Fisher College of Business logo

When nationalism is a negative

Published: 2013-10-07

Isil Erel

Associate Professor Isil Erel

Was it surprising that staunch U.S. opposition to a Chinese oil company's bid to buy Unocal in 2005 ultimately nullified the purchase? Not according to research by Fisher's Isil Erel. She found that nationalistic sentiments by domestic governments can stand in the way of competition in acquisitions depending on the nationality of the acquiring company.

The study, which examined data on government reactions to individual merger attempts in 15 European Union countries from 1997 to 2006, found:

  • Domestic governments were more likely to support domestic acquirers and oppose foreign ones, even though the EU treaty did not provide individual governments the jurisdiction to rule in merger attempts on the basis of nationality
  • Nationalism not only has a direct impact on the outcome of a merger, but it has an indirect deterrent effect on future foreign bids for other firms in that country

Erel's study also concluded that nationalism has helped dictate direct government action, as domestic governments have actively blocked acquisitions by supporting the creation of domestic companies too large for foreign purchase.