Working Paper: NBER ID: w9122
Authors: Zadia Feliciano; Robert E. Lipsey
Abstract: Using U.S. Bureau of Economic Analysis data for individual foreign acquisitions and new establishments in the U.S from 1988 to 1998, and aggregate data for 1980 to 1998, we find that acquisitions and establishments of new firms tend to occur in periods of high U.S. growth and take place mainly in industries in which the investing country has some comparative advantage in exporting. New establishments are largely in industries of U.S. comparative disadvantage, and the relation of U.S. comparative advantage to takeovers is also negative, but never significant. High U.S. stock prices, industry profitability, and industry growth discourage takeovers. High U.S interest rates and high investing country growth and currency values encourage takeovers. Direct investments in acquisitions and new establishments thus tend to flow in the same direction as trade. They originate in countries with comparative advantages in particular industries and flow to industries of U.S. comparative disadvantage.
Keywords: No keywords provided
JEL Codes: F21; F23; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| high U.S. stock prices (G19) | likelihood of takeovers (G34) |
| high industry profitability (L19) | likelihood of takeovers (G34) |
| high interest rates (E43) | likelihood of takeovers (G34) |
| favorable conditions in investing countries (F21) | likelihood of takeovers (G34) |
| U.S. economic growth (O51) | likelihood of acquisitions and new firms (G34) |
| U.S. comparative advantage (F14) | likelihood of takeovers (G34) |
| trade dynamics (F14) | FDI flows (F21) |