Synergy or Negative Synergy? Foreign Acquisition and Firm Productivity in Japan

This paper investigates the impact of cross‐border mergers and acquisitions (M&A) on the post‐acquisition productivity of domestic firms. New panel data on the entry, duration, and exit of acquired domestic firms are constructed to measure the post‐acquisition period accurately. A staggered difference‐in‐differences (DiD) framework is employed to account for variation in acquisition timing and to estimate the average treatment effects of foreign acquisition. Conventional two‐way fixed effects regressions show significantly positive productivity effects. However, the staggered DiD approach yields statistically insignificant estimates for the productivity effects, suggesting neither productivity gains nor adverse effects for acquired firms. Even after accounting for general acquisition effects, foreign ownership changes have no significant productivity effects. Given the potential bias in the conventional DiD, it is crucial to address heterogeneous treatment effects of foreign acquisition.