Consumers’ reactions to cross-border acquisitions

Abstract

Purpose The purpose of this paper is to focus on consumers’ reactions to cross-border acquisitions (CBA) by exploring the role of consumer perceptions of the psychic distance between the country of the acquirer and that of the target firm when the acquiring corporation has a good or poor reputation. Design/methodology/approach A 2×2 experimental design which manipulated psychic distance and acquirer’s corporate reputation was conducted in Italy. The study considers an Italian food target firm and compares four foreign acquiring firms with different combinations of corporate reputation (good/poor) and psychic distance to Italy (small/large). Findings The authors found that the degree of psychic distance between the countries of the acquiring and targeted firms was inversely related to Italian consumers’ intentions to repurchase the products of the post-acquisition target, and unrelated to the acquirer’s corporate reputation. Originality/value This is the first study focusing on psychic distance in the context of CBA, especially from the perspective of consumer behavior, which can help to better understand certain negative reactions toward the acquisition of a business.