Mergers, Innovation, and Productivity: Evidence from Japanese manufacturing firms
AbstractWe investigate the impact of merger on innovation and efficiency using a micro dataset of Japanese manufacturing firms including unlisted firms during the period of 1995-1999. We find that the acquirer's total factor productivity (TFP) decreases immediately after mergers and does not significantly recover to the pre-merger level within three years after mergers. We also find that the R&D intensity does not significantly change after mergers in spite of a significant increase in the debt-to-asset ratio. Our results suggest that the costs of business integration are large and persistent. To take into considering large integration costs, we also analyze the post-merger performance from one year after mergers, finding no significant increase in TFP or R&D intensity up to three years after mergers. Given the heterogeneity of mergers, we analyze the post-merger performance by classifying merger types. We find that the recovery of TFP after mergers is significant for mergers across industries or within the same business group, suggesting that a synergy effect works well and integration costs are small for those types of mergers.
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Bibliographic InfoPaper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 09017.
Length: 24 pages
Date of creation: Apr 2009
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-23 (All new papers)
- NEP-BEC-2009-05-23 (Business Economics)
- NEP-COM-2009-05-23 (Industrial Competition)
- NEP-EFF-2009-05-23 (Efficiency & Productivity)
- NEP-INO-2009-05-23 (Innovation)
- NEP-KNM-2009-05-23 (Knowledge Management & Knowledge Economy)
- NEP-MIC-2009-05-23 (Microeconomics)
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