When firms merge, do carbon emissions fall? Insights from China’s manufacturing sector

Abstract

<p>Manufacturing mergers and acquisitions (M&A) represent a market-driven mechanism for corporate restructuring that facilitates technology transfer, resource reallocation, and the exchange of management knowledge between heterogeneous corporate owners. Unlike complex multi-departmental carbon policies, M&A networks may offer a more manageable pathway for diffusing cleaner production methods across urban systems. This study examines how manufacturing M&A network centrality affects urban carbon emissions using data from 284 Chinese cities (2004–2018). We uncover an inverted U-shaped relationship between M&A network centrality and emissions, indicating that initial network integration increases emissions before deeper connections enable reductions through operational efficiency improvements and the adoption of clean technologies. Using Apple suppliers as an instrumental variable, we establish that M&A network centrality causally reduces carbon emissions. However, unconditional quantile regression reveals striking heterogeneity: emission reductions occur primarily in cities with low to moderate baseline emissions, while high-emission cities show no significant response. The temporal analysis confirms that M&A effects materialize quickly but diminish over time. These findings suggest that for cities with moderate emissions and substantial network integration, facilitating manufacturing M&A offers a cost-effective complement to traditional environmental policies. However, high-emission cities require more direct interventions beyond market-driven restructuring. This evidence highlights the need for tailored policy approaches that harness spontaneous market mechanisms while taking into account both emission contexts and network positions.<br></p>