Intensifying geopolitical turmoil has revealed the fragility of international production networks. This paper demonstrates how multinational firms are redefining their organizational boundaries by examining cross-border mergers and acquisitions (M&A’s) as a lever for restructuring global production networks in turbulent times. Combining comprehensive data from cross-border M&A transactions and US input-output tables, the paper provides robust evidence that rising economic policy uncertainty compels firms to deepen vertical integration by acquiring targets situated at more distant stages of the value chain. Regression estimates suggest that heightened disruption risk is significantly associated with multinational firm integration patterns.
Alfaro et al. (Fri,) studied this question.