Abstract
We investigate the impact of mergers and product innovation on labour productivity through a unique panel data set of roughly 2000 publicly traded U.S. manufacturing firms from 1980 to 2003. OLS estimates reveal that mergers interacted with citation-weighted patents are significantly correlated with increases in labour productivity. OLS and IV estimates of citation-weighted patent stocks with respect to firm-specific labour productivity are positive and consistently significant. Further, mergers are significantly correlated with a rise in citation-weighted patent stocks and research and development (R&D) spending. In tandem, our findings suggest that larger firms resulting from mergers spend more on innovation, which results in higher quality patents, and increased labour productivity.
Acknowledgements
We are grateful to an anonymous referee for extremely useful advice. The usual disclaimer applies.
References
Aghion, P., C. Harris, P. Howitt, and J. Vickers. 2001. “Competition, Imitation and Growth with Step-by-Step Innovation.” The Review of Economic Studies 68 (3): 467–92, https://doi.org/10.1111/1467-937x.00177.Search in Google Scholar
Aghion, P., N. Bloom, R. Blundell, R. Griffith, and P. Howitt. 2005. “Competition and Innovation. An Inverted-U Relationship.” Quarterly Journal of Economics 120 (2): 701–28. https://doi.org/10.1162/0033553053970214.Search in Google Scholar
Aghion, P., U. Akcigit, and P. Howitt. 2015. “The Schumpeterian Growth Paradigm.” Annual Reviews of Economics 7 (1): 557–75. https://doi.org/10.1146/annurev-economics-080614-115412.Search in Google Scholar
Agrawal, A., I. Cockburn, and J. McHale. 2006. “Gone but Not Forgotten: Knowledge Flows, Labor Mobility, and Enduring Social Capital.” Journal of Economic Geography 6 (5): 571–91. https://doi.org/10.1093/jeg/lbl016.Search in Google Scholar
Arellano, M., and S. Bond. 1991. “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations.” The Review of Economic Studies 58 (2): 277–98. https://doi.org/10.2307/2297968.Search in Google Scholar
Arrow, K. 1972. Economic Welfare and the Allocation of Resources for Invention. Princeton, New Jersey: Springer.10.1007/978-1-349-15486-9_13Search in Google Scholar
Ashenfelter, O., D. Hosken, and M. Weinberg. 2009. “Generating Evidence to Guide Merger Enforcement.” In CEPS Working Paper No. 183.10.3386/w14798Search in Google Scholar
Baumann, J., and A. Kritikos. 2016. “The Link between R&D, Innovation and Productivity: Are Micro Firms Different?” Research Policy 45 (6): 1263–74. https://doi.org/10.1016/j.respol.2016.03.008.Search in Google Scholar
Benavente, J. 2006. “The Role of Research and Innovation in Promoting Productivity in Chile.” Economics of Innovation and New Technology 15 (4): 301–15. https://doi.org/10.1080/10438590500512794.Search in Google Scholar
Blonigen, B., and J. Pierce. 2016. “Evicence for the Effects of Mergers on Market Power and Efficiency.” In National Bureau of Economic Research Working Paper No. 22750.10.3386/w22750Search in Google Scholar
Blundell, R., R. Griffith, and J. VanReenen. 1999. “Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms.” The Review of Economic Studies 66 (3): 529–54. https://doi.org/10.1111/1467-937x.00097.Search in Google Scholar
Bond, S., and I. Guceri. 2017. “R&D and Productivity: Evidence from Large UK Establishments with Substantial R&D Activities.” Economics of Innovation and New Technology 26 (1): 108–20. https://doi.org/10.1080/10438599.2016.1203525.Search in Google Scholar
Braguinsky, S., A. Ohyama, T. Okazaki, and C. Syverson. 2015. “Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry.” The American Economic Review 105 (7): 2086–119. https://doi.org/10.1257/aer.20140150.Search in Google Scholar
Crepon, B., E. Duguet, and J. Mairesse. 1998. “Research, Innovation And Productivity: An Econometric Analysis At the Firm Level.” Economics of Innovation and New Technology 7 (1): 115–58. https://doi.org/10.1080/10438599800000031.Search in Google Scholar
Crowley, F., and P. McCann. 2018. “Firm Innovation and Productivity in Europe: Evidence from Innovation-Driven and Transition-Driven Economies.” Applied Economics 50 (11): 1203–21. https://doi.org/10.1080/00036846.2017.1355543.Search in Google Scholar
DeLoecker 2009. “Product Differentiation, Multi-Product Firms and Estimating the Impact of Trade Liberalization on Productivity.” In Working Paper. Princeton University.Search in Google Scholar
DeLoecker, J., and C. Syverson. 2021. “An Industrial Organization Perspective on Productivity.” In Handbook of Industrial Organization, Vol. 4, 141–223. Elsevier.10.1016/bs.hesind.2021.11.003Search in Google Scholar
Dunne, T., S. Klimek, and J. Schmitz. 2008. “Does Foreign Competition Spur Productivity? Evidence from Post WWII U.S. Cement Manufacturing.” In Working Paper. Federal Reserve Bank of Minneapolis.Search in Google Scholar
Duso, T., L. H. Roller, and J. Seldeslachts. 2014. “Collusion through Joint R&D: An Empirical Assessment.” The Review of Economics and Statistics 96 (2): 349–70. https://doi.org/10.1162/rest_a_00367.Search in Google Scholar
Entezarkheir, M., and A. Sen. 2018. “Market Value, Market Share, and Mergers: Evidence from a Panel of U.S. Firms.” Managerial and Decision Economics 39 (4): 498–511. https://doi.org/10.1002/mde.2924.Search in Google Scholar
Geroski, P. 1990. “Entry, Innovation and Productivity Growth.” The Review of Economics and Statistics 71 (4): 490–578. https://doi.org/10.2307/1928098.Search in Google Scholar
Giroud, X., and H. Mueller. 2010. “Does Corporate Governance Matter in Comeptitive Industries?” Journal of Financial Economics 95 (1): 312–31. https://doi.org/10.1016/j.jfineco.2009.10.008.Search in Google Scholar
Griffith, R., E. Huergo, J. Mairesse, and B. Peters. 2006. “Innovation and Productivity Across Four European Countries.” Oxford Review of Economic Policy 22 (4): 483–98. https://doi.org/10.1093/oxrep/grj028.Search in Google Scholar
Griliches, Z. 1979. “Issues in Assessing the Contribution of Research and Development to Productivity Growth.” The Bell Journal of Economics 10 (1): 92–116. https://doi.org/10.2307/3003321.Search in Google Scholar
Hall, B. 2011. “Innovation and Productivity.” In National Bureau of Economic Research Working Paper No. 17178.Search in Google Scholar
Hall, B., and J. Mairesse. 1995. “Exploring the Relationship between R&D and Productivity in French Manufacturing Firms.” Journal of Econometrics 65 (1): 263–93. https://doi.org/10.1016/0304-4076(94)01604-x.Search in Google Scholar
Hall, B., and P. Mohnen. 2013. “Innovation and Productivity: An Update. Innovation and productivity: An update.” Eurasian Business Review 3 (1): 47–65. https://doi.org/10.14208/bf03353817.Search in Google Scholar
Hall, B., and M. Trajtenberg. 2004. “Uncovering GPTs Using Patent Data.” The Journal of Economic History 64 (1): 61–99.10.3386/w10901Search in Google Scholar
Hall, B., and K. Vopel. 1997. “Innovation, Market Share, and Market Value.” Also available at http://elsa.berkeley.edu/∼bhhall/papers/HallVopel97.pdf.Search in Google Scholar
Hall, B., and R. Ziedonis. 2001. “The Patent Paradox Revisited: An Empirical Study of Patenting in the Semiconductor Industry, 1979–1995.” The RAND Journal of Economics 32 (1): 101–28.10.2307/2696400Search in Google Scholar
Hall, B., A. Jaffe, and M. Trajtenberg. 2000. “Market Value and Patent Citations: A First Look.” In National Bureau of Economic Research Working Paper No. 7741.10.3386/w7741Search in Google Scholar
Hall, B., A. Jaffe, and M. Trajtenberg. 2005. “Market Value and Patent Citations.” The RAND Journal of Economics 36 (1): 16–38.Search in Google Scholar
Hall, B., G. Thoma, and S. Torrisi. 2007. “The Market Value of Patents and R&D: Evidence from European Firms.” In National Bureau of Economic Research Working Paper No. 13426.10.3386/w13426Search in Google Scholar
Hall, B., F. Lotti, and J. Mairesse. 2009. “Innovation and Productivity in SMEs: Empirical Evidence for Italy.” Small Business Economics 33 (1): 13–33. https://doi.org/10.1007/s11187-009-9184-8.Search in Google Scholar
Hansen, L. 1982. “Large Sample Properties of Generalized Method of Moments Estimators.” Econometrica 50 (4): 1029–54. https://doi.org/10.2307/1912775.Search in Google Scholar
Harrison, R., J. Jaumandreu, J. Mairesse, and B. Peters. 2014. “Does Innovation Stimulate Employment? A Firm-Level Analysis Using Comparable Micro-data from Four European Countries.” International Journal of Industrial Organization 35 (1): 29–43. https://doi.org/10.1016/j.ijindorg.2014.06.001.Search in Google Scholar
Hasan, I., C. Hoi, Q. Wu, and H. Zhang. 2020. “Is Social Capital Associated with Corporate Innovation? Evidence from Publicly Listed Firms in the US.” Journal of Corporate Finance 62 (1): 1–27. https://doi.org/10.1016/j.jcorpfin.2020.101623.Search in Google Scholar
Heshmati, A., and H. Loof. 2002. “Knowledge Capital and Performance Heterogeneity: A Firm-Level Innovation Study.” International Journal of Production Economics 76 (1): 61–85. https://doi.org/10.1016/s0925-5273(01)00147-5.Search in Google Scholar
Heshmati, A., and H. Loof. 2006. “On the Relationship between Innovation and Performance: A Sensitivity Analysis.” Economics of Innovation and New Technology 15 (4): 317–44. https://doi.org/10.1080/10438590500512810.Search in Google Scholar
Holmes, T., and J. Schmitz. 2010. “Competition and Productivity: A Review of Evidence.” Annual Review of Economics 2 (1): 619–42. https://doi.org/10.1146/annurev.economics.102308.124407.Search in Google Scholar
Jaffe, A., and M. Trajtenberg. 2002. Patent, Citations, and Innovations: A Window on the Knowledge Economy. Cambridge: MIT Press.10.7551/mitpress/5263.001.0001Search in Google Scholar
Klomp, L., and G. Leeuwen. 2006. “On the Contribution of Innovation to Multi-Factor Productivity Growth.” Economics of Innovation and New Technology 15 (4): 367–90. https://doi.org/10.1080/10438590500512927.Search in Google Scholar
Kulick, R. 2017. “Ready to Mix: Horizontal Mergers, Prices, and Productivity.” In US Census Bureau Center for Economic Studies Paper No.CES-WP-17-38.Search in Google Scholar
Lotti, F., and E. Santarelli. 2001. “Linking Knowledge to Productivity: A Germany-Italy Comparison Using the CIS Database.” Empirica 28 (1): 293–317. https://doi.org/10.1023/a:1011871306878.10.1023/A:1011871306878Search in Google Scholar
Matsa, D. 2009. “Competition and Product Quality in the Supermarket Industry.” In Working Paper. Department of Finance, Northwestern University.10.2139/ssrn.1440414Search in Google Scholar
Moeller, S., F. Schlingeman, and R. Stulz. 2004. “Firm Size and the Gains from Acquisitions.” Journal of Financial Economics 73 (1): 201–28. https://doi.org/10.1016/j.jfineco.2003.07.002.Search in Google Scholar
Nickell, S. 1996. “Competition and Corporate Performance.” Journal of Political Economy 104 (4): 724–46. https://doi.org/10.1086/262040.Search in Google Scholar
Noel, M., and M. Schankerman. 2013. “Strategic Patenting and Software Innovation.” The Journal of Industrial Economics 61 (3): 481–520. https://doi.org/10.1111/joie.12024.Search in Google Scholar
Pepall, L., D. Richards, and G. Norman. 2011. Contemporary Industrial Organization: A Quantitative Approach. Hoboken, New Jersey: John Wiley & Sons.Search in Google Scholar
Raymond, W., J. Mairesse, P. Mohnen, and F. Palm. 2015. “Dynamic Models of R&D, Innovation and Productivity: Panel Data Evidence for Dutch and French Manufacturing.” European Economic Review 78 (1): 285–306. https://doi.org/10.1016/j.euroecorev.2015.06.002.Search in Google Scholar
Riordan, M. 1992. “Regulation and Preemptive Technology Adoption.” The RAND Journal of Economics 23 (3): 334–49. https://doi.org/10.2307/2555866.Search in Google Scholar
Schmitz, J. 2005. “What Determines Productivity? Lessons from the Dramatic Recovery of the US and Canadian Iron Ore Industries Following Their Early 1980s Crisis.” Journal of Political Economy 113 (3): 582–625. https://doi.org/10.1086/429279.Search in Google Scholar
Schulz, N. 2007. “Review of the Literature on the Impact of Mergers on Innovation.” In ZEW Discussion Paper No. 07–061.10.2139/ssrn.1023545Search in Google Scholar
Schumpeter, J. 1934. The Theory of Economic Development. Cambridge: Harvard University Press.Search in Google Scholar
Schumpeter, J. 1942. Capitalism, Socialism and Democracy. New York: Harper & Bros.Search in Google Scholar
Shapiro, C. 2001. “Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting.” Innovation Policy and the Economy 1: 119–50. https://doi.org/10.1086/ipe.1.25056143.Search in Google Scholar
Shapiro, C. 2012. “Competition and Innovation: Did Arrow Hit the Bull’s Eye?” In The Rate and Direction of Inventive Activity Revisited, 361–404. Chicago: University of Chicago Press.10.7208/chicago/9780226473062.003.0011Search in Google Scholar
Syverson, C. 2004. “Market Structure and Productivity: A Concrete Example.” Journal of Political Economy 112 (6): 1181–222. https://doi.org/10.1086/424743.Search in Google Scholar
Woltjer, G., M. vanGalen, and K. Logatcheva. 2019. “Industrial Innovation, Labour Productivity, Sales and Employment.” International Journal of the Economics of Business 28 (1): 89–113, https://doi.org/10.1080/13571516.2019.1695448.Search in Google Scholar
© 2023 Walter de Gruyter GmbH, Berlin/Boston
Articles in the same Issue
- Frontmatter
- Research Articles
- Overconfidence and Public Intoxication Arrest: Evidence from a University Town Police Log
- The Changing Determinants of Juvenile Crime
- Failing Young and Temporary Workers? The Impact of a Disruptive Crisis on a Dual Labour Market
- Productivity, Innovation Spillovers, and Mergers: Evidence from a Panel of U.S. Firms
- Trade Policies and FDI with an Endogenous Market Structure
- Is There a Business Cycle Effect on the Incidence of Dual Job Holding?
- The Impact of Environmental Taxation on Wage Inequality in the Presence of Subsidizing Renewable Energy
- The Competitive Foundations of Price Cap Regulation
- Letters
- Exploring the Existence of a Short-Run Kuznets Curve: Does the Fourth Industrial Revolution Affect Income distribution?
- MRS Functions and the Pareto Interval in Public Good Provision
- Optimal Imprisonment with General Enforcement of Law
- Immigration and Perceived Social Position. Insights from an Unintended Survey Experiment
Articles in the same Issue
- Frontmatter
- Research Articles
- Overconfidence and Public Intoxication Arrest: Evidence from a University Town Police Log
- The Changing Determinants of Juvenile Crime
- Failing Young and Temporary Workers? The Impact of a Disruptive Crisis on a Dual Labour Market
- Productivity, Innovation Spillovers, and Mergers: Evidence from a Panel of U.S. Firms
- Trade Policies and FDI with an Endogenous Market Structure
- Is There a Business Cycle Effect on the Incidence of Dual Job Holding?
- The Impact of Environmental Taxation on Wage Inequality in the Presence of Subsidizing Renewable Energy
- The Competitive Foundations of Price Cap Regulation
- Letters
- Exploring the Existence of a Short-Run Kuznets Curve: Does the Fourth Industrial Revolution Affect Income distribution?
- MRS Functions and the Pareto Interval in Public Good Provision
- Optimal Imprisonment with General Enforcement of Law
- Immigration and Perceived Social Position. Insights from an Unintended Survey Experiment