Greenfield versus acquisition

: the drivers for entry and expansion modes of German : based multinational enterprises in Portugal

Abstract

This paper examines the determinants for entry and expansion modes of German multinational enterprises in Portugal. Using a sample of Greenfield and acquisition transactions from 1996 until 2013, we investigate the impact of previously proven parent-level and industry-level drivers that derive from Transaction Cost/Internationalization Theory, Information Economics and Industrial Organization Perspective, and further factors that may have had an influence on the decision to invest in Portugal. We find evidence that the parent’s size, its R&D intensity, the previous experience by another German firm, the target industry's growth and Portugal's membership in the Eurozone increase the probability of a Greenfield investment rather than an acquisition. In turn, the likelihood of an acquisition increases when the parent is publicly traded and productivity in the target industry grows. Our findings confirm that traditional theories can be applied to the particular combination of home and host country. Furthermore, specific policy recommendations can be given based on the results in order to promote German foreign direct investments in Portugal.

Date of Award	19 Sept 2014
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Ricardo Reis (Supervisor)