The Effects of Geographic Distance on the Foreign Acquisition Activity of U.S. Firms

Roberto Ragozzino ()
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Roberto Ragozzino: The University of Texas at Dallas

Management International Review, 2009, vol. 49, issue 4, No 6, 509-535

Abstract: Abstract This paper examines cross-border mergers and acquisitions undertaken by U.S. companies to determine whether geographic distance directly affects these firms’ governance decisions. We find that U.S. firms tend to acquire higher stakes in geographically proximate targets than in remote ones. The paper also investigates the moderating effect of geographic distance on cultural distance and political risk. We find that as these two hazards increase, acquirers prefer shared ownership for proximate deals, and full ownership for acquisitions of geographically distant targets. These findings indicate that the previously-reported effects of cultural distance and political risk on FDI are not absolute, but they are moderated by geographic distance.

Keywords: Cross-border acquisitions; Entry mode; Cultural distance; Political risk; Governance (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1007/s11575-009-0006-7

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