The market for corporate control: do countries and technological regimes matter?

Using DATASTREAM and Lexis Nexis databases, we examine the experience from 1995 to 2005 for eight European countries and twenty-one sectors, and compute the frequency of merger transactions at sectoral level, controlling for the roles of country variables and focusing on distinct technological patterns of innovation. We found that, even in market-based countries, where transfer of control is a frequent phenomenon, mergers are less frequent in those sectors where innovation follows cumulative processes and where takeovers represent a ‘breach of knowledge.’ This study provides empirical support to the fruitful line of research of varieties of capitalism (Hall and Soskice, 2001) and shows that sectoral differences in M&A may be seen in their complementarities with differences by country and their institutional frameworks. Results confirm that acquisitions may occur even in those economies where block-holders are present, but where the good quality of institutions leaves no space for defence against takeovers. It also highlights the significant role played by takeover regulation, and suggests that the recent reforms in European harmonization should be implemented, so that the obstacles impeding takeovers can be removed. However, policy-makers should also try to identify for which economies and sectoral fields of specialization, merger activities produce more beneficial effects and which turn out to be detrimental.