Cross-border merger & acquisition activity and revealed comparative advantage in manufacturing industries

We estimate an important implication of oligopolistic international trade modeling for the predicted pattern of cross-border mergers and acquisitions (M&As). Our core argument is that cross-border M&As are, among other factors, driven by cross-country differences in comparative advantage. We find strong evidence that acquiring firms operate in industries with a comparative advantage. We also report (less pronounced) evidence that this holds for target firms as well. We therefore add another explanation, rooted in international economics, to the industrial organization literature on M&As that emphasizes efficiency and strategic motives.