"Die Effekte von horizontalen Fusionen und Übernahmen: Empirische Evidenz für indische Unternehmen"
Zusammenfassung der Projektergebnisse
The project analyses the determinants and effects of mergers and acquisitions (M&As) and foreign direct investment (FDI) in Indian manufacturing. For this purpose, we use detailed information on prices and quantities and apply recent methodological advances to estimate productivity, production costs, price-cost margins and product quality from firm-product level data. In the first part of the project, we analyze the effects of M&A on various outcomes of merging firms and their competitors. We find that horizontal M&As (i.e. M&As between firms active in the same product markets) are associated with an increase in average prices between 10%-15% while there is no evidence for substantial cost savings. The effects on non-merging competitors are qualitatively similar although somewhat smaller. We do not find such effects for non-horizontal mergers indicating that prices rise due to increased market power. However, we also find that product quality and research and development (R&D) spending increases within merging firms after M&As are completed. The second part of this project analyzes whether foreign multinational enterprises contribute to higher productivity in domestic Indian firms and whether the results differ between international M&As and greenfield investments (newly founded firms and production units). We provide evidence that the competitive advantage of foreign-owned firms stems from the ability to produce high-quality products at relatively low costs. Our results indicate that domestic firms benefit from this ability of foreign investors. Firms in industries that were more exposed to the presence of foreign multinationals experienced larger increases in productivity and higher reductions in marginal costs. These gains are concentrated among firms that produce products of relatively high quality to begin with. Our findings suggest that these effects are mainly due to cross-border M&As while there is little evidence for efficiency gains from greenfield investments. The third part of this project analyses the determinants and effects of vertical integration (the extent to which intermediate inputs are produced in-house rather than outsourced to unaffiliated parties). Specifically, it is analysed how import competition–induced by India’s trade liberalization–affects the incidence of integration, e.g. via vertical M&As. Our results indicate that, on average, a reduction in tariffs on final goods by 100 percentage points increases vertical integration by almost 20 percent. In contrast, a reduction in tariffs on intermediate inputs seems to lead to lower vertical integration. We provide evidence that vertical integration events are associated with lower production costs and higher price-cost margins. Reductions in output tariffs also seem to affect other activities which are likely to affect firm productivity such as R&D and business investment.
Projektbezogene Publikationen (Auswahl)
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“Import Competition and Vertical Integration: Evidence from India”, DICE Discussion Paper No. 293
Joel Stiebale, D. Vencappa
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“Foreign Direct Investment, Prices and Productivity”, DICE Discussion Paper No. 363, July 2021
Joel Stiebale, N. Ali
