This work reviews the paper of Anne-Wil Harzing (2002):
Acquisitions versus Greenfield Investments:
International Strategy and Management of Entry
Modes
In: Strategic Management Journal, Vol. 23, No.3,
pp.211-227
Table of Contents
1. Introduction
2. Development
2.1 Literature Review and Hypotheses
2.2 Data collection
2.3 Statistical methods
2.4 Results
3. Conclusion & Limitations
Objectives and Core Topics
The work examines the strategic choices of multinational corporations (MNCs) regarding their international entry modes, specifically focusing on the distinction between greenfield investments and acquisitions. It aims to analyze how corporate strategies—classified as either global or multidomestic—influence the selection of these entry modes and the subsequent management of subsidiaries, particularly concerning control, expatriate usage, and local responsiveness.
- Strategic classification of MNCs (Global vs. Multidomestic)
- Choice of entry modes (Greenfield investments vs. Acquisitions)
- Headquarter-subsidiary relationship management
- Impact of international strategy on organizational behavior
- Empirical evaluation of entry mode effectiveness and evolution
Excerpt from the Book
2.1Literature Review and Hypotheses
When it comes to the choice of an entry mode, a company has to consider several factors which influence the decision. Those factors have been discussed in a lot of previous studies, but none of those put the emphasis on the impact of the firm‘s international strategy.
The strategy of an MNC can be distinguished into two types: A global as well as a Multidomestic one. Companies following a global strategy usually face a large amount of globalised competition; they need to focus on efficiency and on achieving economies of scale. Therefore they integrate and standardise production and see their subsidiaries as „pipelines“, forcing them into a passive role. Multidomestic companies compete in local markets and adapt their products to local needs. Subsidiaries of these firms are relatively autonomous and very responsive to domestic markets.
Both types of strategies are associated with firm-specific advantages (FSA1-perspective). Global companies are more likely to use non-location bound, home country based advantages (p.213),while
Summary of Chapters
1. Introduction: This chapter introduces the core problem of choosing between greenfield investments and acquisitions as international entry modes and outlines the five hypotheses regarding corporate strategy.
2. Development: This section presents the theoretical literature review, defines the variables and hypotheses, details the data collection process via an international survey, explains the binomial logistic regression methodology, and reports the findings for the stated hypotheses.
3. Conclusion & Limitations: This chapter summarizes the empirical support for the impact of MNC strategies on entry modes and addresses the study's limitations, such as sample size and research design constraints, while suggesting avenues for future research.
Keywords
Multinational Corporations, Greenfield Investments, Acquisitions, International Strategy, Global Strategy, Multidomestic Strategy, Subsidiary Management, Local Responsiveness, Expatriate Presence, Headquarter-Subsidiary Relationship, Firm-Specific Advantages, Entry Mode Choice, Manufacturing Sector, Corporate Strategy, Strategic Management.
Frequently Asked Questions
What is the primary focus of this research paper?
The paper examines how the international corporate strategy of a multinational corporation—categorized as either global or multidomestic—influences its choice of market entry mode, specifically between acquisitions and greenfield investments.
What are the central themes addressed in the work?
The central themes include the relationship between corporate strategy and entry mode selection, the level of control exercised by headquarters, the deployment of expatriates, and the degree of local responsiveness required in different subsidiary types.
What is the main research objective?
The objective is to verify five specific hypotheses concerning the managerial behavior of global versus multidomestic firms and to determine if subsidiary management styles converge toward a "preferred" mode over time.
Which scientific methods were employed?
The study utilizes an international mail survey to collect data from manufacturing firms and applies binomial logistic regression analysis to determine the factors influencing the likelihood of selecting an acquisition over a greenfield investment.
What topics are covered in the main body?
The main body covers the theoretical background of the FSA-perspective, the derivation of five hypotheses, the data collection methodology, the statistical modeling of entry mode selection, and a comparative analysis of results regarding managerial characteristics.
Which keywords best characterize this study?
Key terms include Multinational Corporations, Entry Modes, Greenfield Investments, Acquisitions, Global vs. Multidomestic Strategy, and Headquarter-subsidiary relationships.
How does a "global" strategy differ from a "multidomestic" strategy regarding subsidiary roles?
Global strategies view subsidiaries as standardized "pipelines" for efficiency, whereas multidomestic strategies treat subsidiaries as autonomous entities highly responsive to local market needs.
Why did the author conclude that Hypothesis 5 must be rejected?
Although the author found evidence that management styles sometimes shift, the empirical results did not consistently support the hypothesis that subsidiary management always converges toward the "preferred" mode, leading to the rejection of H5.
What limitations does the paper identify?
The paper identifies small sample sizes for certain entry modes, the lack of a longitudinal design to track individual subsidiary changes, and the focus restricted to the manufacturing sector as primary limitations.
- Citation du texte
- Oliver Gätgens (Auteur), 2009, Discussing 'Acquisitions versus Greenfield foreign direct investments', Munich, GRIN Verlag, https://www.grin.com/document/174927
