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GLOBALIZATION IN THE U.S. AUTO INDUSTRY:

INTERNATIONAL MERGERS AND ACQUISITIONS AS DRIVERS OF INFORMATION SHARING

Paul N. Isel

Grand Valley State University

Gerald P. W. Simon

Grand Valley State University

 

ABSTRACT

There is growing interest in the role that corporate restructurings play in innovation. Although existing research has looked at the impacts of leveraged buyouts of companies on R&D spending and profits, few studies have looked at the effect that buyouts have on the output of R&D, and those studies focus on the impacts of domestic M&As. This paper contributes to the literature by empirically investigating the patenting behavior of "the Big 3" U.S. automobile companies and the effects of international knowledge spillovers from their foreign acquisitions. A log-log regression specification is used to isolate flows of knowledge for 1980-2000 between the country of the acquired subsidiary and the U.S. manufacturer. The Lexis-Nexis patent database is used to count international patent citations and "inventor country of origin" as measures of international information flows. Results indicate that there is a significant difference for the automobile industry in the information flows arising from M&As in two distinct locales: Germany, and the U.K. and Canada, with the latter pair giving greater knowledge spillovers for low levels of M&A, whereas the former gives greater spillovers as the volume of M&A activity increases.

Key words: M&As, innovation, patents, automobile, spillovers.

JEL codes: L60, G34