Productivity Dynamics of Mergers, Acquisitions and Restructuring

A substantial share of firm entry and exit observed in register-based data reflects mergers, acquisitions, spin-offs, and other forms of corporate restructuring, instead of genuinely new firms or firm closures. This distinction is important for productivity decompositions, which typically interpret market entry and exit as manifestations of the Schumpeterian creative destruction. Using linked register-based data on Finnish manufacturing firms and employees for the period 2010–2022, we identify restructuring events through clustered worker flows, and incorporate this classification into a structural productivity decomposition framework. The results show that firms involved in restructuring events exhibit significantly higher productivity levels than genuinely entering or exiting firms. Nevertheless, the contribution of restructuring-related entry and exit to aggregate productivity growth remains modest, whereas genuine creative destruction by newly established firms and closing down make a larger positive contribution to productivity growth. Firms undertaking acquisitions exhibit a temporary decline in labor productivity around the time of acquisition, followed by a gradual recovery. These findings highlight the need to distinguish restructuring events from genuine market entry and exit when analyzing productivity dynamics.