¹Richard Ivey School of Business, University of Western Ontario, London, Canada

Correspondence: S-FS Chen, Richard Ivey School of Business, 1151 Richmond Street N, University of Western Ontario, London, Ontario, Canada N6A 3K7. Tel: +1 519 661 3039; Fax: +1 519 661 3700; E-mail: sfchen@ivey.uwo.ca

Received 1 December 2004; Revised 19 April 2007; Accepted 13 June 2007; Published online 31 January 2008.

Abstract

Multinationals can start up greenfield entities or acquire existing firms to enter foreign nations. Regardless of the choice of greenfield investment vs acquisition, they can control full equity (i.e., wholly owned subsidiaries) or share ownership with local partners (i.e., joint ventures). Depending on the stake taken in the targets, therefore, international acquisitions can be classified into two major categories – full or partial – although this distinction is missing in most previous studies. In this paper, I propose that the motives for acquisitions (vs greenfield investments) are specific to whether entries are made through full or partial ownership, in that full acquisitions are driven mostly by capability procurements, whereas partial acquisitions are motivated by other strategic considerations. By splitting a sample of Japanese investments in the US into two sub-regimes, the study has found that the decision on joint ventures vs wholly owned subsidiaries dictates the determinants that shape the choice between greenfield and acquisitive entries. There is also evidence that Japanese investors self-select the decision on full or partial ownership to justify the strategy that they have chosen to enter the US. These findings offer new insights into the role of ownership structures in shaping the choice of entry strategies.