Can firms learn by observing? Evidence from cross-border M&As |
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| Institution: | 1. Rensselaer Polytechnic Institute, 110 8th Street, Pittsburgh Building, Troy, NY 12180-3590, United States;2. Fordham University and Bank of Finland, 5 Columbus Circle, 11th Floor, New York, NY 10019, United States;3. Johns Hopkins University, 100 N. Charles Street, Baltimore, MD 21201, United States;4. Fordham University, 5 Columbus Circle, 13th Floor, New York, NY 10019, United States;1. University of Bristol, UK;2. Zagazig University, Egypt;3. University of Helwan, Egypt;1. Lally School of Management & Technology, Rensselaer Polytechnic Institute, 110 8th Street, Pittsburgh Building, Troy, NY 12180-3590, United States;2. Fordham University, 5 Columbus Circle, 11th Floor, New York, NY 10019, United States;3. Bank of Finland, Finland;4. Carey Business School, Johns Hopkins University, 100 N. Charles Street, Baltimore, MD 21201, United States;1. School of Management, Zhejiang University of Technology, 288 Liuhe Road, Xihu District, Hangzhou, Zhejiang 310023, China;2. School of Management, University of San Francisco, 2130 Fulton Street, San Francisco, CA, USA 94117;1. Surrey Business School, University of Surrey, Guildford, Surrey GU2 7XH, UK;2. ALBA Graduate Business School at The American College of Greece, Athens, Greece;1. Department of Finance, Florida State University, Tallahassee, FL 32306-1110, United States;2. Department of Finance, Ming Chuan University, Taipei City, Taiwan |
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| Abstract: | In the presence of high uncertainty and limited experience, can observing the actions of other acquiring predecessors help firms make better acquisition decisions? Using a sample of cross-border M&As conducted by US acquirers in developing countries, we document a positive and significant relationship between an acquirer's performance and its predecessors' acquisition activity. This relationship is especially pronounced in the prevalence of news events about the outcome of predecessors' acquisitions, when predecessors consist of US peers from the same industry and/or when targets are based in culturally distant countries. Our findings shed light on one channel through which information spillovers across industries and acquiring firms could be a key driver of value creation in developing market cross-border M&As. |
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