Extending Industry Specialization through Cross-Border Acquisitions

Laurent Frésard
University of Maryland – Robert H. Smith School of Business

Ulrich Hege
Toulouse School of Economics; European Corporate Governance Institute (ECGI)

Gordon M. Phillips
Tuck School of Business at Dartmouth; National Bureau of Economic Research (NBER)

May 22, 2016


We investigate the role of industry specialization in horizontal cross-border mergers and acquisitions. We find that acquirers from more specialized industries in a country are more likely to buy foreign targets in countries that are less specialized in these same industries. The role of industry specialization is more prevalent when contracting and trading costs limit arms’ length relationships and exporting. Moreover, the economic gains in cross-border deals are larger when specialized acquirers purchase assets in less specialized industries. These results are consistent with an internalization motive for foreign acquisitions, through which localized industry know-how and management skills provide mobile advantages that acquirers can deploy on foreign assets.

Extending Industry Specialization through Cross-Border Acquisitions

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