Journal of International Business Studies

Abstract

What determines the patterns of international expansion of financial institutions?Rugman and others have argued that internationalisation primarily occurs at the regional rather than global level.Others, including Johanson and Valne, have argued that, as well as region, language, culture and legal system are also important in explaining internationalisation patterns.We investigate FIs' preferences for regional expansion compared with the impacts of language, culture and legal system, using a quantitative analysis of over 12,000 crossborder, financial-services merger-and-acquisition transactions from 1990 to mid-2005.We find that the region effect is high, and stronger than language and cultural effects individually, but about the same as their combined effect.The legal system similarity is not statistically significant when all effects are combined.Our research also tests the impact of international experience on these factors.The tendency for internationalisation to occur in similar regions, languages, legal systems and cultures is found to be less prevalent in FIs that had more experience of internationalisation.That is, internationally active FIs appear more willing to expand into "distant" countries, where distance is measure by geography, language, legal system and culture.Experienced FIs have apparently learnt how to reduce the barriers they face associated with geographical distance and different languages, cultures and legal systems.