Merger Motives and Technology Deployment: A Retrospective Evaluation

Abstract

The nature of post-merger technological progress outcomes is unclear, with theoretical and empirical literature being inconclusive and equivocal. We contend that merger motives materially drive post-merger outcomes and that post-merger outcomes vary significantly because merger motives vary. Hence, assessments of post-merger outcomes should take into account such motives, by the use of suitable statistical constructs. Our retrospective study has empirically assessed post-merger technology deployment patterns in the US telecommunications industry over a considerable recent historical period of major institutional changes. The events have provided information enabling us to conduct a detailed evaluation of the relative outcomes of differently motivated mergers under clean natural experiment conditions. Mergers have been classified as those undertaken for consolidation, financial, and market exploitation reasons. We have found consolidation and market exploitation motivated mergers to have had a positive impact, resulting in materially greater technology deployment outcomes for firms experiencing these mergers. The largest category of mergers that the firms have engaged in have been of the liquidity-seeking type, and such liquidity-seeking mergers have resulted in materially lower levels of technology deployment outcomes. On balance, we unequivocally conclude that negative lower technology deployment outcomes have outweighed the positive higher technology deployment outcomes. Such results should meaningfully influence agencies’ approaches in deciding whether or not to permit important sector mergers under review.