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. Analyzing 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.HD30.28;acquisitions;institutional theory;foreign entry;greenfields;subsidiary performance;subsidiary integration

Greenfield or Acquisition Entry: A Review of the Empirical Foreign Establishment Mode Literature

This paper reviews the empirical literature on the determinants of the choice by multinational enterprises between entering foreign countries through greenfields or acquisitions. We discuss and compare the main theoretical perspectives used, provide a detailed overview of the empirical findings, examine why these findings have often been inconsistent, and offer theoretical and methodological suggestions to guide future research.review;establishment mode choice;acquisition;greenfield

Digitalized service multinationals and international business theory

Banalieva and Dhanaraj argue that digital service multinationals (DSMNCs) possess a new category of firm-specific advantage (FSA), the network advantage, and that, contrary to extant theory, they use networks as a mode of governance. I review the business models used by DSMNCs, compare them to non-digital ones, and explore what we can learn about them from extant IB theory. I conclude that network advantages are not a new category of FSAs, that networks are not a mode of governance, and that their use by DSMNCs is well explained by extant theory