Cross-Border Mergers and Upstreaming

Global forces of fragmentation continue to distance (upstream) a product's conception from its end use. A concurrent flow of cross-border mergers and upstreaming, by multinational corporations, dominates the fashion of doing international business. We investigate if there is any link between cross-country variations in upstreaming within firms, apparent in international data, and mergers between firms across borders. Our empirical analysis reveals a significantly positive association between country upstreamness and cross-border mergers. We build on Neary as well as Beladi etal. to provide a theoretical explanation of our findings in terms of the incentives in business strategic decision-making to realise the gains from cross-border mergers and upstreaming through the pricing mechanism of intermediate inputs in a vertically related oligopolistic industry.