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Archived — Research Summaries: Working Paper 2008-01: The Impact of Cross-Border Acquisitions on Headquarter and Headquarter-related Activities in Canada

by Ronald Hirshhorn

In this study we attempt to assess the impact of cross-border acquisitions by applying an understanding of the factors influencing the organizational decisions of multinational enterprises (MNEs). Through a review of the relevant literature and an examination of a number of specific recent transactions, we investigate the factors underlying the choice of headquarters and the delegation of management responsibilities by multinationals. These findings are then applied to help understand the effects of recent merger and acquisition activity. The available evidence does not point to any hollowing-out of corporate Canada. The consolidation of administrative activities that occurs when a company is acquired may result in some initial job losses. But, over time, affiliate offices benefit from the overall growth of the corporation. Acquired Canadian-based companies by foreign-based firms, like other foreign-owned firms in Canada, generally compare favourably with domestic firms in terms of research and development (R&D) investment. Multinationals are unlikely to transfer R&D operations following acquisitions as they risk losing highly skilled workers or disrupting the important links that affiliates have developed with local universities and research groups.

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