Corporate ownership transfer and urban economic growth: A study of manufacturing M&As in China

Mergers & Acquisitions (M&As) are strategic business transactions that combine the ownership of one firm with another, typically to achieve synergies, growth, and diversification. However, the spatial implications of transferring corporate control between cities have been largely overlooked. This article examines the impact of such spatial transfer on urban economic growth, focusing on the restructuring of the manufacturing industry in China. Three types of M&As are distinguished: horizontal, vertical, and conglomerate. Drawing on an instrumental variable analysis of 10,316 M&A transactions from 2004 to 2018, we find that vertical M&As that integrate the supply chain foster urban economic growth, while conglomerate M&As that diversify into unrelated businesses have a negative impact. Furthermore, based on the network properties of M&A flows, the positive effects of vertical M&As is stronger for acquirer cities compared to receiver cities, highlighting the need for place-based financial regulations to address regional disparities in China.