Project summary: This project studies the interaction of two key elements -technology and financing - in the market for domestic and cross-border mergers and acquisitions. It takes both a theoretical and empirical approach using dynamic optimizing models and rich firm level data. The overarching goal of this project is to help complete a key part of the jigsaw puzzle of globalization by seeking a deeper and more nuanced understanding of the process of resource reallocation - both financial and real - across and within foreign and domestic firms, thereby providing a precise quantification of the welfare gains from globalization that will be of academic and policy interest. 

The broad social and scientific context of this project is the sharp increase in financial globalization that has marked the last three decades. Foreign direct investment in the form of cross-border mergers and acquisitions has played a critical role in this regard, and has come to represent a major source of technology and financing for firms across the world. While the gains of financial globalization arising from technology spillovers versus financing have been studied individually by academics, less is known about the interplay of these two sources of potential gains at the micro level; even less is known about how these gains aggregate up to the macro level. This project seeks a deeper understanding of these processes, and will be of academic as well as policy interest.

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