This study explores how home-country corporate political activity, particularly lobbying, influences firms’ internationalization strategies through cross-border acquisitions. While prior research has focused on political ties and host-country lobbying, this study emphasizes the critical yet underexamined role of home-country lobbying in mitigating informational and transactional challenges in international markets. Using data from U.S. firms between 2000 and 2019, we find that home-country lobbying increases the likelihood of pursuing cross-border acquisitions and reduces deal cancellations. By addressing information asymmetry, transaction costs, and regulatory barriers, lobbying enhances firms’ capacity to navigate complex institutional environments. Grounded in Transaction Costs and Political Affinity theories, our findings reveal that lobbying firms strategically target countries with higher political affinity, leveraging shared interests to foster collaboration and mitigate risks. Additionally, from an Institutional Economics perspective, these firms prefer targets with greater negative and lower positive economic and regulatory institutional distances while avoiding culturally distant environments, where informal barriers are less amenable to political strategies.
