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Absolute and relative resources as determinants of international acquisitions
Author(s) -
Anand Jaideep,
Delios Andrew
Publication year - 2002
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.215
Subject(s) - greenfield project , downstream (manufacturing) , upstream (networking) , fungibility , complementary assets , industrial organization , business , foreign direct investment , resource (disambiguation) , german , differential (mechanical device) , multinational corporation , investment (military) , mode (computer interface) , international business , economics , international trade , marketing , computer science , management , finance , telecommunications , political science , politics , law , history , macroeconomics , aerospace engineering , computer network , archaeology , engineering , operating system
Although it is established that firms sometimes expand abroad to augment their capabilities, previous studies have generally focused on technological determinants of foreign expansion. We analyze capability‐seeking aspects of foreign direct investment by examining the relationship between upstream (technological) and downstream (marketing) capabilities and the choice between acquisition and greenfield modes of international entry. In analyzing 2175 entries by British, German, and Japanese investors into the United States, we find that for downstream capabilities, which tend not to be geographically fungible, the absolute level of capabilities in the entered industry explains the mode choice. However, for upstream capabilities, which tend to be geographically fungible, the acquisition motive stems from a relative capability differential between host and home country firms. These results have implications for the concept of fungibility in the resource‐based view of the firm as well as for the literature on sourcing of resident assets by foreign firms, which has thus far ignored issues of entry mode and downstream assets. Copyright © 2002 John Wiley & Sons, Ltd.