Geographical and cultural patterns in cross-border mergers and acquisitions: the role of experience

We exploit temporal and spatial correlation in a cross-border merger and acquisition (M&A) database with worldwide coverage to show that firms’ M&A choices are significantly influenced by experience effects related to knowledge accumulation. Our empirical strategy rests on the assumption that experience effects are expected to be at play in M&A directed toward culturally contiguous countries (arguably driven by knowledge accumulation) and not in M&A deals in geographically contiguous countries (arguably driven by transport costs). The analysis is conducted on a bilateral measure of cultural distance (encompassing linguistic, religious and genetic distance indicators), which is meant to capture the idea of the cultural heritage originated by historic linkages.