No abstract

Multinationals can start up greenfield entities or acquire existing firms to enter foreign nations. Regardless of the choice of greenfield investment vs acquisition, they can control full equity (i.e., wholly owned subsidiaries) or share ownership with local partners (i.e., joint ventures). Depending on the stake taken in the targets, therefore, international acquisitions can be classified into two major categories – full or partial – although this distinction is missing in most previous studies. In this paper, I propose that the motives for acquisitions (vs greenfield investments) are specific to whether entries are made through full or partial ownership, in that full acquisitions are driven mostly by capability procurements, whereas partial acquisitions are motivated by other strategic considerations. By splitting a sample of Japanese investments in the US into two sub-regimes, the study has found that the decision on joint ventures vs wholly owned subsidiaries dictates the determinants that shape the choice between greenfield and acquisitive entries. There is also evidence that Japanese investors self-select the decision on full or partial ownership to justify the strategy that they have chosen to enter the US. These findings offer new insights into the role of ownership structures in shaping the choice of entry strategies. Journal of International Business Studies (2008) 39, 454–471. doi:10.1057/palgrave.jibs.8400357

No abstract

Internalization theory suggests that multinational enterprises set up subsidiaries to exploit technology advantages abroad when licensing is too difficult to arrange with indigenous firms. This direct investment vs licensing trade-off, which is built on a business-to-business transaction, does not recognize the linkages with the final products market as a component of transaction cost analysis. By adopting a unilateral perspective on international technology transfer, neither does it consider the possible role of complementary assets (e.g., manufacturing capabilities) held by potential business partners in foreign countries. After taking into account the presence of such assets in indigenous firms, this article extends internalization theory by positioning the technology transfer transaction in the broader context of the entire value chain, including especially the manufacturing/marketing linkages with the final products market. More specifically, it demonstrates that conventional internalization theory neglects various alternative market governance mechanisms not captured by a licensing agreement. The analysis shows that the choice of an optimal governance structure is determined by the complementarity of strategic assets controlled by the economic actors involved, and by the linkages among the technology–manufacture interaction in two intermediate input markets, and the subsequent sales function in the final products market. Journal of International Business Studies (2005) 36, 231–245. doi:10.1057/palgrave.jibs.8400124

No abstract