The impacts of M&A on employment and labor productivity in Japan

Whether the active M&A in Japan has brought about positive or negative impacts on the volume of employment is not only the concern of each firm, but also the center of national interests in the context of national industrial policies. M&A activities, however, vary in terms of micro behavior of each firm such as motivation, management and organization as well as of the industrial category that each firm belongs to, and the employment consequences may differ depending on the types of firms’ micro behavior and the industrial sectors. This chapter tried to come up with some aggregated consequences of M&A in Japan on employment volume on empirical bases, by the M&A categories in which we take firms’ behaviors and industrial sectors into consideration to maximum extent. To be specific, we examined employment-effects of M&A in Japan by the deal type (merger and acquisition) and by the sector (manufacturing and non-manufacturing), tracing the effects in the long term, using large dataset with 9,880 sample firms and 2,530 M&A cases for the period from 1995 to 2008. Our main findings were: the “acquisition” with the key role of “extension and growth” proved to have positive effects in the dynamic terms on target firms’ employment, mainly in manufacturing sector with high labor productivity. On the other hand, the “merger” with key function of “consolidation” turned out to have negative impacts dynamically on post-merger firms’ employment, mainly in non-manufacturing sector with low labor productivity. The strategic implication might to be that the different employment responses to M&A events between manufacturing and non-manufacturing reflect the difference in labor productivity between them, i.e. the dual structure of Japanese economy.