Role of Acquisitions in chains:
Our cohort analysis has shown that each cohort of Mega firms has grown rapidly over the last several decades, we now explore the role of acquisitions of existing establishments versus entry of new establishments in this growth. To gain some perspective on the relevance of acquisitions for Mega firms, Table 5 provides summary statistics on the patterns of acquisitions and divestitures. It shows the cumulative totals of acquisitions and divestitures of establishments over the 1977-2002 period for the 2002 Mega firms. We find that 28 percent of 2002 Mega firms did not have any acquisitions over the 25 year period and 31 percent acquired only one establishment. 60 percent did not have any divestitures over the 25 year period and 16 percent had only one. Given these patterns of acquisition, we now turn to the growth patterns of these two different groups. Here we repeat the cohort analysis but break a given cohort into two groups: those firms that added at least one establishment via an acquisition over the 25 year horizon and those that did not. The log number of establishments per firm by cohort of the 2002 Mega firms for firms that did not acquire an existing establishment while the lower panel shows the equivalent pattern for those firms with acquisitions. While both groups show rapid growth, 9 A simple regression analysis at the firm level could shed more direct light on this question and we plan this in future drafts.
24 there are distinct differences in the patterns. ConsMore…ider the 1977 cohort, for example. The 2002 Mega firms from the 1977 cohort that only increased the number of establishments via entry of establishments (true births) started with a substantially smaller number of establishments (around 7 in 1977) but exhibited phenomenal growth of almost 300 log points. For the same cohort that had at least one acquisition they started substantially larger (about 50 establishments) but also exhibited rapid growth of around 200 log points. This same qualitative pattern is repeated for other cohorts. Thus, the group that used only establishment entry grew faster than the group that used acquisitions, although the latter group is clearly larger especially for the oldest cohort. We should note in interpreting this pattern that even the group that had acquisitions likely grew largely via establishment entry. Almost 80 percent of job creation at the establishment level for Mega firms is via establishment entry.10 Figure 12 shows the equivalent pattern now focusing on log employment per firm. The same qualitative pattern. The firms that did not have an acquisition tarted smaller and grew more rapidly. Figure 13 looks at these patterns by the number of states he firm is operating in. Again, the same basic pattern emerges. The firms without cquisitions start with a substantially smaller number of states but grow more rapidly. By 2002, those ith acquisitions are in slightly more states but those without acquisitions have largely caught p in terms of the number of states.
About 72 percent of 2002 Mega firms had at least one acquisition over the time period so they are the dominant group. Moreover, they are also larger than 10 In future drafts, we will explore empirical decompositions of the growth patterns of the different cohorts identifying the contribution of acquisitions, establishment entry and the like.