Mergers and Acquisitions in the Interstate Trade Network

Using a network framework, we show that cross‐state mergers are more likely to occur in state pairs that trade more with each other. Moreover, mergers propagate across states along trade links: High merger activity in one state leads to subsequently high merger activity in its trading partner states. Exploiting state‐level shocks and oil price changes, we show that this relationship is likely to be causal. The state‐industry level analysis further indicates that merger propagation along trade links occurs not only within industries but also across industries in the supply chain. Finally, we show that the propagation effect is weaker in nontradable industries.