Do Foreign Greenfields Outperform Foreign Acquisitions or Vice Versa? An Institutional Perspective
Prior 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.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 45 (2008)
Issue (Month): 7 (November)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2380|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=00022-2380|
References listed on IDEAS
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.:
- Pol Herrmann & Deepak K. Datta, 2006. "CEO Experiences: Effects on the Choice of FDI Entry Mode," Journal of Management Studies, Wiley Blackwell, vol. 43(4), pages 755-778, 06.
- Benito, Gabriel R.G. & Tomassen, Sverre & Bonache-Pérez, Jaime & Pla-Barber, José, 2005. "A transaction cost analysis of staffing decisions in international operations," Scandinavian Journal of Management, Elsevier, vol. 21(1), pages 101-126, March.
- Shimizu, Katsuhiko & Hitt, Michael A. & Vaidyanath, Deepa & Pisano, Vincenzo, 2004. "Theoretical foundations of cross-border mergers and acquisitions: A review of current research and recommendations for the future," Journal of International Management, Elsevier, vol. 10(3), pages 307-353.
- David L. Deephouse & Suzanne M. Carter, 2005. "An Examination of Differences Between Organizational Legitimacy and Organizational Reputation," Journal of Management Studies, Wiley Blackwell, vol. 42(2), pages 329-360, 03.
- Peter S Davis & Ashay B Desai & John D Francis, 2000. "Mode of International Entry: An Isomorphism Perspective," Journal of International Business Studies, Palgrave Macmillan, vol. 31(2), pages 239-258, June.
- Lance Eliot Brouthers & John Hadjimarcou, 2005. "Generic Product Strategies for Emerging Market Exports into Triad Nation Markets: A Mimetic Isomorphism Approach," Journal of Management Studies, Wiley Blackwell, vol. 42(1), pages 225-245, 01.
- C Patrick Woodcook & Paul W Beamish & Shige Makino, 1994. "Ownership-Based Entry mode Strategies and International Performance," Journal of International Business Studies, Palgrave Macmillan, vol. 25(2), pages 253-273, June.
- John Child, 2005. "The Dynamic Between Firms' Environmental Strategies and Institutional Constraints in Emerging Economies: Evidence from China and Taiwan," Journal of Management Studies, Wiley Blackwell, vol. 42(1), pages 95-125, 01.
- Hennart, Jean-François & Roehl, Thomas & Zeng, Ming, 2002. "Do exits proxy a liability of foreignness?: The case of Japanese exits from the US," Journal of International Management, Elsevier, vol. 8(3), pages 241-264.
- J. Myles Shaver, 1998. "Accounting for Endogeneity When Assessing Strategy Performance: Does Entry Mode Choice Affect FDI Survival?," Management Science, INFORMS, vol. 44(4), pages 571-585, April.
- Jiatao Li & Stephen Guisinger, 1991. "Comparative Business Failures of Foreign-Controlled Firms in the United States," Journal of International Business Studies, Palgrave Macmillan, vol. 22(2), pages 209-224, June.
- Nikolaus Uhlenbruck, 1998. "Privatization from the Acquirer's Perspective: a Mergers and Acquisitions Based Framework," Journal of Management Studies, Wiley Blackwell, vol. 35(5), pages 619-640, 09.
- Bruce Kogut & Harbir Singh, 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, Palgrave Macmillan, vol. 19(3), pages 411-432, September.
- Chris Changwha Chung, 2005. "The Impact of Institutional Reforms on Characteristics and Survival of Foreign Subsidiaries in Emerging Economies," Journal of Management Studies, Wiley Blackwell, vol. 42(1), pages 35-62, 01.
- Christine Oliver, 1997. "The Influence of Institutional and Task Environment Relationships on Organizational Performance: The Canadian Construction Industry," Journal of Management Studies, Wiley Blackwell, vol. 34(1), pages 99-124, 01.
- Piero Morosini & Scott Shane & Harbir Singh, 1998. "National Cultural Distance and Cross-Border Acquisition Performance," Journal of International Business Studies, Palgrave Macmillan, vol. 29(1), pages 137-158, March.
- Heckman, James J, 1979.
"Sample Selection Bias as a Specification Error,"
Econometric Society, vol. 47(1), pages 153-61, January.
- Yadong Luo, 1999. "Time-based Experience and International Expansion: The Case of an Emerging Economy," Journal of Management Studies, Wiley Blackwell, vol. 36(4), pages 505-534, 07.
- Pennings, J.M. & Barkema, H.G. & Douma, S.W., 1994. "Organizational learning and diversification," Other publications TiSEM 2cabb122-340f-4729-afb3-9, Tilburg University, School of Economics and Management.
- 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.
- Klaus E. Meyer, 2005. "Foreign Investment Strategies and Sub-national Institutions in Emerging Markets: Evidence from Vietnam," Journal of Management Studies, Wiley Blackwell, vol. 42(1), pages 63-93, 01.
- J Michael Geringer & Louis Hebert, 1991. "Measuring Performance of International Joint Ventures," Journal of International Business Studies, Palgrave Macmillan, vol. 22(2), pages 249-263, June.
When requesting a correction, please mention this item's handle: RePEc:bla:jomstd:v:45:y:2008:i:7:p:1301-1328. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.