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TitleForeign acquisition and internal organization
Author(s)Bastos, Paulo
Monteiro, Natália P.
Straume, Odd Rune
KeywordsForeign direct investment
Internal organization
Wage inequality
Information technologies
Issue date2016
PublisherUniversidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)
Abstract(s)We study the effect of foreign takeovers on firm organization. Using a comprehensive data set of Portuguese firms and workers spanning two decades, we find that foreign acquisitions lead to: (1) an expansion in the scale of operations; (2) a higher number of hierarchical layers; (3) increased span of control among top managers; and (4) increased wage inequality across layers. These results accord with a theory of knowledge-based hierarchies in which foreign takeovers improve management practices and reduce communication costs within the acquired firms. Evidence from auxiliary survey data provides support to this mechanism by suggesting that acquired firms are more likely to use information technologies that reduce internal communication costs.
TypeWorking paper
DescriptionNIPE WP 05/2016
Publisher version
AccessOpen access
Appears in Collections:NIPE - Documentos de Trabalho

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