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Consolidating Product Lines via Mergers and Acquisitions: Evidence From the USPTO Trademark Data

Published online by Cambridge University Press:  10 March 2022

Po-Hsuan Hsu ,
Kai Li Open the ORCID record for Kai Li [Opens in a new window] ,
Xing Liu  and
Hong Wu
Po-Hsuan Hsu
Affiliation:
National Tsing Hua University College of Technology Management pohsuanhsu@mx.nthu.edu.tw
Kai Li*
Affiliation:
University of British Columbia Sauder School of Business
Xing Liu
Affiliation:
University of British Columbia Sauder School of Business xing.liu@sauder.ubc.ca
Hong Wu
Affiliation:
Fudan University School of Economics hong.wu.pitt@gmail.com
*
kai.li@sauder.ubc.ca (corresponding author)
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Abstract

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Using a new trademark-based product market competition measure and a novel trademark-merger data set over the period 1983–2016, we show that companies facing greater product market competition are more likely to be acquirers. We further show that postmerger, compared to their nonacquiring peers, acquirers consolidate their product offerings by discontinuing more existing product lines and developing fewer new product lines. Using a quasi-experiment based on bids withdrawn due to exogenous reasons helps us establish the causal effect of deal completion on product-market consolidation. We conclude that acquisitions create product market synergies by cutting overlapping product offerings to achieve cost efficiency.

Information

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 57 , Issue 8 , December 2022 , pp. 2968 - 2992
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (https://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

We are grateful for helpful comments from an anonymous referee, Kenneth Ahern, Tania Babina, Markus Baldauf, Benjamin Balsmeier, Tetyana Balyuk, René Belderbos, Shai Bernstein, Thomas Chemmanur, Tarun Chordia, Lauren Cohen, Hans Degryse, François Derrien, Michael Ewens, Mara Faccio (the editor), Lee Fleming, Rohan Gandari, Will Gornall, Clifton Green, Jarrad Harford, Jerry Hoberg, Chang-Tai Hsieh, Jessica Jeffers, Bart Leten, Gustavo Manso, Gonzalo Maturana, Roni Michaely, Christine Parlour, Gordon Phillips, Ed Rice, Jay Shanken, Ping Wang, Kuan Xu, Ting Xu, Liu Yang, Sandy Yu, Feng Zhang, and Jun Zhou, seminar participants at Dalhousie University, Emory University, KU Leuven, Iowa State University, OECD, Paris Dauphine University, and University of Utah, and conference participants at the 2019 American Finance Association Meetings, 2017 Berkeley Innovation and Finance Conference, 2017 Financial Management Association Asia/Pacific Conference, 2017 Taiwan Economics Research Conference, 2017 Second Annual CASS Mergers and Acquisitions Conference, 2017 Pacific Northwest Finance Conference, and 2017 Finance, Organizations and Markets Research Conference for their valuable comments. Yunan Liu provided excellent research assistance. Hsu acknowledges financial support from the Ministry of Science and Technology and the Ministry of Education in Taiwan (MOST109–2628-H-007–001-MY4 and MOE109J0321Q2). Li acknowledges financial support from the Centre for Innovative Data in Economics (CIDE), the Social Sciences and Humanities Research Council of Canada (Grant Number: 435–2018-0037), the Beijing Outstanding Young Scientist Program (BJJWZYJH01201910034034), and the 111 Project (B20094). Wu acknowledges financial support from the National Natural Science Foundation of China (Grant Number: 71803027). All errors are our own.

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