How Private Equity Firms Make Cross-border Investments: Learning to Internationalize

This paper examines the main effects of domestic and international investment experience of private equity firms on the likelihood of doing a PE cross-border investment. We distinguish between experiential learning and inter-organizational learning from previous domestic and international investments respectively in stand-alone investments and in syndicated investments. Hypotheses are developed for the likelihood of making stand-alone cross-border investment. Additionally, the moderating effects of industry specialization and prior experience with syndication were assessed on the chance of making cross border investments. The hand collected dataset comprises 15.522 deal observations from 2237 mainly US, UK, and EU unique private equity investors located in 66 countries. Analyses indicate domestic has positive effects on standalone cross-border investments, but international experience has negative effects. Furthermore, a strong focus on service industry will promote the use of syndication, and reduce the likelihood of standalone cross-border investments.