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Mergers, Innovation, and Productivity: Evidence from Japanese manufacturing firms

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  • HOSONO Kaoru
  • TAKIZAWA Miho
  • TSURU Kotaro

Abstract

We 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.

Suggested Citation

  • HOSONO Kaoru & TAKIZAWA Miho & TSURU Kotaro, 2009. "Mergers, Innovation, and Productivity: Evidence from Japanese manufacturing firms," Discussion papers 09017, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:09017
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    References listed on IDEAS

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    Cited by:

    1. Walter Park & Ralph Sonenshine, 2012. "Impact of Horizontal Mergers on Research & Development and Patenting: Evidence from Merger Challenges in the U.S," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 143-167, March.
    2. INOUE Kotaro & NARA Saori & YAMASAKI Takashi, 2013. "Are Japanese Acquisitions Efficient Investments?," Discussion papers 13085, Research Institute of Economy, Trade and Industry (RIETI).

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