History & Area Studies / Thematic History / Economic History & Industrialization

Why Japan’s Cotton Mills Prove: Profitability Beats Productivity in Acquisitions

In this video, we dive into a groundbreaking study from 2014 that challenges the conventional wisdom about mergers and acquisitions. Using evidence from Japan’s cotton textile industry in the late 19th and early 20th centuries, researchers discovered that it wasn’t the most productive firms buying the least productive ones. Instead, it was the most profitable firms acquiring the least profitable ones—even when the acquired factories had superior technology. The key? Demand management, not just production efficiency. By analyzing historical data, we reveal how poor sales channels and inventory mismanagement led to low profitability, and how successful acquirers turned things around by improving operations. This video explains the hidden dynamics of M&A and what modern businesses can learn from 19th-century Japan. Perfect for anyone interested in economics, business strategy, or history. Author: The study is by a team of economists, published in a leading journal.