Economic Behavior in Institutional Environments: The Corporate Merger Wave of the 1980s

Over the last 100 years, the United States has experienced four waves of corporate merger activity. The first occurred at the turn of the century, then again in the 1920s, the 1960s, and the 1980s. Most research on merger waves has focused on individual mergers within a wave. Our research focuses on the wave itself. We develop a theoretical model that centers on the actors who promote the mergers and on those changes in the political and economic environments that provide the resources these actors need to act. Specifically, we argue that a permissive state combined with increased access to capital market funds encourages fringe players to initiate the innovations that enable them to execute mergers. Merger waves occur when these actors become increasingly successful and their innovations are imitated throughout the business community. We provide empirical support for the model using data from the 1980's merger wave