NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Donghyun Lee

1301 College Avenue
University of Mary Washington
Fredericksburg, VA 22401

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of Mary Washington

NBER Working Papers and Publications

June 2019Evidence for the Effect of Monitoring Costs on Foreign Direct Investment
with Bruce A. Blonigen, Anca D. Cristea: w25933
A proposed reason for the significant inverse relationship between distance (both physical and cultural) and foreign direct investment is the increased costs for a parent firm to monitor an affiliate when there is greater distance between them. We provide the first direct test of this hypothesis using O*NET data on occupational skills to construct industry-level measures of the importance of monitoring-related skills. We then exploit this cross-industry variation to examine whether physical and cultural distances have a greater impact on cross-border M&A in industries where monitoring-related skills are more important. Using data on worldwide cross-border M&A activity from 1985 through 2014, we find significant evidence for the effect of monitoring costs on cross-border M&A activity. We ...
August 2016Heterogeneous Frictional Costs Across Industries in Cross-border Mergers and Acquisitions
with Bruce A. Blonigen: w22546
While there has been significant research to explore the determinants (and frictions) of foreign direct investment (FDI), past literature primarily focuses on country-wide FDI patterns with little examination of sectoral heterogeneity in FDI. Anecdotally, there is substantial sectoral heterogeneity in FDI patterns. For example, a substantial share of FDI (around 40-50%) is in the manufacturing sector, yet manufacturing accounts for a relatively small share of production activity in the developed economies responsible for most cross-border M&A. In this paper, we extend the Head and Ries (2008) model of cross-border M&A to account for sectoral heterogeneity and estimate the varying effects of FDI frictions across sectors using cross-border M&A data spanning 1985 through 2013. We find that...
 
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