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The role of technical efficiency in takeovers: Evidence from the French cheese industry, 1985–2000
Author(s) -
Chaaban Jad,
Réquillart Vincent,
Trévisiol Audrey
Publication year - 2005
Publication title -
agribusiness
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.57
H-Index - 43
eISSN - 1520-6297
pISSN - 0742-4477
DOI - 10.1002/agr.20064
Subject(s) - econlit , agribusiness , production (economics) , returns to scale , economics , data envelopment analysis , scale (ratio) , commodity , economies of scale , logit , industrial organization , econometrics , microeconomics , business , market economy , agriculture , ecology , mathematical optimization , physics , mathematics , medline , quantum mechanics , political science , law , biology
The paper aims to identify whether production characteristics, such as technical efficiency and returns to scale, affect takeovers. Applying a two‐stage procedure on original panel data on French cheese manufacturers, the paper first estimates firm‐specific productive efficiency and scale economies using data envelopment analysis. The paper then uses the findings of the first stage to evaluate a random effects logit model of the determinants of takeover in the French cheese industry for the period 1985–2000. The paper finds that technical efficiency is not a significant determinant of takeovers, whereas the nature of scale economies is. Firms with decreasing returns to scale (i.e., an oversized production capacity) face a higher risk of takeover. This suggests that cheese manufacturers have been seeking to expand their milk processing capacities by acquiring large firms. This proves to be an indirect consequence of the non‐transferable milk quota regime affecting the scarce milk input commodity. [EconLit citations: D24, L25, Q13]. © 2005 Wiley Periodicals, Inc. Agribusiness 21: 545–564, 2005.