Working Paper: NBER ID: w30230
Authors: Rocco Macchiavello; Ameet Morjaria
Abstract: Well-functioning markets allocate assets to owners that improve firms’ management and performance. We study the effects of ownership changes on coffee mills in Rwanda – an industry in which managing relationships with farmers and seasonal workers is important and that has seen many ownership changes in recent years. We combine administrative data, a survey panel of mills and an original survey of acquirers that allows us to construct acquirer-specific and target-specific control groups. A difference-in-differences design reveals that ownership changes do not improve performance unless the mill is acquired by a foreign firm. Our preferred interpretation – supported by detailed survey evidence that considers alternative hypotheses – is that foreign firms successfully implement management changes in key operational areas. Upon acquisition, both domestic and foreign owned mills attempt to implement similar changes, but domestic firms face resistance from workers and farmers. Domestic owners have relationships with their local communities, which can create opportunities to establish new mills and acquire existing ones. However, these same relationships create pressure to maintain status-quo relational arrangements, which makes it harder to implement managerial changes.
Keywords: Acquisitions; Management; Efficiency; Coffee Industry; Rwanda
JEL Codes: D24; G32; G34; L25; N57; O12; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| foreign ownership (F23) | improved performance (D29) |
| ownership changes (G32) | improved performance (only by foreign firms) (F23) |
| domestic ownership (F23) | resistance to management changes (M54) |
| domestic ownership (F23) | existing relational arrangements complicate management changes (L14) |
| foreign ownership (F23) | increase in coffee cherries sourced (Q37) |
| foreign ownership (F23) | improved capacity utilization (D24) |
| domestic ownership (F23) | lower capacity utilization (D24) |