Mergers and acquisitions: a tool for knowledge/technology transfer

More companies than ever before are turning to Mergers and Acquisition (M&As), at a pace that is not expected to abate any time soon. For many companies M&As represent the fastest possible route to growth. For other companies, formally aligning oneself with another company makes it possible to enter new markets unavailable before, such as many US- and European-based automobile manufacturers have done in China and other Asian countries heretofore closed to foreign car makers. M&As also represent an opportunity to achieve economies of scale and scope and pare operating costs, or to increase their capabilities and innovative capability. M&As facilitate the acquisition and transfer of new knowledge, technologies or systems that are critical for competitive advantage. Building upon previous results we hypothesize that the impact of M&As is not the same for all countries and that its effect depends upon the incentives, infrastructures and institutions in place (as conceptualized by scholars such as North 1990; Lall 1992; Wiliamson 1985). To test the hypothesis we use data from the "Worldwide Statistics on Cross-border M&As from 1988 to 1998" (KPMG Corporate Finance 1999), and from the OECD database on indicators of product market regulations and employment protection legislation published by Nicoletti et al. (1999). In this context the following broad research questions are discussed: How far are M&As dependent on country specific structural effects, and on the broad dimensions of incentives, infrastructures and institutions?; To what extent can M&As be influenced by policy frameworks and the administrative regulatory environment?; and, What is the impact of M&As for the economic development of small and open economies?.