Selective Scrutiny: Evidence from FIRRMA and Cross-Border Tech M&A

Abstract

This paper examines the effects of the 2018 Foreign Investment Risk Review Modernization Act (FIRRMA) on global cross-border mergers and acquisitions (M&A) in the technology sector. Using an event study framework and firm-level data from 2013 to 2023, it analyzes whether the Committee on Foreign Investment in the United States\u27 (CFIUS) expanded regulatory authority disproportionately deterred investment from strategic competitors like China while leaving U.S. allies relatively unaffected. The findings suggest that FIRRMA had a highly selective impact: Chinese firms sharply reduced their U.S. tech-sector acquisitions post-FIRRMA, while firms from allied countries in the Five Eyes and Fourteen Eyes alliances maintained or even increased their M&A activity. These results imply that FIRRMA functioned as a targeted national security tool rather than a broad protectionist barrier, though the contraction in Chinese investment raises questions about the long-term innovation costs of selective deterrence