Does the participation to global value chains impact on cross-border mergers and acquisitions?

Global value chains (GVCs) are a major feature of globalization, with a strong impact on the patterns of international trade. In this paper we take the analysis one step forward, studying the impact of GVCs on cross-border mergers and acquisitions (M&As). We test the two symmetric hypotheses that a higher degree of participation in GVCs of a supplier sector to the exports of a user sector (e.g., the assembly in China of cell-phones eventually exported to US and, in turn, to the rest of the world) encourages: (i) firms in the user sector to acquire foreign participations in the supplier sector; and (ii) firms in the supplier sector to acquire foreign participations in the user sector. Our analysis is based on a unique dataset covering 12 supplier and user sectors, for over 22 investor countries and 47 target countries between 1995 and 2010. Estimating an augmented gravity equation model of cross-border M&As, inflated with a large number of bilateral sector and country fixed effects, we find strong support that a higher GVC participation has a positive impact on the size of M&As in both the user and the supplier sectors.