Crossborderm&a

THE LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE

Essay question: Has globalization, and, in particular, the increase in cross-border mergers and acquisitions, led to a greater degree of industrial concentration – that is, industries becoming concentrated in the hands of a smaller number of players? Discuss this question in the light of the industries that have been discussed in the first five lectures, and other industries, which you think are relevant.

Course: Business in Global Environment – MN425 Professors Geoffrey Owen and Louis Turner Degree: CEMS Master in International Management

  London

  2009

  INTRODUCTION

The modern era has had a couple of intense periods of globalization: a) 1850 – 1914 where the falling transportation costs and migration led to a convergence between economies at the time (WILLIAMSON, 1998); b) from 1970, where the liberalization of international trade, the substitution of the international monetary system and also the falling transportation and communication costs have led to rapid rise in: i) international trade, from roughly 6% to 30% of world GDP (CRAFTS; VENABLES, 2001); ii) in FDI, especially after the mid-1980s (HELD et al, 1999; BALDWIN; MARTIN, 1999); iii) global financial integration (BALDWIN; MARTIN, 1999). The capital flows and FDI that occurred after 1980s, have had significant impacts on the way some industries are structured, changing the patterns of competitiveness and global production and distribution (HELD et al, 1999). As Baldwin and Martin (1999) shows, intra-industry FDI has flown especially between similar economies - NorthNorth direction – and concentrated in outsourcing, manufacturing and services. In this environment, cross-border M&A have played an important role, growing steadily over the last three decades: from roughly 66% of total FDI flows in the mid-1980s to 77% in the period 1998 – 2001 (NAVARETTI; VENABLES, 2004, p. 10). Interesting is that M&A Activity is...