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Do market, resource and knowledge distance impact inbound cross-border acquisition?

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  • Raghavendra, Chandrika
  • Sharif, Taimur
  • Mahesh, Rampilla
  • Yadav, Miklesh Prasad
  • Abedin, Mohammad Zoynul

Abstract

With the increasing phenomena of cross-border acquisition (CBA) activities in emerging economies (EE), evidence about “distance” factors that make these economies attractive to home country firms is sparse. Given this background, we employ major locational advantage distance measures such as market, resource, and knowledge distances and examine their impact on the value and number of inbound CBAs in India. We source inbound CBA deal data from the Thomson Reuters Eikon database for the 1990–2020 period during which 47 home countries were making acquisitions of target firms in India. We develop relevant hypotheses based on a comprehensive literature review. We run tobit and negative binomial regression models on a final sample of 921 country-pair-year observations to test the hypotheses. The results show that increasing market and knowledge distances enhanced the value and number of India's inbound CBAs, fueled by the country's growth potential and knowledge base. However, we find no evidence of a role played by resource distance.

Suggested Citation

  • Raghavendra, Chandrika & Sharif, Taimur & Mahesh, Rampilla & Yadav, Miklesh Prasad & Abedin, Mohammad Zoynul, 2023. "Do market, resource and knowledge distance impact inbound cross-border acquisition?," Global Finance Journal, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:glofin:v:57:y:2023:i:c:s1044028323000571
    DOI: 10.1016/j.gfj.2023.100862
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    More about this item

    Keywords

    Cross-border acquisitions; Knowledge distance; Locational advantage; Market distance; Resource distance;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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