Two-stage choice process of FDI: Ownership structure and diversification mode

International Establishment Mode Choice: Past, Present and Future

“…It is worth noting that the lack of clarity in the relationship between firm size and establishment mode choice is reflected in the conflicting results. Only three studies find firm size related to the use of greenfield ventures (Lopez-Duarte and Garcia-Canal 2002; Tsai and Cheng 2004;Dikova 2012) while others find a significant relation with acquisitions (Andersson and Svensson 1994;Elango 2003;Vermeulen and Barkema 2001;Ruiz-Moreno et al 2007;Larimo 2003;Arslan and Larimo 2011;Klimek 2011;Mudambi and Mudambi 2002;Brouthers and Dikova 2010;Meyer et al 2014) or no relation to establishment choice at all (Yip 1982;Rienda et al 2013;Bhaumik and Gelb 2005;Barkema and Vermeulen 1998;Cho 1995, 1999;Chang and Rosenzweig 2001;Shaver 1998;Dow and Larimo 2011;Drogendijk and Slangen 2006;Demirbag et al 2008;Herrmann and Datta 2006). Clearly, firm size cannot explain in a meaningful way the establishment mode choice of firms: it merely indicates availability of resources which can be committed to either of the establishment modes.…”

“…Chen (2008) uses RBV theory and suggests that locally inexperienced firms are likely to procure complementary capabilities such as host country experience through the acquisition of local businesses. Chen (2008) and Chang and Rosenzweig (2001) find empirical support but most studies report insignificant results Bhaumik and Gelb 2005;Ruiz-Moreno et al 2007;Meyer et al 2009;Kogut and Singh 1988;Estrin et al 2009). A few others find that host country experience is related to acquisitions (Andersson and Svensson 1994;Rienda et al 2013; Barkema and Vermeulen 1998;Shaver 1998;Drogendijk and Slangen 2006;Slangen and Hennart 2008;Demirbag et al 2008).…”

“…Second, RBV scholars argue that international experience helps firms develop organizational routines which generate a firm-specific advantage that can be more easily exploited through greenfield ventures, rather than incurring the difficulties of transferring such advantages to acquired units (Padmanabhan and Cho 1999). Despite the popularity of this variable, many studies report either insignificant results (Wilson 1980;Zejan 1990;Larimo 2003;Dow and Larimo 2011;Cho 1995, 1999;Herrmann and Datta 2006;Ruiz-Moreno et al 2007; Kogut and Singh 1988;Meyer et al 2009, Hennart et al 2015 or opposite results (Andersson and Svensson 1994;Harzing 2002;Mudambi and Mudambi 2002). Dow and Larimo (2011) refine the measure by distinguishing between the experience from similar and dissimilar locations and conclude that similar international experience leads to acquisitions while dissimilar international experience results in greenfields.…”

“…Greenfield ventures however allow firms to carefully select employees who fit the national culture of the investor easing management issues (Drogendijk and Slangen 2006). A large number of studies find support for this association (Kogut and Singh 1988;Chang and Rosenzweig 2001;Larimo 2003;Tsai and Cheng 2004;Drogendijk and Slangen 2006;Dow and Larimo 2011), even studies that only include cultural distance as a control variable Vermeulen and Barkema 2001;Harzing 2002;Bhaumik and Gelb 2005;Elango 2005;Herrmann and Datta 2006;Cheng 2006;Ruiz-Moreno et al 2007). Two studies, however, posit an alternative TCE-based hypothesis; that acquiring a local firm may be an efficient way of obtaining local knowledge and reducing the transaction costs related to environmental uncertainties.…”

The effect of local corruption on ownership strategy in cross-border mergers and acquisitions

“…From this perspective, cross border mergers and acquisitions (M&A) are an important strategic corporate initiative that enables firms to extend their businesses, leverage their capabilities, and sometimes diversify into related markets. Among various strategic choices, corporate control is a key element in the implementation of an international acquisition strategy (Ruiz-Moreno et al 2007). Indeed, cross-border M&A can be carried out on full control modes based on sole ownership and shared control modes based on collaboration (Anderson and Gatignon 1986).…”