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Acquisition or greenfield start‐up? Institutional, cultural and transaction cost influences

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  • Keith D. Brouthers
  • Lance Eliot Brouthers

Abstract

In this paper, we develop and test a model of diversification mode choice (how firms decide between acquisitions and greenfield start‐up ventures) which includes institutional, cultural, and transaction cost variables. Using a sample of Japanese firms entering western Europe, our results show the model correctly predicts over eighty‐seven percent of the mode choices. Thus, we provide strong initial evidence to support using institutional, cultural and transaction cost variables to predict firms’ choices between acquisitions and greenfield start‐ups in international expansion. Our findings also suggest that organizations which have developed strong intangible capabilities may be able to more readily leverage these capabilities through greenfield start‐ups. Copyright © 2000 John Wiley & Sons, Ltd.

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  • Keith D. Brouthers & Lance Eliot Brouthers, 2000. "Acquisition or greenfield start‐up? Institutional, cultural and transaction cost influences," Strategic Management Journal, Wiley Blackwell, vol. 21(1), pages 89-97, January.
    • Handle: RePEc:bla:stratm:v:21:y:2000:i:1:p:89-97
    DOI: 10.1002/(SICI)1097-0266(200001)21:13.0.CO;2-8
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