Acquisitions, markups, efficiency, and product quality:Evidence from India

Stiebale, Joel and Vencappa, Dev (2018). Acquisitions, markups, efficiency, and product quality:Evidence from India. Journal of International Economics, 112 , pp. 70-87.

Abstract

This paper uses a rich panel data set of Indian manufacturing firms to analyze the effects of domestic and international acquisitions on various outcomes at target firm and product level. We apply recent methodological advances in the estimation of production functions together with information on prices and quantities to estimate physical productivity, markups, marginal costs and proxies for product quality. Using a propensity score reweighting estimator, we find that acquisitions are associated with increases in quantities and markups and lower marginal costs on average. These changes are most pronounced if acquirers are located in technologically advanced countries. We also provide evidence that the quality of products increases while quality-adjusted prices fall upon acquisitions. Our results indicate that knowledge transfer from foreign acquirers to domestic firms, predicted by theories of multinational firms, can materialize in both cost- and quality-based gains and benefit both firms and consumers.

Publication DOI: https://doi.org/10.1016/j.jinteco.2018.02.005
Divisions: Aston Business School
Aston Business School > Economics, Finance & Entrepreneurship
Additional Information: © 2018, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
Uncontrolled Keywords: Foreign ownership,Markups,Mergers and acquisitions,Multi-product firms,Product quality,Productivity,Finance,Economics and Econometrics
Full Text Link: http://linkingh ... 022199618300230
Related URLs: http://www.scop ... tnerID=8YFLogxK (Scopus URL)
https://www.sci ... 0230?via%3Dihub (Publisher URL)
Published Date: 2018-05-01
Authors: Stiebale, Joel
Vencappa, Dev ( 0000-0002-1749-6669)

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