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Mergers as Reallocation

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Author Info

  • Boyan Jovanovic

    (New York University)

  • Peter L. Rousseau

    (Vanderbilt University)

Abstract

We model merger waves as reallocation waves, and argue that mergers spread new technology in a way that is similar to that of the entry and exit of firms. We focus on two periods: 1890-1930, during which electricity and the internal combustion engine spread through the U.S. economy, and 1970-2000-the Information Age. As the model implies, reallocation did rise during both epochs. The model also implies that exits should lead mergers during a transition, but this seems to have happened more emphatically in the electrification epoch. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/rest.90.4.765
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Bibliographic Info

Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 90 (2008)
Issue (Month): 4 (November)
Pages: 765-776

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Handle: RePEc:tpr:restat:v:90:y:2008:i:4:p:765-776

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  1. Frank R. Lichtenberg & Donald Siegel, 1987. "Productivity and Changes in Ownership of Manufactoring Plants," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 643-684.
  2. Boyan Jovanovic & Peter L. Rousseau, 2002. "The Q-Theory of Mergers," NBER Working Papers 8740, National Bureau of Economic Research, Inc.
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  5. Jeremy Greenwood & Boyan Jovanovic, 1999. "The IT Revolution and the Stock Market," NBER Working Papers 6931, National Bureau of Economic Research, Inc.
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  12. Robert H. McGuckin & Sang V. Nguyen, 1995. "On Productivity and Plant Ownership Change: New Evidence from the Longitudinal Research Database," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 257-276, Summer.
  13. Boyan Jovanovic & Serguey Braguinsky, 2004. "Bidder Discounts and Target Premia in Takeovers," American Economic Review, American Economic Association, vol. 94(1), pages 46-56, March.
  14. David, P.A., 1989. "Computer And Dynamo: The Modern Productivity Paradox In A Not-Too Distant Mirror," The Warwick Economics Research Paper Series (TWERPS) 339, University of Warwick, Department of Economics.
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