Metropolitan Size and Corporate Merger Behavior

Abstract

Firms' headquarters in larger urban areas are shown to be more active in the merger process and more likely to be predators than firms located in smaller places. The larger the metropolitan area, the stronger the tendencies. The findings are attributable to (1) the disproportionate presence of large corporations in large urban areas and (2) efficiency advantages of large metropolitan locations, which include face-to-face communications, establishing and maintaining business relationships, maintaining interurban linkages, and attracting top talent. The shift of corporate headquarters away from smaller places has adversely affected the economies of those regions through decreased employment, income loss, and a decline in future development prospects. The spatial asymmetries have implications for economic development policy.