In their seminal work describing the decline of American industry, Robert Hayes and William Abernathy (1980) identified competitive failures in world markets (loss of market shares at home and abroad); declining productivity (in both absolute terms and relative to Japan and West Germany from 1960 to 1978); and the loss of leadership in both mature and high technology industries. While other commentators had noted the relative decline in American economic performance and cited a large number of alleged causes for this decline, the Hayes and Abernathy article was notable for citing managerial failure as being at the root of the problem. Although Hayes and Abernathy acknowledged the influence of excessive government regulation and taxation, pressures from labor unions and public interest groups, dependency on OPEC-priced oil, and capital market emphasis on short-run financial returns, they argued that Japanese and West German companies were subject to the same constraints, only more so. How then, they asked, can one explain the poorer performance of American industry by these factors? Instead, they pointed to the new management orthodoxy as deserving a major share of the blame, and provided the results of a comparative study of management attitudes in the United States, Japan, and Western Europe to substantiate their charges.'

Robert S. Harris, The Cities Service Takeover: A Case Study: Discussion, The Journal of Finance, Vol. 38, No. 2, Papers and Proceedings Forty-First Annual Meeting American Finance Association New York, N.Y. December 28-30, 1982 (May, 1983), pp. 345-347

PERHAPS of utmost importance to the longterm structure and performance of the railroad industry are the large-scale corporate mergers which are currently pending or in the planning stage. Though railroad managers and the Congress have apparently been very enthusiastic about the benefits of rail mergers,' this enthusiasm is not shared in the conclusions of retrospective studies on the topic. For instance, Gallamore (1969) and Sloss, Humphrey and Kruttner (1975) concluded that recent mergers have had little success in achieving anticipated cost savings. Unfortunately, these studies do not shed much light on the social desirability of rail reorganization as they fail to measure the benefits which accrue to shippers through mergerinduced improvements in the quality of rail service. In a recent paper, Levin and Weinberg (1979) used post-merger changes in market shares to measure the effect of mergers. They found that end-to-end mergers did increase the market shares of the firms in the sample, whereas parallel mergers did not. In their analysis, increases in market share are assumed to reflect social benefits; however, as acknowledged by the authors2 and demonstrated by Spence (1975), changes in a firm's performance are not likely to be a sufficient criterion for determining the social value of service quality improvements. In general, an analysis of railroad mergers is complicated by the fact that one is analyzing a network industry. That is, performance in the rail industry (and other network industries such as telecommunications, trucking, and electricity) is generally dependent upon operations by a number of distinct firms which jointly produce the final output. In rail freight transportation, for instance, roughly 70% of total car-miles consists of interline service (i.e., involves two or more carriers). Unfortunately, previous analyses of the rail industry have failed to incorporate two critical features of the industry: the network interdependencies among carriers and links in the network, and the effects of differences in service quality upon users of the rail system. In this paper, we explicitly recognize that rail costs and service quality are significantly affected by market competition and/or coordination among rail carriers. From this perspective, we attempt to estimate the potential consequences of rail mergers, vertical or parallel, respectively. We measure separately two classes of potential effects of rail mergers: the cost savings which might be realized by rail carriers (through increased operating efficiencies and improved capacity utilization) and the improvements in service quality which would potentially accrue to the users of the rail system. In the next section, we identify the economies which can be potentially realized through horizontal and vertical mergers. In section III we develop the framework within which the cost and service-related benefits are estimated and describe our data base. The empirical results are presented and interpreted in section IV. Finally, the implications of the results for public policy toward mergers are discussed in the concluding section.

This paper examines foreign direct investment by studying shareholder wealth gains for 1273 U.S. firms acquired during the period 1970‐1987. Three findings stand out. First, cross‐border takeovers are more frequent in research and development intensive industries than are domestic acquisitions; furthermore, in three‐fourths of cross‐border transactions the buyer and seller are in related industries. These industry patterns suggest that costs and imperfections in product markets play an important role in foreign direct investment. Second, targets of foreign buyers have significantly higher wealth gains than do targets of U.S. firms. This cross‐border effect is comparable in size to the wealth effects of all‐cash and multiple bids, two effects receiving substantial attention in the finance literature, and is robust to inclusion of these two variables. Third, while the cross‐border effect on wealth gains is not well explained by industry and tax variables, it is positively related to the weakness of the U.S. dollar, indicating a significant role for exchange rate movements in foreign direct investment.