mergers & Acquisitions
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