Table of Contents

International Handbook on Industrial Policy

International Handbook on Industrial Policy

Elgar original reference

Edited by Patrizio Bianchi and Sandrine Labory

This timely and much-needed Handbook reconsiders an old topic from a fresh perspective, raising a number of new, interesting and worthwhile issues in the wake of ten years of globalization. This comprehensive analysis illustrates that old-style industrial policies whereby the government directly intervened in markets, and was often the producer itself, are no longer relevant. Structural changes occurring in economies – summarized in the term ‘globalization’ – are triggering the definition and implementation of new industrial policies. The contributors, leading experts in their field, unite to evaluate this shift of over a decade ago.

Chapter 8: Mergers and Concentration Policy

Hans Schenk

Subjects: economics and finance, industrial economics

Extract

Hans Schenk 1 Introduction Over the last one hundred years, we have seen five merger waves, three of which occurred after World War II. The fifth wave, which had its rising tide from 1995 to 2000, required worldwide investments of no less than about US$12 000 billion. With about US$9000 billion, American and West European firms took the lion’s share (for more details, see Schenk 2002a, 2005). At the time, by way of comparison, acquisition expenditures by American and European firms were about seven times larger than Britain’s annual gross domestic product and more than 20 times Dutch GDP. On average, they amounted annually to about one-fifth of US GDP. Put differently, American and West European investments in mergers and acquisitions were approximately equal to 60 per cent of their gross investments in machinery and equipment (gross fixed capital formation) and they easily outpaced those in research and development (R&D). Business enterprise investments in acquisitions were no less than about eight times higher than business enterprise expenditures on R&D (which amounted to approximately US$1237 billion over the same period). The sheer size of the phenomenon makes it clear that the fate of mergers and acquisitions periodically, that is, during and after a wave, must have a crucial effect on the fate of the economies in which they occur. If they improve the way in which society generates wealth, economies will noticeably benefit, leaving aside the question to which parties the bene...

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