Exploring antecedents of acquired firms' survival after cross-border acquisitions

Building on a knowledge-based perspective of mergers and acquisitions, this paper investigates the likelihood of survival of target firms acquired by foreign investors. Specifically, we examine the role played by three potential antecedent conditions of an acquiring firm’s absorptive capacity on the likelihood of the target firm’s survival: a) previous experience of the acquirer in the host country; b) the business similarity between acquirer and target; and c) the cultural distance between the countries of the acquiring and acquired firms. Based on a sample of 396 Italian firms acquired by foreign multinational companies in the decade 2005-2015, results suggest that acquired firms are more likely to survive in case the acquirer benefits from previous country-level experience and in case of business similarity, while the cultural distance between the country-of-origin of the acquiring firm and Italy does not prove to be a significant determinant of survival versus mortality of acquired subsidiaries. Overall, our analysis confirms that context familiarity, in terms of both country and business contexts, plays a fundamental role in determining the destiny of acquired firms.