Effects of Firm-specific and Country-specific Advantages on Relative Acquisition Size in Service Sector Cross-Border Acquisitions: An Empirical Examination |
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Authors: | Dynah A. Basuil Deepak K. Datta |
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Affiliation: | 1. Washington SyCip Graduate School of Business, Asian Institute of Management, Manila, Philippines;2. Department of Management, College of Business University of Texas at Arlington, Arlington, TX 76019, United States of America |
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Abstract: | Using a sample of 348 service sector cross-border acquisitions by U.S. firms in 44 countries during 1990–2006, our study seeks to identify factors that influence relative acquisition size (acquisition transaction value as a percentage of acquiring firm's asset value). Our findings indicate that firm-specific advantages (FSAs) in the form of available financial slack and target industry knowledge were positively associated with relative acquisition size. However, contrary to expectations, we observed a negative relationship between cross-border acquisition experience and relative acquisition size. In addition, our results suggest that country-specific advantages (CSAs) associated with higher market potential, lower political risk, and greater cultural similarity contributed to increased relative acquisition size in service industry cross-border acquisitions. Finally, our analysis reveals that the relationship between available financial slack and relative acquisition size is contingent on cultural similarity with the relationship being more pronounced when cultural similarity is high. |
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Keywords: | Relative acquisition size Transaction value Cross-border acquisition Service sector |
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