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Strategic Management Journal
Strat. Mgmt. J., 23: 211-227 (2002) DOI: 10.1002/smj.218
ACQUISITIONS VERSUS GREENFIELD INVESTMENTS: INTERNATIONAL AND STRATEGY MANAGEMENT ENTRYMODES OF ANNE-WIL HARZING* Faculty of Economics and Commerce, University of Melbourne, Parkville Campus, Melbourne, Victoria,Australia
Thispaper adds an importantexplanatoryvariable to the well-established list offactors shown to influence the choice between foreign acquisitions and greenfield investments: the international strategy followed by the multinational company (MNC) in question. The MNC's international strategy is subsequently linked to the management of the two different entry modes by showing that differences in strategy are reflected in different headquarters-subsidiary relationshipsfor acquisitions and greenfields. Some aspects of this relationship are also shown to change over time, a process that is mediated by the MNC's strategy. Copyright ? 2002 John Wiley & Sons,
INTRODUCTION The choice of entry mode into foreign markets has received a lot of attention from international business researchers in recent decades. An expansion into foreign markets requires a decision on two related but distinct issues. First, a company has to choose between non-equity entry modes such as exporting through agents and licensing, and equity-based entry modes, in which the local enterprise is either partially or wholly owned. Many studies have investigated factors that might influence the choice for different entry modes, often focusing on three alternatives: licensing, joint ventures and wholly owned subsidiaries and usually underpinned by either transaction cost theory or the Ownerframework ship-Location-Interationalization Caves, 1982; Anderson and Gatignon, (see, e.g., 1986; Kogut and Singh, 1988; Gomez-Casseres, Key words: acquisition; greenfield; international strategy; entry mode *Correspondenceto: Anne-Wil Harzing, Departmentof Management, Faculty of Economics and Commerce, University of Melbourne, Parkville Campus, Melbourne, Victoria 3010, Australia. Copyright ? 2002 John Wiley & Sons, Ltd.
1989; Hill, Hwang and Kim, 1990; Agarwal and Ramaswami, 1992; Kim and Hwang, 1992; Erramilliand Rao, 1993; Kwon and Konopa, 1993; Bell, 1996; Benito, 1996; Erramilli, 1996; Arora and Fosfuri, 2000; Makino and Neupert, 2000; Pan and Tse, 2000). Second, if an equity mode of entry into a foreign market is chosen, the issue of whether to acquire an existing local firm (acquisition) or to set up a completely new plant (greenfield investment) has to be decided. A substantialnumber of studies have investigated factors that might influence this choice (see, e.g., Wilson, 1980; Forsgren, 1984; Caves and Mehra, 1986; Kogut and Singh, 1988; Andersson, Arvidsson and Svensson, 1992; Hennart and Park, 1993; Anderson and Svensson, 1994; Cho and Padmanabhan, 1995; Padmanabhan and Cho, 1995; Hennart, Larimo, and Chen, 1995; Larimo, 1996, 1998; Barkema and Vermeulen, 1998; Brouthers and Brouthers,...