Technological Distance and Post-Merger Performance: Evidence on Labor Market Frictions from China

Abstract

In the context of technology-driven mergers and acquisitions, how technological distance between acquirers and targets shapes post-merger operating performance has become an important issue in corporate finance and industrial organization research. This paper studies how technological distance between acquirers and targets affects acquirers’ post-merger operating performance, and whether employee bargaining conditions shape this relationship. Using a Chinese listed-firm panel from 2017 to 2024, we employ a triple difference estimation to show that: First, acquirers experience lower return on assets (ROA) after deal completion. Second, the post-merger ROA decline is more pronounced among high-technology-gap acquirers. Third, the triple interaction of the post-merger indicator, technological distance, and bargaining conditions reaches statistical significance only when deals completed in 2020 are excluded. Continuous full-sample estimates remain sensitive to specification. These findings provide supportive evidence that technological distance and labor-market frictions jointly shape post-merger operating performance.