Do Foreign Greenfields Outperform Foreign Acquisitions or Vice Versa? An Institutional Perspective.

Arjen H. L. Slangen, Jean-François Hennart

Research output: Contribution to journalArticle

59 Citations (Scopus)

Abstract

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. Analysing 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. [ABSTRACT FROM AUTHOR]
Original languageEnglish
Pages (from-to)1301-1328
Number of pages28
JournalJournal of Management Studies
Volume45
Issue number7
Early online date20 Sep 2008
DOIs
Publication statusPublished - Nov 2008

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