Is failure the mother of success? Prior failure experience and cross-border M&A completion by emerging market firms

Although emerging market firms (EMFs) seek to undertake aggressive cross-border mergers and acquisitions (M&As), many of the announced deals are not finalized. This study examines how the prior failure of EMFs to complete cross-border M&As may influence the likelihood of completing future deals. Challenging the conventional wisdom that failure is the mother of eventual success, we argue that EMFs' prior failure experiences may instead reduce the likelihood of their completing a subsequent deal. Moreover, the negative effect of prior failure experience is conditioned on firm capabilities to learn and the institutional contexts of the subsequent deals. Specifically, if EMFs have successfully completed cross-border M&A(s) or achieved a high degree of internationalization, they can learn more effectively from prior failure experience. Prior failure experience can be even more detrimental when the subsequent deal is carried out in an institutionally distant or more developed market. Based on over 30 years of data on cross-border M&As announced by EMFs, mostly from Asia, our analyses strongly support these propositions.