Resource title

Analysing foreign market entry : the choice between greenfield investment and acquisitions

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Resource description

This paper formalises the choice a firm has to face when entering a foreign market via FDI as between setting up an entirely new plant (greenfield investment) or acquiring an existing indigenous firm. We assume the existence of an asymmetric duopoly in the host country, and these duopolists face the entry of a technologically advanced foreign firm in the market. The analysis shows how different constellations of entry costs and the post-entry competition affect the foreign firm's entry mode choice. Simulation results show that the foreign entrant will in most cases be best off by acquiring an existing indigenous high-technology firm, thus, forming a duopoly with an indigenous low-technology firm. We also discuss briefly the strategic dimension to the model, where the foreign firm has the possibility of crowding out the indigenous incumbents through lowering the price.

Resource author

Holger Görg

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/2474

Resource license

Adapt according to the presented license agreement and reference the original author.