Product Market Competition, Heterogeneous Firms, and the World Market for Corporate Assets

This paper theoretically and empirically explores how firms' heterogeneous characteristics, in particular their competitiveness in the product market and their productivity, affect their domestic and cross-border corporate asset transactions. I find that firms participate in the domestic and overseas corporate asset markets through endogenous self-selection. Specifically, firms with strong competitiveness, measured by high excess price cost margin, are more likely to sell corporate assets in the domestic market, and they are more likely to purchase assets in the overseas markets. This finding indicates that in the increasingly integrated world economy, highly competitive firms tend to use asset purchases as an entry mode when utilizing production synergies to exploit their competitiveness in the product market worldwide. Firms with high productivity are more likely to buy assets in both the domestic and overseas markets, and they are less likely to sell assets in the domestic market.