Abstract

The fundamental tenet of institutional theory is that markets cannot function in the absence of social institutions including laws, networks, culture, and norms that regulate economic transactions. Intercountry spaces are hampered by the absence of institutional frameworks that regulate commercial transactions because these institutions are primarily formed and function within national borders. So, from an institutionalist standpoint, what may account for the recent three decades' worldwide integration of the M&A markets? I contend that the spread of antitrust law and merger control, two government regulations that directly manage transactions, is what allowed cross-border mergers and acquisitions to surge. Arguments for deregulation, which contend that market integrations can occur through the removal of existing rules rather than the enactment of new ones, stand in stark contrast to this one. In fact, adopter nations see an increase in the number of incoming cross-border mergers and acquisitions when antitrust laws and merger controls are adopted, according to my empirical studies. Antitrust laws encourage overseas acquisitions by sending a message to adopting nations that they adhere to international standards for market-oriented reforms. By providing clarity to otherwise ambiguous regulations for purchasing companies in adopting nations, merger control makes overseas acquisitions easier.

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