Do Foreign Greenfields Outperform Foreign Acquisitions or Vice Versa? An Institutional Perspective
AbstractPrior studies of the comparative performance of greenfields and acquisitions have advanced competing arguments, with some arguing that greenfields should outperform acquisitions because acquisitions are costlier to integrate, and others that acquisitions should outperform greenfields because greenfields suffer from a liability of newness. Moreover, while the costs of integration and the liability of newness are at their greatest during a subsidiary's first years, prior studies have tested their competing arguments on samples containing older subsidiaries. We extend these prior studies by (1) developing an institutional theory-based framework that simultaneously considers the costs of integration and the liability of newness, (2) recognizing that both types of costs vary with the level of subsidiary integration, and (3) focusing on the stage of their life during which subsidiaries predominantly incur these costs. To measure subsidiary performance, we ask managers of Dutch multinationals how their "ex ante" performance expectations compare to the subsidiary's "ex post" performance during its first two years. Analysing a sample of 191 foreign subsidiaries and controlling for entry mode self-selection and other factors, we find that acquisitions outperform greenfields at low and intermediate levels of subsidiary integration, but that greenfields outperform acquisitions at higher integration levels. Copyright (c) Blackwell Publishing Ltd 2008.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Management Studies.
Volume (Year): 45 (2008)
Issue (Month): 7 (November)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2380
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- Slangen, A.H.L. & Hennart, J-F., 2008. "Do Foreign Greenfields Outperform Foreign Acquisitions or Vice Versa? An Institutional Perspective," ERIM Report Series Research in Management ERS-2008-009-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- M - Business Administration and Business Economics; Marketing; Accounting
- M14 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
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