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Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry

Author

Listed:
  • Serguey Braguinsky

    (Department of Social and Decision Sciences, Carnegie Mellon University)

  • Atsushi Ohyama

    (Graduate School of Economics and Business, Hokkaido University)

  • Tetsuji Okazaki

    (Faculty of Economics, The University of Tokyo)

  • Chad Syverson

    (University of Chicago Booth School of Business and NBER)

Abstract

We explore how changes in ownership and managerial control affect the productivity and profitability of producers. Using detailed operational, financial, management, and ownership data from the Japanese cotton spinning industry at the turn of the last century, we find a more nuanced picture than the straightforward "higher productivity buys lower productivity" story commonly appealed to in the literature. Acquired firms' production facilities were not on average any less physically productive than the plants of the acquiring firms before acquisition, conditional on operating. They were much less profitable , however, due to consistently higher inventory levels and lower capacity utilization—differences which reflected problems in managing the inherent uncertainties of demand in the industry. When these less profitable plants were purchased by more profitable establishments, the acquired plants saw drops in inventories and gains in capacity utilization that raised both their productivity and profitability levels, consistent with acquiring owner/managers spreading their better demand management abilities across the acquired capital.

Suggested Citation

  • Serguey Braguinsky & Atsushi Ohyama & Tetsuji Okazaki & Chad Syverson, 2014. "Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry," CIRJE F-Series CIRJE-F-945, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2014cf945
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • G3 - Financial Economics - - Corporate Finance and Governance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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