Learning by Doing in Mergers and Acquisitions

In his classic 1962 paper, “The Economic Implications of Learning by Doing,” Nobel laureate Kenneth J. Arrow argued that firms can gain proficiency through the repetition of activity. Since then, learning by doing, or LBD, has been widely studied across business and economics disciplines. Researchers have come to realize that firms can obtain significant cumulative experience and achieve efficiency in operations, production, and innovations using LBD (e.g., Irwin and Klenow, 1994; Jovanovic and Nyarko, 1996; Beck and Wu, 2006).

In a new study, we revisit the LBD hypothesis in the context of mergers and acquisitions (M&A). We argue that firms … Read more