Essays on crossborder acquisitions and greenfield investments
Abstract
This thesis investigates the determinants of the entry mode decision of a MNC in three essays. In the first essay, a detailed model of entry mode decision is developed and simulated. In the second essay theoretical model is simplified and solved analytically. Then, using an extremely detailed panel data on Swedish' MNCs, the postulated properties of the proposed theory are tested. Finally, in the third essay, a small sample of US MNCs is used to test the theoretical findings. Firm specific assets are decomposed into technological and managerial skills. Technical skills provide cost advantages in “go-it-alone” activities, while managerial skills make it easier for firms to adapt the technical skill set of an acquisition target. The major findings of this thesis can be summarized tinder three headings. First of all, this study revealed that low trade costs would promote acquisitions. Although it seems counterintuitive at first sight, this result is consistent with acquisition price being a function of trade costs. Higher trade costs can put the local firm in a stronger bargaining position and could therefore decrease the likelihood of acquisitions. Secondly, skill in managing large industrial organizations makes acquisitions more attractive for the investing firm. Finally, as the technological specialization of a firm increases it becomes harder to adapt the superior technology to the production technology of the existing local firms. Therefore, any difficulty of harmonizing existing technologies favors greenfield investments.
Degree
Ph.D.
Advisors
Pomery, Purdue University.
Subject Area
Economics|Economic theory
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