Acquisition Or Greenfield Start-up

After 60 years' development, China's equipment manufacturing industry has played an important role in petroleum, chemical, electric power, metallurgy, mining and other economic construction. All of the above indicate the significance of equipment manufacturing industry in China's economic development. However, the development of any industry will subject to key resource constraints, so many equipment manufacturing firms lacking the key technological innovation capability are going abroad to seek technical resources and achieve sustainable development. In addition, some labor-intensive firms whose technologies are already mature intend to transfer some of the production lines with relative surplus supply, but less domestic demand to the less developed countries where technologies are relatively backward, and exists huge demand for marginal industries via direct investment.With the rapid development of economic globalization and the deepening of reform and opening-up in the world, developing foreign direct investment(FDI) vigorously to promote China's economic is the objective requirement. Under such conditions, the development of the equipment manufacturing industry in China is faced with tremendous opportunities and challenges.Therefore, under the promotion of multiple propellant factors such as the inner impulse, national policy support and external demand, many China's equipment manufacturing enterprises have actualized their investments in the context of economic globalization. To achieve the industrial structure adjustment and improvement of core competitiveness of enterprises, Chinese equipment manufacturing enterprises have chosen to greenfield investment or cross-border mergers and acquisitions to go abroad, and actively cope with economic crisis and the economic globalization which brought both opportunities and challenges. However, when the equipment manufacturing enterprises intend to invest directly overseas, they concern not only which market to enter, how to operate in the market, but primarily concern how to enter the market, that is choice on FDI entry mode: whether to buy an existing foreign entity (cross-border M&A)or set up a completely new plant(greenfield investment). The decision is directly related to the inherent business benefits and risks of enterprises diversification. The purpose of this study is intended to regard domestic equipment manufacturing enterprises foreign direct investment behavior as samples, using logistic model to analyze their investment to provide a theoretical basis for investors.This paper is structured as five parts.In the second section, we will introduce the basis of theoretical studies and relative research on the FDI issue. This part will then be followed by a set of hypotheses and relative discussion about the influencing factors of choices on entry mode to offer a theoretical basis for the setting of empirical model. The subsequent section describes the setting and test of our empirical model, more fully examining the impact of the affecting factors through a binomial logistic regression analysis based on samples of 83 FDI entries of 39 different firms. We then report our conclusions and finish the paper with offering guidance for more domestic equipment manufacturing business in their FDI entries.The study found the macroeconomic factors of host country impact the strategy choice of investment more significantly, while the size and management of the enterprises and other factors also have a certain effect. As China's equipment manufacturing's industry value added rate is low, the industrial structure is still mainly labor-intensive, and R&D capabilities of new technologies and products are still weak, it is important for companies to make a reasonable choice on entry mode by evaluating their own advantages and investment environment in host country and to get advanced technologies and to enhance their competitive power and profitability.