Do foreign mergers and acquisitions boost firm productivity?
International Business Review, Vol. 26, Issue 6, December 2017, pp.1124–1140, 2017
This paper examines the causal link between foreign acquisitions and firm productivity in the UK.
The productivity of foreign-acquired firms depends on characteristics of acquiring and acquired firms.
Productivity gains are linked to acquisitions by foreign firms operating in industries intensive in R&D.
Productivity gains are less likely when foreign acquirers operate in marketing-intensive industries
This paper examines the causal relationship between foreign mergers and acquisitions (M&A) and the productivity of acquired firms using micro-data from the UK over the period 1999–2007. Our results suggest a significant heterogeneity in the total factor productivity (TFP) effects of foreign M&A at the industry level. Overall, we uncover a systematic pattern of post-acquisition TFP effects that is consistent with the most recent theoretical models of firm heterogeneity and cross-border mergers and acquisitions as mode of foreign entry. Furthermore, we find positive aggregate effects on labor productivity due to capital deepening but not due to changes in TFP.