Working Paper: NBER ID: w22848
Authors: Laurent Fresard; Ulrich Hege; Gordon Phillips
Abstract: We investigate the role of industry specialization in horizontal cross-border mergers and acquisitions. We find that acquirers from more specialized industries in a country are more likely to buy foreign targets in countries that are less specialized in these same industries. The role of industry specialization in foreign acquisitions is more prevalent when contracting inefficiencies and exporting costs limit arms' length relationships. The economic gains in cross-border deals are larger when specialized acquirers purchase assets in less specialized industries. These results are consistent with an internalization motive for foreign acquisitions, through which acquirers can apply localized intangibles on foreign assets.
Keywords: Cross-border acquisitions; Industry specialization; Internalization theory; Mobile intangible advantages
JEL Codes: D22; D4; D53; G34; L1; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| difference in industry specialization (L69) | flow of cross-border acquisitions (F23) |
| difference in industry specialization (L69) | aggregate transaction value (C43) |
| weak contractual environment (D86) | positive association between cross-border acquisitions and differences in industry specialization (F23) |
| difference in industry specialization (L69) | stock market reactions in cross-border acquisitions (G34) |
| difference in industry specialization (L69) | control premiums in cross-border acquisitions (G34) |