Cross-border mergers and acquisitions: The interplay of cultural differences and prior M&A activity

We examine the extent to which cross-border mergers and acquisitions (M&A) are affected by national cultural differences (i.e., cultural distance) and prior M&A activity. Our empirical specification follows the standard gravity framework. Estimating a series of Tobit models using bilateral data that represent 9389 mergers involving firms in 30 countries over three periods (1995–1998, 2005–2008, and 2017–2020), we find a negative but declining influence of cultural distance on cross-border M&A activity. We also find merger activity involving firms in a particular country pair is positively related to subsequent M&A activity and that this experience counteracts the hindering influence of cultural differences, which becomes insignificant after approximately ten prior mergers. Our findings are robust to sample composition, choice of periods examined, model specification, estimation technique, and alternative measurements of both cultural distance and prior M&A activity.