¹Department of International Business, National Chengchi University, Taipei, Taiwan

Correspondence: D Tan, Department of International Business, National Chengchi University, 64, Chih-nan Rd, Sec. 2, Wenshan, Taipei 11623, Taiwan. Tel: +886 2 2939 3091 ext 81139; Fax: +886 2 2938 7699; E-mail: dctan@nccu.edu.tw

Received 11 April 2006; Revised 10 August 2008; Accepted 1 September 2008; Published online 12 March 2009.

Abstract

We examine the relationship between the foreign market entry strategy and the subsequent growth of a subsidiary. We build upon the Penrose theory of firm growth, and on the organizational economics, international management, and foreign market entry strategy literatures. We hypothesize that the post-entry growth of acquisitions is positively associated with weak and codifiable interdependence within the multinational enterprise network, whereas the post-entry growth of greenfield investments is positively related to strong and complex interdependence. Empirical findings from a sample of Japanese subsidiaries in the US lend support to our argument.