Journal of International Business Studies

, Volume 45, Issue 4, pp 450–470 | Cite as

Cross-border mergers and domestic-firm wages: Integrating “spillover effects” and “bargaining effects”

  • Joseph A Clougherty
  • Klaus Gugler
  • Lars Sørgard
  • Florian W Szücs


Two literatures exist concerning cross-border merger activity’s impact on domestic wages: one focusing on positive spillover effects; the other focusing on negative bargaining effects. Motivated by scarce theoretical scholarship spanning these literatures, we nest both mechanisms in a single conceptual framework. Considering the separate phenomena of inward and outward cross-border merger activity, our theoretical model generates three formal propositions: cross-border mergers can lead to wage increases via positive spillover effects; and negative bargaining effects are relatively more dominant when union market power is high, and when merging firms exhibit relatedness. Employing US firm-level panel data on wages combined with industry-level data on unionization and merger activity (covering 1989–2001), we find support for our propositions as inward and outward cross-border merger activity generate positive spillovers to wages, but are more likely to generate firm-level wage decreases when unionization rates are high and when cross-border merger activity is characterized as horizontal. Accordingly, future research on how cross-border mergers affect domestic wages should be mindful that both spillover and bargaining effects are at play, and that the degree of union market power and the relatedness of cross-border merger activity are critical in determining which effect dominates.


multinational corporations (MNCs) and enterprises (MNEs) foreign direct investment bargaining econometrics spillovers wages 



We wish to thank ESMT-Berlin for institutional support, Claudia Baldermann for research assistance, and Sørgard thanks the Norwegian Research Council for financial support through the project “improving competition policy” on SNF. We greatly appreciate comments and suggestions by our editor (Ram Mudambi), Ragnhild Balsvik, Tomaso Duso, anonymous referees, and during presentations at the 2010 EARIE in Istanbul, University of Stavanger in March 2011, 2011 IIOC in Boston, 2012 AIB in DC, and the 2012 JIBS special issue conference on the “Multinational in Geographic Space”.


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Copyright information

© Academy of International Business 2014

Authors and Affiliations

  • Joseph A Clougherty
    • 1
    • 2
  • Klaus Gugler
    • 3
  • Lars Sørgard
    • 4
  • Florian W Szücs
    • 5
  1. 1.University of Illinois at Urbana-ChampaignChampaignUSA
  2. 2.CEPRLondonUK
  3. 3.WU Vienna University of Economics and BusinessViennaAustria
  4. 4.Norwegian School of EconomicsBergenNorway
  5. 5.DIWBerlinGermany

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