In this study, we underline the importance of the relationship between absorptive capacity and an acquiring firm’s post-merger performance following the acquisition of a target firm’s knowledge through cross-border mergers and acquisitions (CBMAs). We analyzed CBMAs between developed countries to highlight how realized absorptive capacity plays a crucial part in a firm’s achievement of CBMA sustainability. Using United States CBMA transactions with other developed countries during 2000–2014, our findings suggest that an acquiring firm’s greater absorptive capacity leads to better post-merger performance. More interestingly, compared to for domestic M&As, the direct effect between absorptive capacity and post-merger performance was found to be more positively related in CBMA transactions, even when we applied propensity-score matching (PSM) and Heckman’s selection model to the same estimation. In addition, we introduce four moderating variables that could either intensify or lessen a firm’s effort to seek external knowledge for organizational growth. In terms of an acquiring firm’s strategic behavior, we find that paying in cash and past CBMA experiences positively influence a firm’s post-merger performance. For a target firm’s knowledge assets, we show that when a target firm possesses more strategic assets, they reinforce the acquiring firm’s post-merger performance, and when the target firm is in a high-tech industry, the acquiring firm’s post-merger performance is weakened. Our study contributes to the CBMA literature by incorporating the concept of a knowledge-based view and by empirically testing the different effects of absorptive capacity between domestic M&A and CBMA and how both strategic behavior and a target firm’s knowledge assets affect a firm’s post-merger performance related to CBMA sustainability.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.