Mergers and organizational disruption: Evidence from the US airline industry

Author:

González Julia1,Lemus Jorge2,Marshall Guillermo3ORCID

Affiliation:

1. Cornerstone Research San Francisco California USA

2. Department of Economics University of Illinois at Urbana‐Champaign Champaign Illinois USA

3. Sauder School of Business University of British Columbia Vancouver British Columbia Canada

Abstract

AbstractMerger‐specific efficiencies alleviate anticompetitive concerns of horizontal mergers. However, organizational challenges inherent in mergers pose a threat to achieving these efficiencies and could negatively impact the merged firm's productivity and market outcomes. We separately measure the organizational and strategic effects of mergers on quality provision using administrative data from the US airline industry, leveraging an industry‐specific regulation. We find that organizational challenges (e.g., combining workforces) cause a significant reduction in the quality supplied by a merged firm. In contrast, strategic effects (e.g., market strategy) have a minor impact on quality. Also, we find that a merger can reduce the performance of both merging firms. Our results suggest a merger's organizational challenges create uncertain efficiency gains.

Funder

Social Sciences and Humanities Research Council of Canada

Publisher

Wiley

Subject

Management of Technology and Innovation,Strategy and Management,Economics and Econometrics,General Business, Management and Accounting,Colloid and Surface Chemistry,Physical and Theoretical Chemistry

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