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Ekonomie

DOES ECONOMIC INTERVENTIONISM HELP STRATEGIC INDUSTRIES? EVIDENCE FROM EUROPE Anita Maãek, Rasto Ovin

Introduction On the other hand it is important to know, that with unfavourable conditions negative Inward FDI should stabilize domestic income effects of FDI are often. These are especially fluctuations and help investment risks in the evident in the form of reducing productivity of domestic economy to disperse, at the same the host country, reducing employment, time enabling access to modern technology diminished R&D intensity, increased concentration and financial sector development [8]. Thus they in the domestic market and the closing of support a typical classical argument for companies, shrinking of the domestic stock international capital flows liberalization. market because shares are being transferred to There are several studies showing the a foreign stock market, anti-competitive reactions effects of FDI in different host countries. The of the acquired firms, abnormally low sales earliest studies are showing the positive effects prices of companies or eliminated competition of foreign ownership on productivity in in the domestic market [18], [19]. In recent a domestic firm [2], [1]. The same conclusions years, negative effects often include also were later drawn also by some other authors threats to national sovereignty and autonomy of [11], [3]. Other studies show that FDI affect the the host country and thus losing control of development potential of the economy as well strategic industries, whereby the threat of as reduce unemployment, affect transfer of losing economic independence is especially new technologies and knowledge, generate emphasised [9]. additional tax revenue for the state, support In order to minimize these effects [22] development strategies of individual sectors, requires cautious economic policy with adjustment affect the development of managerial knowledge, of institutional settings and especially competition increase engagement of local companies in policy. Real national economic policies supplier and subcontractor networks and gene- therefore often tend to distinguish between rate a better utilisation of the local infrastructure greenfield investment and C-B M&A within FDI: and service activities [15], [5]. better accepted than C-B M&A, greenfield FDI The benefits of FDI are not self-evident and should enable new production, employment greatly differ among different countries. The and technology. On the other hand, C-B benefits from FDI are enhanced in an open M&A are less stable due to greater mobility of investment environment with a democratic this form of FDI and can include opportunistic trade and investment regime, active competition capital movements. Although differences policies, macroeconomic stability and privatisation between these two forms of FDI diminish in the and deregulation. The distribution of positive long term, C-B M&A should bring the following compared to the negative effects depends on risks to macroeconomic developments: the economic policy towards these processes Unlike with greenfield investment, with C-B and the entrepreneurial environment as well as M&A a foreign corporation may buy a local other factors affecting their consequences [9]. It company in order to exclude a competitor in also often happens that positive effects of these an important market; transactions usually occur with a time lag [16].

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If it holds a sufficient market share, foreign economic goals (employment, balance of affiliate with an intention described above payments, industrial structure) [10], [12]. These may seriously harm competition in the developments bring new experience to the EU entire domestic market; developed countries’ governments: they are New owners from abroad not involved in often put into position when their national domestic environment issues may economic policy makers seem to lose the unproportionally exercise cost reduction control over economic goals and especially thus causing degradation of the acquired nationally important or strategic companies or company; even industries. The above facts support the The takeover of the domestic firm may take expectations that the liberalization of place in a period of financial crisis or in international capital mobility within the EU adds other circumstances unfavorable to the to the concerns of national governments. So it domestic company, thus the selling price is no surprise that it took long lasting process to achieved may be too low in comparison to come to a minimum agreement of international the company’s real value; capital mobility rules in the EU common market. In the case when the subject to a bid is Before it was adopted in 2004 it took member a large company stock markets may shrink countries about 17 years to meet a minimum as through the C-B M&A deal shares have agreement formalized by the Directive on been collected from the domestic public Takeover bids. Although being formalized in the [17]. form of Directive the rules did not prove In 1987, 90% of all inward C-B M&A were sustainable from the very beginning and so realized in industrial countries. Owing to their European capital market in the years after 2004 stronger and stronger incorporation into world experienced considerable national economic trade and capital mobility in the 1990s policy interventions expressing short term view developing and transition countries became on economic goals fulfillment. more and more important locations for inward In this article authors discuss the issue of C-B M&A and in 2012 they reached almost C-B M&A from the point of the lesson that the 23% of global C-B M&A flows [20]. Despite their European evidence could represent to relatively higher level of capital saturation economic policy of an economy, which is compared with developing and transition shaping its cohabitation in the EU and is eager countries, developed countries retain their to steer its economic policy towards reducing dominant position in world C-B M&A also as its gap towards developed EU industrial host countries. After they stabilized on 80% of countries. It starts with presentation of some of global inward C-B M&A level towards the end of the most known cases of interventionism in last decade and losing some pace in 2010 and Europe after the adoption of EC Directive on 2011 (about 75%) the last accessible data 2012 takeover bids in 2004. After brief presentation demonstrated their even stronger lead (84%). of the results of the Takeover Directive in the When taking an example of the EU developed first chapter, in the second chapter authors countries such developments are in present results of a study measuring economic accordance with expectations basing on better effects of inward C-B M&A in Europe. By state of their economies regarding stock market combining the data about economic effects capitalization, value addition and the condition from the study with the data of investment of the regulatory and financial institutional freedom as prepared by Heritage Foundation in setting [16]. Apart from the fact that developed 2009 and 2014, authors analyse if strategic countries are retaining their leading position in sectors benefit from incoming C-B M&A when EU economy one should, however, note that subject to the previous market oriented dimension (consolidation of industries) and industrial policy. The last chapter brings dynamics of C-B M&A transactions have conclusions. progressively earned structural character in their economies. As proven in several analyses 1. Empirical Phenomena traditional leaders of trade and international Although liberalization of international capital capital transactions are more and more flows was formally legalized in the EU with the experiencing the impact of C-B M&A on their Treaty of Maastricht in 1994, the most relevant

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for C-B M&A within the EU is the Directive countries and clearly show the defence policy 2004/25/EC of the European Parliament, and of of developed host countries when dealing with the Council on Takeover Bids (2004). Despite C-B M&As in strategic industries [13]. the fact that the years preceding 2004 were The engagement of most important European marked by dynamic integration processes economies in these processes, however, between European states, it took 17 years (!) differed substantially. According to the IMF in until the text of the directive was acceptable 2006 FDI represented about 13% of GDP in enough so as to be adopted by the EU member Italy, 25% in Germany, 36% in Britain, and 42% states. This is the consequence of the fact that in France. These figures obviously explain why the member states wanted to keep the right to the French government seems to be the most individually define mechanisms for protecting active with protecting their “national champions.” important domestic companies from takeovers On the other hand, however, a lack of such after implementing the new EU legislative [6]. striking examples from Britain despite relatively Soon after legalization in 2004 the takeover high share of FDI if compared to their GDP, Directive already triggered the concern of characterizes the typical Anglo-Saxon attitude European national governments that their national of an open economy. industrial policy supporting other economic When judging the actions of EU member goals would be out of control. Foreign spectators states’ governments, however, one should note warned that the attitude of real economic policy that after the adoption of the EU Directive on of European governments demonstrated takeover bids obviously the era of fast growth of economic nationalism. According to [14] “There inward FDI in the EU has started. So with is a neo-nationalism in Europe... they don't respect to 2004 and 2005 the growth of FDI as even believe in their own project. They say they a percentage of gross fixed capital formation in want a big market for capital and goods, but the EU was 125%, while in the same period it when it doesn't go well, they resort to neo- grew in developed countries of the world for protectionism.” The attitude of the EU 41%. Also, in the top 50 pairs of countries with governments came out to be the protection of the largest bilateral inward stock, in 2005 22 “national champions” – an expression was were from Europe, compared to 17 in 1995 assigned to the French Prime Minister De [19]. Considering this and adding quite a high Villepin (2005–2007), who deliberately acted ranking of employment goals and state- against foreign companies’ bids for some supported social cohesion in continental important French companies. So he prevented Europe, we should not be surprised that an Italian bid for the French water and energy reactions previously described came from company Suez, and an American bid for the ruling parties – coalitions regardless their French food empire Danone. political orientation. Also, other European countries in the After eight years of its application the EU period between 2005 and 2006 offered typical Commission analysed the effects of takeover examples of reviving economic nationalism. Directive (2012). According to the analysis the German chancellor Angela Merkel personally Directive did not led to major changes in the prevented the bid of Russia Sistema for a share member states legislative – allegedly also in the national telephone service provider because of the fact that changes in member Deutsche Telekom. In Italy the bid for countries framework have already been in a takeover of highway company Autostrade by process in the time of the Directive adoption. As Spanish Albertis was disabled. In Spain, to the transposing of the whole Directive the accompanied by political arguing, the takeover actions of member states differ quite a lot. of electric company Endesa by German E.ON While the board neutrality rule (“prevents any was brought to a halt. In Italy an attempt for action by the company, which could frustrate considerable foreign investment into national the bidder without authorization by the general telephone service provider Telecom Italia by shareholder meeting”) was adopted by 19 American AT&T and Mexican America Movil member states, only three of them transposed was stopped due to internal political the breakthrough rule (“neutralizes the pre-bid disagreement. Some studies are presenting the defenses during the takeover by making them concrete cases on interventionism of individual inoperable during the takeover period) and half

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of the states allow the home companies who Respondents in the survey from 2009 were are subject to a foreign bid, not to apply the two professionals from business schools, who in rules mentioned, when the foreign offer or is not one way or another are following real practice subject to the same rule – reciprocity. in the field in their home countries. In our Nevertheless the analysis states that the research, we considered the respondents’ view shareholders in general believe that the as typical and respectively representative for Directive made a difference in the field of the country in which business school is located. coordination that it has strengthened the This could include the risk of a personal bias. position of minority shareholders and it improved However, the respondents were invited to the disclosure regime. Relevant for the political participate by individual schools’ deans according market exchange and thus influencing to their field of research and teaching. As a rule economic policy practice is the reluctance they were in one way or another actively towards the Directive by the representatives of involved in the field of C-B M&A in their employees, stating that the document does not countries, or were at least well-acquainted with sufficiently protect employees against changing professional or public discussion on the matter conditions and layoffs after the takeover. In this in local circles and in the media. way the analysis of the Directive In this way the quality of answers does not implementation points to the fact that the lag behind the quality of answers obtained in choice of national policies to intervene in the other known studies using a similar field of intra EU capital movements still exists. methodology. One that should be mentioned is the analysis of public sentiment with Norway 2. Empirical Study on bank takeover by analyzing printed media [21]. Consequences of the Directive The methodology used is to a certain extent comparable with the study of European Group 2.1 The Data, Sample and Method for Investor Protection [4], where answers are The research presented in this article is based obtained by interviewing government officials in on the analysis of the relationship between individual states, and with the study of Global economic effects of C-B M&A and Heritage Financial Communication Network [7] where Foundation Index of Investment Freedom. An authors rely on the opinion of editors and top international study of C-B M&A’s economic journalists on C-B M&A effects. Considering effects at the national level was carried out the types of involvement of respondents in our using the method of total analysis. It study, one could rate the method used less deliberately considers answers from a survey prone to political or popular bias. carried out in chosen academic communities in The study 2009 was carried out with the 2009 because five years after the adoption of help of a questionnaire consisting of 21 questions Takeover Directive the estimates from academic in the fields of macroeconomic and community were considered to be the most microeconomic effects of inward C-B M&A in realistic. In the research we presupposed that European economies. academic view on economic effects of inward The sample included 109 business schools C-B M&A in their home country would stay from the following 36 countries (the number of relevant for at least mid-term period, here respondents is in parentheses): Austria (4), meaning 5–10 years, as one of the academics’ Belarus (2), Belgium (2), Bosnia and Herze- mission is to retain robust position with current govina (2), Bulgaria (2), Croatia (4), Cyprus (2), issues of economic policy. The research was Czech Republic (4), Denmark (2), Estonia (2), carried out through estimation of two equations. Finland (2), France (2), Germany (3), Georgia (2), With the first one the relationship between Greece (2), Hungary (4), Ireland (2), Italy (3), results of a study 2009 (especially government Island (2), Latvia (3), Lithuania (6), Netherlands intervention and economic position of strategic (2), Norway (2), Poland (4), Portugal (2), sectors) and Index of Investment Freedom for Romania (4), Russia (4), Slovakia (3), Slovenia 2009 and with the second one the relationship (4), Spain (5), Serbia and Montenegro (2), between results of a study 2009 and the same Sweden (2), Switzerland (2), Turkey (4), UK (3) Index for 2014 was tested. and Ukraine (4). In most parts of this research, we divided these countries into two groups:

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developed countries and transition countries. national economic policy. The most important As developed countries we have considered threats to transition countries were the old EU members before 2004 EU enlargement, crowding-out of domestic companies by foreign Island, Norway and Switzerland plus Turkey. bidders and insufficient price achieved for sold Although there are considerable differences domestic companies. Those two threats were among them, these countries have been also quite strongly present in developed experiencing western type of democracy, countries, however with substantially lower market economy and private ownership. They importance relative to transition economies. are: Austria, Belgium, Cyprus, Denmark, Finland, An analysis of microeconomic effects shows France, Germany, Greece, Ireland, Italy, Island, divergent results for both groups of countries to Netherlands, Norway, Portugal, Spain, Sweden, a certain extent. For developed countries the Switzerland, Turkey and UK. On the other side biggest benefit of C-B M&A proved to be the as transition countries considered are European consolidation of strategic sectors, while the countries and Russia, who after World War II reduction of domestic firms’ capital was on the shared state ownership, central planning and top on the list as a threat. In transition countries mono-party system. We presupposed that the consolidation of strategic sectors was also these heritages should define a different need considered on the top of benefits, while as the for privatization, to replace obsolete capacities top threat informal pressure of foreign investors in manufacturing and to develop markets and on market conditions. This effect of C-B hierarchies typical for a market economy – all M&A registered in developed countries quite being normal consequences of inward C-B a low value. The less present effect in both M&As. The countries representing this group groups of countries here was contraction and are: Belarus, Bosnia and Herzegovina, Bulgaria, the closing of R&D departments of firms Croatia, Czech Republic, Estonia, Georgia, acquired from foreign companies. Among Hungary, Latvia, Lithuania, Poland, Romania, microeconomic effects also the forms of Russia, Slovakia, Slovenia plus Serbia and acculturation with inward C-B M&A were Montenegro. analyzed. With 62% (transition countries) and For statistical analysis the program SPSS-X 67% (developed countries) the biggest weight for Windows and Microsoft Excel were used. was assigned to integration as a form of By using linear regression the compatibility of acculturation. Readiness for assimilation in the results from the questionnaire was as already transition countries (36% vs. 29%) was mentioned tested with Index of Economic expectedly higher than in industrial countries, Freedom as a part of Index of Economic while separation was quoted as an exception in Freedom by the Heritage Foundation (for years both groups of countries. 2009 and 2014). The results of the study were In general, the obtained results of the study considered compatible to the index mentioned enable us to conclude that despite differences above as the equation coefficients were between both groups of economies with inward statistically significant. FDI in the form of C-B M&A in 2009 mostly positive effects in both countries were present. 2.2 Main Results about Economic These findings diverge from real policies of Effects industrial states described above. The statistical source related to macro- Theory and own research in this way lead economic consequences consists of eight sets to the conclusion that when subject to of questions referring to benefits and threats consistent marked founded industrial policy the that inward C-B M&A caused in receiving strategic sectors should benefit from C-B economies. M&A as these transactions would help industry When benefits are concerned, the consolidation. Unlike rational industrial policy strongest statistical significance was in both that would through supporting market groups of countries assigned to market access adjustment strengthen strategic sectors, rather and know-how, followed by technology transfer. mercantilist state sheltering of these sectors Respondents in transition countries stressed – would lead to unwanted sensibility. We tested relative to those from developed countries – this thesis and are presenting the results below. stronger pressure of international investors on

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2.3 Is Protectionism Serving governments in the C-B M&A processes in Nationally Important order to protect the domestic economy and Companies? shareholders cause an increase in the free flow For testing the relationship between consistent of investment. Therefore the model in the form: market adjusted industrial policy and the C-B M&As' effects on strategic sectors, we exposed (1) the results of the 2009 study to the Heritage Foundation Index of Economic Freedom – was expected. The following variables were Index of Investment Freedom (IIF) for the same included in the model: economies in the same year. Following the mid- INDEXIIF(2009) – Index of Investment term character of the data collected with the freedom for chosen economies in 2009; questionnaire for the study 2009 we took the GI – government intervention in the C-B latest IIF indicators for the year 2014 and M&A processes in order to protect the included them in to the equation together with domestic economy and shareholders; the indicators of economic effects of C-B M&As SE – Strengthening of the economic as estimated by the academics interviewed five position of strategic sectors as a consequence years ago. In this way the statistical and of C-B M&A analytical quality of the first equation which The scatter plots indicated a good linear

should provide us with stylized facts was relationship between INDEXIIF and GI plus SE. proved. For the subjects of economic policy in So as to estimate a linear regression equation European countries – and especial transition we carried out econometrical tests using ones confirmation of the article thesis would be variables provided by the study 2009 together

of help when judging political decisions with with INDEXIIF. The results are organized in the their industrial policy. following three tables. Table 1 below shows the As already mentioned we first started with multiple linear regression model summary and the analysis using the IIF for 2009. Our expec- overall fit statistics. tation was that less frequent the intervention of

Tab. 1: Multiple linear regression summary

Adjusted R Std. Error of the Model R R Square Durbin-Watson Square Estimate 1 .493(a) .243 .194 .15586 2.170 Source: own

Table 1 brings multiple linear regression was between the two critical values of 1.5 < d < summary. The adjusted R2 in our model was 2.5, and therefore it can be assumed that there 0.194 with the R2 = 0.243. Thus, the linear was no first order linear autocorrelation in our regression explains 24.3% of the variance in multiple linear regression data. the data. The Durbin-Watson test d = 2.170 Table 2 shows the results of ANOVA F-test.

Tab. 2: ANOVA F-test

Model Sum of Squares df Mean Square F Sig. 1 Regression .241 2 .121 4.968 .013(b) Residual .753 31 .024 Total .994 33 Source: own

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The ANOVA F-test in Table 2 includes the evidence against the null hypothesis). In this null hypothesis that there is no linear way we can assume that a linear relationship relationship between the variables. F-test is between the variables in our model exists. highly significant (the P-value for the F test Table 3 shows coefficients of linear regression. statistic is less than 0.05, thus providing strong

Tab. 3: Coefficients

Standard. Unstandard. Coefficients Collinearity Statistics Model Coeffic. t Sig. B Std. Error Beta Tolerance VIF 1 Constant .630 .128 4.908 .000 GI -.067 .027 -.382 -2.446 .020 .999 1.001 SE .067 .033 .323 2.065 .047 .999 1.001 a Predictors: (Constant), GI,SE

b Dependent Variable: INDEXIIF(2009) Source: own

Beta coefficients from the Table 3 express hand, strengthening of the economic position of the relative importance of each independent strategic sectors as a consequence of C-B

variable in standardized form. We found that GI M&A, increases the value of INDEXIIF(2009). and SE are significant predictors and that GI According to these results the best solution for

has a higher impact on the INDEXIIF(2009) than strategic enterprises should be to enable them to SE (beta = -0.382 and beta = 0.323). In the open to the international economic environment. Table 3 also a multicollinearity test for our The second step of our research was model is presented. As the tolerance should be testing the results of the study with the IIF > 0.1 (or VIF statistics should be < 10) for all 2014. The main aim of this step was to check included variables, this requirement was whether judgments of the academic community fulfilled with achieved VIF values 1.00. to which mid-term relevance was ascribed The coefficients obtained above give the could be considered relevant also after five following equation: years following the real experience as basis of their judgement. The thesis here was the same (2) is it was for IIF 2009. We expected that values of descriptors in the linear equation will not differ essentially from the ones in 2009. Equation (2) shows that less frequent the Below we present the main results and intervention of governments in the C-B respectively descriptive statistics for the M&A processes in order to protect the domestic equation for the IIF data for 2014. Table 4 economy and shareholders cause an increase presents model summary. in the free flow of investment. On the other

Tab. 4: Model summary

Adjusted Std. Error of the Model R R Square Durbin-Watson R Square Estimate 1 .541(a) .292 .247 .15859 1.920 Source: own The determination coefficient R2 = 0.292 there is no first order linear autocorrelation in from Table 4 shows that the linear regression our multiple linear regression data. The results from explains 29.2% of the variance in the data. The ANOVA F-test are presented in the Table 5. value of the Durbin-Watson test is 1.920, so

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Tab. 5: ANOVA F-test

Model Sum of Squares df Mean Square F Sig. 1 Regression .322 2 .161 6.404 .005(a) Residual .780 31 .025 Total 1.102 33 Source: own

ANOVA F-test from Table 5 is highly between IG, SE, and INDEXIIF(2014). In Table 6 significant (F=6.404, P=0.005), thus we can coefficients for regression are presented. assume that there is a linear relationship

Tab. 6: Coefficients

Standard. Unstandard. Coefficients Collinearity Statistics Model Coeffic. t Sig. B Std. Error Beta Tolerance VIF 1 Constant .620 .131 4.747 .000 GI -.064 .028 -.351 -2.320 .027 .999 1.001 SE .093 .033 .423 2.796 .009 .999 1.001 a Predictors: (Constant), GI, SE

b Dependent Variable: INDEXIIF(2014) Source: own

In the Table 6 we see that IG and SE are C-B M&A. This, however, supports the significant predictors. Values of VIF test proves conviction that national economic policy that no multicollinearty exists. Following these reaction on inward C-B M&A flows also reflects results the equation including all previous the economic freedom in a given economy. presented variables is: Following to the fact that between the two equations only irrelevant differences in (4) descriptors as well as with statistics appear, we can conclude that the (explanatory) variables obtained through 2009 study approach are Equation 4 supports the thesis presented relevant and that the thesis could be confirmed above. It demonstrates that with less intervention even after almost five year time span. of governments in the C-B M&A the value of This could be therefore of use for Index of Investment Freedom is higher. At the consideration by the national governments same time the higher value of index is especially in European transition and pre- explained with improvement of strategic accession countries. sectors' economic position. Better value of the index thus demonstrates better environment for Conclusions strategic sectors development. The significance of the GI variable demonstrates economic Although most of studies prove positive effects policy attitude towards protection of domestic of C-B M&A we should be aware that these shareholders and companies in general. Here processes, when big enough, may influence as the matter of fact domestic and international economic goals of a country. With typically transactions cannot be distinguished and so interventionist style of economic policy in less discretionary economic policy approach biggest continental EU economies (Germany, means less intervention also in the field of France, Italy, Spain) the FDI often proves to be

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a source of disharmony between government once, establishing themselves as strategic and businesses. sectors and companies – the latter gains on The revival of interventionism (including economic strength when involved in free elements of economic nationalism) in Europe international capital flows and when might have been triggered by the liberalization government intervention for their protection and of international capital flows after adopting the for protection of their shareholders is reduced. EU Directive on takeover bids in 2004. Activist reaction of the most important EU governments References except for Great Britain in this way actually [1] BLOMSTROM, M. and PERSSON, H. Foreign demonstrated that when goals of economic Investment and Spillover Efficiency in an Under- growth and employment are concerned, they developed Economy: Evidence from the Mexican rely rather to their control over nationally Manufacturing Industry. World Development. 1983, important sectors and companies than to the Vol. 11, No. 6, pp. 493-501. ISSN 0305-750X. opening of the economy. [2] CAVES, R.E. Multinational firms, Competition Our study on inward Cc-B M&A in Europe and Productivity in Host-Country Markets. proves that the interested (academic) Economica. 1974, Vol. 41, No. 5, pp. 176-193. community has judged benefits and threats of ISSN 1468-2702. C-B M&A much less critical than real economic [3] DRIFFIELD, N. The Impact on Domestic policy. In order to prove which standing is Productivity of Inward Investment in the UK. The closer to the facts, an additional analysis by Manchester School. 2001, Vol. 69, No. 1, pp. 103-119. introducing existing international FDI indicators ISSN 1467-9957. was carried out. By using models, where our [4] EGIP. European Group for investor protection results were combined with the Index of [online]. 2005 [cit. 2007-09-22]. Available from: Investment Freedom (Heritage Foundation), we http://www.egip.org/root/index.php?page_id=128. carried out linear regression. [5] ESTRIN, S., HUGHES, K.S. and TODD, S. With the first equation the relationship Foreign Direct Investment in Central and Eastern between results of a study 2009 and Index of Europe: multinationals in transition. London: Royal Investment Freedom for 2009 and with the Institute of International Affairs, 1997. 276 p. ISBN second one the relationship between results of 978-1855674813. a study and the same Index for 2014 was [6] FRESHFIELDS BRUCKHAUS DERINGER. tested. As academics’ mission is also to retain Public takeovers in Europe [online]. 2006 [cit. robust position with current issues of economic 2007-05-04]. 56 p. (PDF). Available from: policy we presupposed in the research that http://www.freshfields.com/uploadedFiles/SiteWid their view on economic effects of inward C-B e/Knowledge/Public%20takeovers%20in%20 M&A in their home country would stay relevant Europe.pdf. for at least mid-term period, here meaning 5–10 [7] GFC/NET. Economic Patriotism/Nationalism years. Likely to Intensify According to Business Jour- The obtained equations for both periods nalists Worldwide. Business Wire [online]. Global were almost identical. As despite the financial Financial Communication Network, 2007 and economic crisis the IIF was not subject to [cit. 2007-12-09]. Available from: http://www. notable changes it enables us to conclude that allbusiness.com/trade-development/trade- nothing significant also happened in the field of development-fi nance/5420005-1.html. the C-B M&A economic effects for the host [8] KAMINSKY, G.L. International Capital Flows, economies, that would trigger economic policy Financial Stability and Growth. DESA Working protectionist action. Of course this again would Paper [online]. 2005, No. 10 [cit. 2007-03-05]. 24 be offset in the individual countries’ IIF value, p. (PDF). Available from: http://www.un.org/ which did not happen. esa/desa/papers/2005/wp10_2005.pdf. We can conclude that according to our [9] LIN, C.H. Role of Foreign Direct Investment in research C-B M&A should promote a consolidation Telecommunication Industries: A Developing of strategic sectors, thus suggesting that the Countries’ Perspective. Contemporary Mana- openness of countries has positive consequences gement Research. 2008, Vol. 4, No. 1, pp. 29-42. for the development of these sectors. So ISSN 1813-5498. basing on these results we can assume that

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Ekonomie

Abstract

DOES ECONOMIC INTERVENTIONISM HELP STRATEGIC INDUSTRIES? EVIDENCE FROM EUROPE Anita Maãek, Rasto Ovin

Although most studies proves that Cross-Border Mergers and Acquisitions (C-B M&A) cause more benefits than threats, the real economic policy in the EU countries offsets the fear that liberalization of inward C-B M&A would endanger economic position of strategic industries and thus national economic goals. After the adoption of EU Directive 2004/25/EC on Takeover Bids the era of fast growth of inward C-B M&A in the EU and consequently the era of rising interventionism so as to protect national strategic industries and companies has started. Additional stimulus for the European Union’s (EU) most developed economies to exercise interventionism was financial and economic crisis starting in 2008. Considering high ranking of employment goals and state-supported social cohesion in continental Europe, it is not surprise that interventionist reactions came from ruling parties and coalitions regardless their political orientation. By the help of the results of their 2009 empirical study on C-B M&A authors tested the relation between the results referring to C-B M&A effects on strategic sectors and the Heritage Foundation Index of Investment Freedom. With combining the results from 2009 study with Index of Investment Freedom from 2009 and in the second equation with index from 2014 authors checked if strategic sectors benefit from incoming C-B M&A when subject to the previous market oriented industrial policy. Both estimated equations proves that unlike with sheltering economic policy, when subject to market conform measures of industrial policy, strategic sectors will benefit from inward C-B M&A. By proving the statistical significant relationship between the results from 2009 study and Index from 2014 authors also proved the statistical and analytical quality of the equation from 2009. By proving statistical significance of the second equation we proved that the judgement of the academic community could be considered relevant also after five years following the real experience as basis of their judgement.

Key Words: Cross-border mergers and acquisitions, economic interventionism, strategic industries.

JEL Classification: C3, E2, F2.

DOI: 10.15240/tul/001/2014-3-001

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