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

  • HOSONO Kaoru
  • TSURU Kotaro

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.

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Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 09017.

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Length: 24 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:eti:dpaper:09017
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  1. Boyan Jovanovic & Peter L. Rousseau, 2008. "Mergers as Reallocation," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 765-776, November.
  2. Oliver Hart & John Moore, 1994. "Debt and Seniority: An Analysis of the Role of Hard Claims in Constraining Management," NBER Working Papers 4886, National Bureau of Economic Research, Inc.
  3. David Good & M. Nadiri & Lars-Hendrik Röller & Robin Sickles, 1993. "Efficiency and productivity growth comparisons of European and U.S. Air carriers: A first look at the data," Journal of Productivity Analysis, Springer, vol. 4(1), pages 115-125, June.
  4. 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.
  5. Hall, Bronwyn H., 1989. "TheImpact of Corporate Restructuring On Industrial Research and Development," Department of Economics, Working Paper Series qt7dw7p5dq, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  6. Vojislav Maksimovic, 2001. "The Market for Corporate Assets: Who Engages in Mergers and Asset Sales and Are There Efficiency Gains?," Journal of Finance, American Finance Association, vol. 56(6), pages 2019-2065, December.
  7. Sang V Nguyen & Robert H Mcguckin, 1993. "On Productivity and Plant Ownership Change: New Evidence From the LRD," Working Papers 93-15, Center for Economic Studies, U.S. Census Bureau.
  8. Randall Morck & Andrei Shleifer & Robert W. Vishny, 1989. "Do Managerial Objectives Drive Bad Acquisitions?," NBER Working Papers 3000, National Bureau of Economic Research, Inc.
  9. Kaoru Hosono & Masayo Tomiyama & Tsutomu Miyagawa, 2004. "Corporate governance and research and development: Evidence from Japan," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(2), pages 141-164.
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