Cross-border M&As and Stock Market Performance: Evidence from Medium-Sized US and European Firms

Over the last few decades, the intensity of the internationalization process in small- and medium-sized enterprises (SMEs) has dramatically increased as a result of a combination of a number of external trends such as globalization, evolution of information and communication technology, transportation cost reduction, development of policies by supranational institutions aimed at fostering SME international growth, etc. (Wright et al., 2007; Knight and Kim, 2009). International diversification strategies have become particularly important strategic options for SMEs whose business scope has been geographically confined by nature. SMEs adopt internationalization strategies to seize new opportunities for growth in terms of markets and profitability. However, numerous researchers have observed that the implementation of internationalization strategies of SMEs is strictly affected by liabilities of foreignness (Hymer, 1976), newness (Stinchcombe, 1965), entrepreneurial behavior (Jones and Coviello, 2005), and lack of resources and capabilities (Buckley, 1989; Jarillo, 1989; Beamish, 1999). As a result, the complexities of international operations are likely to be more challenging for SMEs than for their larger established counterparts (Czinkota, 1982; Craig and Douglas, 1996). The level of risk becomes higher when SMEs attempt to adapt knowledge and capabilities that have developed in a domestic context to a host market with different operational, political, economic, and cultural barriers (Oviatt and McDougall, 1994; McDougall and Oviatt, 1996).