Paper 1
We examine how product similarity and competition in
uence mergers and acquisitions and the ability offi rms to exploit product market synergies through
asset complementarities. Using novel text-based analysis of firm 10-K product
descriptions, we find three key results. (1) Firms are more likely to enter
mergers with firms whose language describing their assets is similar. (2) Trans-
actions in competitive product markets with similar acquirer and target firms
experience increased stock returns and real longer-term gains in cash
flows and higher growth in their product descriptions. (3) These gains are higher when
the target is less similar to the acquirer’s closest rivals, and when firms have the
potential for unique products. Our findings are consistent with firms merging
and buying assets to exploit asset complementarities and to create new prod-
ucts to increase product differentiation.
Paper 2

We study how firms differ from their competitors using new dynamic mea-
sures of product differentiation based on novel text based analysis of 50,673
product descriptions from rm 10-K statements led yearly with the Securities
Exchange Commission. These year-by-year set of rm product differentiation
measures allow us to generate a set of dynamic industry classifications and new
measures of industry structure and competition. Market structure and com-
petitiveness measures based on these new classifications better correlate with
rm profitability than do those based on SIC or NAICs classifications. Using
these new dynamic industry classifications, we examine endogenous product
differentiation. We show that rms use R&D and advertising to differentiate
themselves from competitors and increase their profitability.