Cross-border mergers and domestic-firm wages: Integrating "spillover effects" and "bargaining effects"

Clougherty, Joseph A. and Gugler, Klaus and Sørgard, Lars and Szücs, Florian (2014) Cross-border mergers and domestic-firm wages: Integrating "spillover effects" and "bargaining effects". Journal of International Business Studies, 45. pp. 450-470. ISSN 0047-2506


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Two literatures exist concerning cross-border merger activity's impact on domestic wages: one focusing on positive spillover-effects; the other focusing on negative bargaining-effects. Motivated by scarce theoretical scholarship spanning these literatures, we nest both mechanisms in a single conceptual framework. Considering the separate phenomena of inward and outward cross-border merger activity, our theoretical model generates three formal propositions: cross-border mergers can lead to wage increases via positive spillover-effects; and negative bargaining-effects are relatively more dominant when union market power is high, and when merging firms exhibit relatedness. Employing US firm-level panel data on wages combined with industry-level data on unionization and merger activity (covering 1989-2001), we find support for our propositions as inward and outward cross-border merger activity generate positive spillovers to wages, but are more likely to generate firm-level wage decreases when unionization rates are high and when cross-border merger activity is characterized as horizontal. Accordingly, future research on how cross-border mergers affect domestic wages should be mindful that both spillover and bargaining effects are at play, and that the degree of union market-power and the relatedness of cross-border merger activity are critical in determining which effect dominates. (authors' abstract)

Item Type: Article
Additional Information: This is a pre-print of an article published in "Journal of International Business Studies". The definitive publisher-authenticated version is available online at: . To see the final version of this paper please visit the publisher's website. Access to the published version may require a subscription.
Keywords: multinational corporations (MNCs) and enterprises (MNEs) / foreign direct investment / bargaining / econometrics / spillovers / wages
Divisions: Departments > Sozioökonomie > Sozialpolitik > Quantitative VWL
Version of the Document: Draft
Variance from Published Version: Minor
Depositing User: ePub Administrator
Date Deposited: 23 Apr 2014 12:17
Last Modified: 06 Sep 2017 00:37
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