Greenfield or M&A? An institutional and learning perspective on the establishment mode choice of Chinese outward investments
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2020Metadata
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Alon, I., Elia, S. & Li, S. (2020). Greenfield or M&A? An institutional and learning perspective on the establishment mode choice of Chinese outward investments. Journal of International Management, 26(3), 1-17. doi: 10.1016/j.intman.2020.100758Abstract
We develop and test a model of Chinese greenfield investments using institutional and learning
theories. Both the host country institutional context and the firm's international characteristics
affect the establishment mode. Using 152 Chinese emerging market multinationals (EMNEs) with
401 subsidiaries distributed in 26 countries from 2003 to 2013, we build a database of 284 pairs
of host country/Chinese firms to test two hypotheses. We find that, first, governance environment
affects the establishment mode: greenfield investments are preferred over acquisitions in relation-based host markets, and M&As are preferred in rule-based countries. Second, the depth of
Chinese EMNEs' international experience (i.e. the amount of previous investments in the same
host market) moderates the effect of the governance environment on the establishment mode.
Firms with greater international depth use more M&As in relation-based markets and more
greenfield investments in rule-based markets, suggesting that previous investments in the same
host country provide a type of learning that reduces acquisition uncertainty in the former case
and increases the self-confidence of Chinese EMNEs in the latter.