Cross-border Acquisitions and Knowledge Transfer: An Empirical Test of Liability of Foreignness

This paper investigates whether knowledge-seeking cross-border acquisitions suffer from liability of foreignness. The moderating role of knowledge profile similarity between the acquirer and the target is also examined. The statistical results of the study employing zero-inflated negative binomial regressions generally offer support for theoretical predictions of the research. We find that foreign acquisitions, especially Asian acquisitions, acquire less knowledge from acquired firms than do domestic acquisitions. We also find that the negative effect of foreignness of Asian acquiring firms on knowledge transfer from the target to the acquirer is weakened by knowledge profile similarity between the two.