Acquired versus Non-Acquired Subsidiaries - Which Entry Mode do Parent Firms Prefer
Despite the economic importance of international foreign direct investment (FDI) flows, investment decisions of multinational firms are not well understood. A multinational firm can establish a subsidiary in a foreign country through greenfield investment or through acquiring an existing firm in the target country. The goal of this paper is to shed some light on the determinants of foreign market entry modes. In particular to analyze the systematic variation in the mode choice of FDI, namely acquisition versus non-acquisition (greenfield) investments. We propose a transparent and general applicable method to construct a data base. This database includes information about parent firms and their majority owned affiliates in foreign countries. A particular feature is the construction of a variable which allows to differentiate the establishment mode of parent firms into foreign markets. For this purpose two databases from the Bureau van Dijk are interlinked: Osiris and Zephyr. We provide evidence that firm heterogeneity is important for U.S. multinational firms in determining their entry mode choice. However, this is not a distinguishing feature for European multinational firms. For both sets of parent firms the host country characteristics play an important role in deciding on the entry mode. Higher institutional quality increases the likelihood of acquisitions versus greenfield investments.
|Date of creation:||Dec 2010|
|Contact details of provider:|| Postal: NRN Labor Economics and the Welfare State, c/o Rudolf Winter-Ebmer, Altenbergerstr. 69, 4040 Linz|
Web page: http://www.labornrn.at/
More information through EDIRC
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.:
- Andrew K. Rose & Mark M. Spiegel, 2011.
"The Olympic Effect,"
Royal Economic Society, vol. 121(553), pages 652-677, 06.
- Andrew K. Rose & Mark M. Spiegel, 2009. "The Olympic Effect," NBER Working Papers 14854, National Bureau of Economic Research, Inc.
- Andrew K. Rose & Mark M. Spiegel, 2009. "The Olympic effect," Working Paper Series 2009-06, Federal Reserve Bank of San Francisco.
- Rose, Andrew K & Spiegel, Mark, 2009. "The Olympic Effect," CEPR Discussion Papers 7248, C.E.P.R. Discussion Papers.
- Volker Nocke & Stephen Yeaple, 2008. "An Assignment Theory of Foreign Direct Investment," Review of Economic Studies, Oxford University Press, vol. 75(2), pages 529-557.
- Volker Nocke & Stephen Yeaple, 2004. "An Assignment Theory of Foreign Direct Investment," PIER Working Paper Archive 05-003, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- Stephen Yeaple & Volker Nocke, 2005. "An Assignment Theory of Foreign Direct Investment," 2005 Meeting Papers 146, Society for Economic Dynamics.
- Volker Nocke & Stephen Yeaple, 2004. "An Assignment Theory of Foreign Direct Investment," NBER Working Papers 11003, National Bureau of Economic Research, Inc.
- Andrew Rose, 2005. "Which International Institutions Promote International Trade?," Review of International Economics, Wiley Blackwell, vol. 13(4), pages 682-698, September.
- Rose, Andrew K, 2003. "Which International Institutions Promote International Trade?," CEPR Discussion Papers 3764, C.E.P.R. Discussion Papers.
- Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, October.
- Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, March.
- Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2.
- Pol Antràs & Mihir A. Desai & C. Fritz Foley, 2009. "Multinational Firms, FDI Flows, and Imperfect Capital Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 124(3), pages 1171-1219.
- Pol Antràs & Mihir A. Desai & C. Fritz Foley, 2007. "Multinational Firms, FDI Flows and Imperfect Capital Markets," NBER Working Papers 12855, National Bureau of Economic Research, Inc.
- Desai, Mihir & Antras, Pol & Foley, C. Fritz, 2009. "Multinational Firms, FDI Flows and Imperfect Capital Markets," Scholarly Articles 3199065, Harvard University Department of Economics.
- Slangen, Arjen & Hennart, Jean-François, 2007. "Greenfield or acquisition entry: A review of the empirical foreign establishment mode literature," Journal of International Management, Elsevier, vol. 13(4), pages 403-429, December.
- Slangen, A.H.L. & Hennart, J-F., 2007. "Greenfield or Acquisition Entry: A Review of the Empirical Foreign Establishment Mode Literature," ERIM Report Series Research in Management ERS-2007-059-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.
- Stiebale, Joel, 2010. "The Impact of Foreign Acquisitions on the Investors' R&D Activities – Firm-level Evidence," Ruhr Economic Papers 161, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
- repec:zbw:rwirep:0161 is not listed on IDEAS
- James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
- Ali Hortacsu & Chad Syverson, 2009. "Why Do Firms Own Production Chains?," Working Papers 09-31, Center for Economic Studies, U.S. Census Bureau.
- Enghin Atalay & Ali Hortacsu & Chad Syverson, 2012. "Why Do Firms Own Production Chains?," NBER Working Papers 18020, National Bureau of Economic Research, Inc.
- Klaus Gugler & Dennis C. Mueller & B. Burcin Yurtoglu, 2007. "Corporate Governance and the Determinants of Investment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(4), pages 598-626, December.
- Desislava Dikova & Arjen van Witteloostuijn, 2007. "Foreign direct investment mode choice: entry and establishment modes in transition economies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(6), pages 1013-1033, November.
- Bertrand, Olivier & Hakkala, Katariina & Norbäck, Pehr-Johan, 2007. "Cross-Border Acquisition or Greenfield Entry: Does it Matter for Affiliate R&D?," Working Paper Series 693, Research Institute of Industrial Economics.
- Nocke, Volker & Yeaple, Stephen, 2007. "Cross-border mergers and acquisitions vs. greenfield foreign direct investment: The role of firm heterogeneity," Journal of International Economics, Elsevier, vol. 72(2), pages 336-365, July.
- Larimo, Jorma, 2003. "Form of investment by Nordic firms in world markets," Journal of Business Research, Elsevier, vol. 56(10), pages 791-803, October.
- Yeaple, Stephen Ross, 2009. "Firm heterogeneity and the structure of U.S. multinational activity," Journal of International Economics, Elsevier, vol. 78(2), pages 206-215, July. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:jku:nrnwps:2010_22. 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: (René Böheim)
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.