Psychic distance and corporate reputation in cross border acquisitions: A consumer perspective

The aim of this research is to investigate the effect of psychic distance between an acquirer firm and a local target, and acquirer’s corporate reputation on consumers behaviour toward a post-acquisition target. More specifically, we expect that the higher is the acquirer’s reputation, the more the negative impact of distance on consumers’ attitudes and repurchase intentions toward the post-acquisition target is attenuated. Using a multidimensional approach to measure reputation, the research is conducted in two different countries. The data for the first study was collected in Italy. It considers an Italian target firm which operates in the food and beverage industry, and compares two foreign acquiring firms: the first one showing large psychic distance to Italy and the second one small psychic distance to Italy. We compared consumers’ attitude and repurchase intentions toward the post-acquisition target in both the case of large and small psychic distance between the acquirer and the acquired firm. We found that distance have a negative impact on Italian consumers’ attitude and repurchase intentions toward the post-acquisition target, and reputation mitigates the negative effect of psychic distance. Then, the study was replicated in Austria considering a local firm operating in the field of food and beverage.