Local Externalities and Ownership Choices in Foreign Acquisitions by Multinational Enterprises

Bibliographic Data

ID4043537
AuthorsSergio Mariotti (0000-0001-5743-4625, DIG‐Politecnico di Milano Piazza Leonardo da Vinci 32‐20133 Milan Italy), Lucia Piscitello (0000-0002-4817-315X, DIG‐Politecnico di Milano Piazza Leonardo da Vinci 32‐20133 Milan Italy), Stefano Elia (0000-0001-7478-6657, DIG‐Politecnico di Milano Piazza Leonardo da Vinci 32‐20133 Milan Italy)
Year2014
Volume90
Issue2
Pages187-211
Publication date2014-04-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueEconomic Geography (JOURNAL)
Journal identifiersISSN: 0013-0095 • E-ISSN: 1944-8287
PublisherWiley (PUBLISHER • GB)
DOI10.1111/ecge.12039
OpenAlexW1941851496
LanguageEN
Citations received5
References cited87

This article assesses the influence of spatial heterogeneity on the entry mode by multinational enterprises (MNEs) in foreign markets. Focusing on acquisitions, we claim that the location of the target firm influences the MNE's ownership choice. MNEs normally execute partial acquisitions to reduce their liability of foreignness and to preserve their target's inherent competencies, particularly in highly innovative and internationally competitive sectors. However, this phenomenon occurs less frequently if target firms are located in areas that are characterized by relevant externalities, such as core cities and industrial districts. In particular, core cities allow foreign MNEs to access a variety of information and knowledge as well as other externalities that are associated with international interconnectedness; industrial districts provide MNEs with easier access to industry-specific agglomeration economies (a local pool of skilled labor, local input-output linkages, and local knowledge spillovers). These locations provide substitutes for different aspects of the target firm's competences, thus reducing an MNE's need to maintain a local partner. Empirical evidence from foreign acquisitions of local manufacturing firms that occurred in Italy during the 2001-10 period confirms these expectations

Business · Core (optical fiber) · Economic geography · Economics · Economies of agglomeration · Empirical evidence · Externality · Industrial organization · International trade · Liability · Microeconomics · Multinational corporation · Corporate Finance and Governance · Global trade and economics · International Business and FDI

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Open DOISci-HubOpen Access