Does Regional Integration Change the Effects of Country-Level Institutional Barriers on M&A? The Case of the European Union

This paper raises the question of whether the process of regional integration experienced by the European Union (EU) has affected the growth strategies of firms pursuing cross-border mergers and acquisitions. More precisely, it examines whether the effects of known country-level barriers to cross-border mergers and acquisitions (M&A) have weakened as the EU has developed, thereby creating a propensity by firms inside and outside the EU to invest more in the region. Overall, the results show support for this idea, revealing that cultural and political barriers to cross-border M&A significantly explain the governance decision implemented by foreign buyers earlier in the life of the EU, whereas they do not after the Union has taken steps towards integration. These barriers also affect EU-based acquirers differently from non-EU-based ones. A number of implications of these findings are discussed.