Acquisition versus greenfield foreign entry : diversification mode choice in Central and Eastern Europe
AbstractDeparting from the traditional transaction cost approach in diversification mode literature, this study investigates the influence of experimental organizational learning on the choice between acquisition and a greenfield investment. We provide empirical support that prior experience with acquisitions and/or greenfield investments, firm?s predominant international strategy (global or multidomestic) and the technological intensity of the parent play a crucial role in subsequent diversifications. Furthermore, contrary to extant arguments that foreign ownership decision is independent of a diversification mode choice we demonstrate that the type of ownership (joint venture vs. wholly owned subsidiary) is a significant predictor of firms? preference for acquisition or a greenfield. Unlike Caves and Mehra (1986) and Larimo (2002) who found a positive relationship between acquisitions and full ownership, we show that acquisitions in Central and Eastern European (CEE) transition economies are unlikely to be wholly owned subsidiaries. In addition, we contribute to extant diversification literature by introducing another neglected predictor of firms? diversification strategy: We demonstrate the incremental power of hostcountries? institutional structure on investors? diversification choice.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 04G26.
Date of creation: 2005
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-12-12 (All new papers)
- NEP-EEC-2004-12-12 (European Economics)
- NEP-EEC-2004-12-27 (European Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alan M Rugman & Alain Verbeke, 1992. "A Note on the Transnational Solution and the Transaction Cost Theory of Multinational Strategic Management," Journal of International Business Studies, Palgrave Macmillan, vol. 23(4), pages 761-771, December.
- Hennart, J.-F. & Park, Y.R., 1993.
"Greenfield vs. Acquisition : the strategy of Japanes investors in the United states,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-174430, Tilburg University.
- Jean-François Hennart & Young-Ryeol Park, 1993. "Greenfield vs. Acquisition: The Strategy of Japanese Investors in the United States," Management Science, INFORMS, vol. 39(9), pages 1054-1070, September.
- Jean-Fran�ois Hennart & Jorma Larimo, 1998. "The Impact of Culture on the Strategy of Multinational Enterprises: Does National Origin Affect Ownership Decisions?," Journal of International Business Studies, Palgrave Macmillan, vol. 29(3), pages 515-538, September.
- Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766, September.
- Andersson, Thomas & Svensson, Roger, 1994. " Entry Modes for Direct Investment Determined by the Composition of Firm-Specific Skills," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(4), pages 551-60.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joke Bulthuis).
If references are entirely missing, you can add them using this form.