Handbook of Institutional Approaches to International Business
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Handbook of Institutional Approaches to International Business

Edited by Geoffrey Wood and Mehmet Demirbag

Expertly written by leading scholars from a range of different starting points, this compendium presents a synthesis of recent work relating to institutionally-informed accounts from transitional and emerging markets, as well as from mature economies. It specifically focuses on the linkage between institutions and what goes on inside firms, and the relationship between setting, strategic choice and systemic outcomes.
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Chapter 13: Partial or Full Acquisition: Influences of Institutional Pressures on Acquisition Entry Strategy of Multinational Enterprises

Ahmad Arslan and Jorma Larimo


* Ahmad Arslan and Jorma Larimo 13.1 INTRODUCTION Foreign market entry mode decisions are an important research topic in the field of international business (IB) studies (Brouthers and Hennart 2007; Slangen and Hennart 2008). Foreign market entry mode decisions of multinational enterprises (MNEs) are commonly segmented into equitybased and non-equity-based modes (e.g. Pan and Tse 2000). The equitybased entry modes involve foreign direct investment (FDI) made by the MNEs (Dunning and Lundan 2008; Demirbag et al. 2008) and are considerably inflexible and irreversible in nature (e.g. Elango and Sambharya 2004). Therefore, the choice of FDI mode involves detailed analyses of trade-offs between control and investment risk as well as conformance to the institutional requirements of host countries (e.g. Luo 2001; Xu and Shenkar 2002; Gaur and Lu 2007). MNEs face two important decisions when they wish to enter new international markets using the FDI mode: the level of equity control in a subsidiary (formation of wholly owned subsidiary or a joint venture with local partner), and whether to acquire an existing enterprise (acquisition) or build a new start-up (greenfield investment) (Brouthers and Brouthers 2000; Dikova and van Witteloostuijn 2007; Slangen and Hennart 2008). IB scholars have analyzed these FDI decisions of MNEs using different approaches. Some past studies have addressed the ownership mode choice of MNEs by studying the choice between a joint venture (JV) and full ownership (e.g. Anderson and Gatignon 1986; Luo 2002; Xu et al. 2004; Brouthers and Hennart 2007; Jung et al. 2008). Other IB scholars have...

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