The role of management practices in acquisitions and the FDI location decision

This paper investigates how management practices as intangible transfers are associated with the performance of multinational business groups. Differences in the management level across source countries are predictive for multinationals’ investment patterns for a given destination country. This study argues that acquisitions are a means to transplant management practices from parents to affiliates abroad. It finds that better-managed parents decrease employment and increase productivity post-acquisition. The productivity gains are driven by targets with less-developed management practices and by targets of larger parents. Better-managed parents are also more likely to install or retain a manager from the parent country post-acquisition.