Scale Versus Technology—M&A Effects by Firm Size and Ex‐Post M&A Time Horizon in Korea

ABSTRACT This study aims to examine the effects of mergers and acquisitions (M&A) on technical change (TC) and the scale component (SC)—the two primary constituents of total factor productivity (TFP)—by firm size and ex‐post M&A time horizon (i.e., short‐term vs. long‐term effects). We conduct an empirical analysis on Korean firms using a covariate balancing propensity score methodology, which is the most advanced technique for propensity score matching. The main finding is that while firms can achieve technological advancements through M&A, they may not achieve optimal scale. Moreover, we find that large firms have M&A motives from a long‐term perspective and perform M&A due to technological motives, while small and medium‐sized enterprises (SMEs) have M&A motives from a short‐term perspective for a one‐point solution. This suggests that the motives of M&A are not uniform across large firms and SMEs and that they may prioritise different strategic objectives when undertaking M&A transactions.