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An acquisition or a greenfield subsidiary? The impact of knowledge on sequential establishments in a host country

Anders Pehrsson (School of Business and Economics, Linnaeus University, Vaxjo, Sweden)

International Marketing Review

ISSN: 0265-1335

Article publication date: 12 May 2020

Issue publication date: 19 May 2020

875

Abstract

Purpose

Establishment of wholly owned subsidiaries in a foreign market is central to international marketing because sole ownership and high commitment facilitate firm's marketing in the local market. Drawing on knowledge-based theory, this study extends the current understanding of firm's sequential establishments of wholly owned subsidiaries in a host country.

Design/methodology/approach

Swedish firms' establishments of wholly owned subsidiaries in Germany, the United Kingdom and the United States were analyzed using a longitudinal approach.

Findings

A firm's broad international experience is associated with an acquisition in any phase, while mode experience and value-adding experience are associated with postinitial acquisitions. There is no association between mode experience and greenfield investments.

Research limitations/implications

Knowledge-based theory explains a firm's choice of establishment mode when establishing in the same host country. Effects of marketing experiences are due to the establishment mode and different experiences explain choices for initial and postinitial establishments.

Practical implications

In choosing between a wholly owned subsidiary in terms of an acquisition or a greenfield investment, for a foreign establishment the firm is advised to consider the impact of marketing experiences and establishment phase.

Originality/value

Research is needed on how experiences affect choices between foreign establishment modes where the firm is the sole owner. This study is the first to focus on the choice between wholly owned subsidiaries in terms of acquisitions and greenfield investments, and the impact of experience and phase of establishment in a particular host country.

Keywords

Acknowledgements

The author is thankful for comments received from Professor Olli Kuivalainen, Associate Editor of International Marketing Review (IMR), three anonymous reviewers of IMR, participants at the AMA Global Marketing SIG Conference, Santorini, Greece, 2018, Per Servais and Pär Vasko. Andreas Pehrsson assisted in collecting the empirical data.The research was funded by Linnaeus University.

Citation

Pehrsson, A. (2020), "An acquisition or a greenfield subsidiary? The impact of knowledge on sequential establishments in a host country", International Marketing Review, Vol. 37 No. 2, pp. 377-396. https://doi.org/10.1108/IMR-12-2018-0345

Publisher

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Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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