The effect of mergers on efficiency and productivity of public transport services

Merger is a process whereby two or more companies merge into one company to strengthen their market positions. Merger in the bus transport sector has been prevalent in Europe, and elsewhere, since the early 1990s. A question rarely addressed by researchers of transportation is the extent to which mergers lead to efficiency by which services are provided to the public. This is the substantive issue in this paper in which Norwegian data are used to assess the impact that mergers have on the performances of bus companies. The data cover the period 1995–2002; 1995–1998 are the pre-mergers years and the post-merger years are 1999–2002. The framework for the analyses is that of data envelopment analysis and the Malmquist productivity index (MPI) to investigate the impacts of mergers on efficiency and productivity growth, respectively. It is found that: (1) there is great potential for efficiency and productivity improvements in the bus industry; (2) mergers outperformed non-mergers as far as scale efficiency was concerned; and (3) the merger process led to productivity improvements in the post-merger periods for the reasons that merged companies utilized their scale economies to improve efficiencies while the non-mergers significantly became more technically innovative in order to be competitive. These results are an asset to the less-explored field of the impact of mergers in transportation.