| A firm can expand internationally by acquiring existing companies (i.e., acquisitions) or by starting new operations from scratch (i.e., greenfields). While acquisitions allow a firm to take over the physical and human assets of existing firms, economizing on the time and effort that its managers would otherwise have to use to build up these assets, they are often fraught with managerial problems that hamper expansion in the foreign market. In contrast, greenfield ventures require more managerial time and effort to get started, but are easier to integrate later on.;This dissertation attempts to explore the conditions under which firms following acquisition strategies achieve higher (lower) growth in a given foreign industry than those following greenfield strategies. It proposes that when a multinational firm has to impose greater behavioral constraints on its foreign affiliates in order to manage them effectively, a strategy of growth through acquisition will demand more managerial effort from the parent firm than a strategy of growth through greenfields. Firms following acquisition strategies will therefore grow more slowly in the foreign markets entered. I hypothesize that an acquisition strategy is more likely to lead to lower growth than a greenfield strategy when (1) the industry entered is highly global, (2) it is characterized by tacit knowledge, (3) the firm transfers firm-specific technology to its affiliates, and (4) the industry entered is highly unionized. On the other hand, an acquisition strategy is expected to lead to higher growth than a greenfield strategy when (1) the products and processes of the industry entered are highly standardized, and (2) the firm transfers marketing competencies to its foreign subsidiaries.;I test these hypotheses using a sample of Japanese manufacturing investments made in the United States between 1978 and 1990. The results show that Japanese firms that followed acquisition strategies had lower growth than those that employed greenfield strategies in three cases: (1) when the industries entered were characterized by tacit knowledge, (2) when they were highly unionized, and (3) when the firms transferred firm-specific technology. On the other hand, they were likely to achieve higher growth when they transferred marketing competencies. |
