Cross-border acquisition abandonment and completion: The effect of institutional differences and organizational learning in the international business service industry, 1981–2001

Abstract

Based on the concepts of North's (1990) political economy of national institutions and economic behavior, we investigate how formal and informal institutional features influence the likelihood that a cross-border acquisition deal will be completed, as well as the time taken for its completion after announcement. Additionally, we study how past experience with completed acquisition deals moderates the effects of institutional differences. We focus on a relatively new context – the pre-completion stage of acquisition processes. We test our hypotheses using data from 2389 announced cross-border acquisition deals in the international business service industry (1981–2001). We find that differences in national formal and informal institutions explain part of the variation in the likelihood that an announced cross-border acquisition deal will be completed, as well as the duration of the deal-making. In addition, organizational learning moderates the effects of institutional distance: past experience with completed cross-border acquisition deals increases the likelihood of a subsequent deal completion in institutionally closer environments, but shortens the deal duration in institutionally distant environments.