The Global Diffusion of Antitrust and Merger Control and Its Impact on Cross-Border Mergers and Acquisitions

Abstract

A central insight of institutional theory is that markets cannot operate without social institutions that govern economic transactions, such as laws, culture, norms, and networks. As these institutions are developed and mainly operate within national borders, intercountry spaces suffer from a lack of institutional arrangements to guide economic transactions. What, then, can explain the global integration of mergers and acquisitions markets over the last three decades from an institutionalist perspective? I argue that the upsurge of cross-border mergers and acquisitions was made possible by diffusions of governmental policies that directly regulate transactions: antitrust law and merger control. This argument sharply contrasts with deregulation arguments that market integrations are possible by eliminating government regulations rather than by creating new ones. My empirical chapters find that adoptions of antitrust law and merger control actually increase the volume of incoming cross-border mergers and acquisitions in adopter countries. Antitrust law increases foreign acquisitions by signaling that adopter countries conform to global norms of market-oriented reforms. Merger control facilitates foreign acquisitions by stipulating otherwise unclear procedures of buying companies in adopter countries.