Desislava Dikova

Acquisitions and Real Options: The Greenfield Alternative

Although acquisitions are a popular way to enter new markets, empirical evidence tends to indicate few benefits accrue to acquiring firms. This might be the case because firms use acquisitions when they should be employing an alternative mode of expansion. Applying real options theory to this issue, we suggest that greenfield start-up ventures provide a real option alternative to acquisitions for firms establishing new international subsidiary units. To test this notion we examine a sample of Western European firms entering the emerging economies of Eastern Europe. The evidence suggests that acquisitions are a good choice only when firms enter markets containing low demand uncertainty and when these firms possess acquisition-based strategic flexibility. Overall, our analysis indicates that greenfield ventures appear to provide firms with a real option when making the acquisition decision.

Entry Mode Choices in Transition Economies: The Moderating Effect of Institutional Distance on Managers’ Personal Experiences

This article examines the moderating effect of institutional distance on the relation between personal experiences of chief executive officers (CEOs) and entry mode choice. Hypotheses are tested with data on 156 foreign direct investments made by west-European multinational enterprises in 10 central and eastern European economies in the 1992–2002 period of transition. Two demographic features are examined: CEOs’ age and international experience. The results provide support for the theory that the impact of CEOs’ experiences on the entry mode choice is conditional on the institutional distance between home and host countries.

Which Resources Matter How and Where? A Meta-Analysis on Firms’ Foreign Establishment Mode Choice

Firm resources play an important role in explaining the foreign establishment mode choice. However, a theoretical framework that simultaneously a) differentiates between heterogeneous types of resources, b) provides a rationale that consistently explains how firms adapt their establishment mode choice to their resource base, and c) reflects on contextual factors that intervene in the consistency of the direct relationships is largely missing. The present paper draws on the resource-based view (RBV) to develop such a framework. More specifically, we study the effect of knowledge-based and experience-based resources on a firms establishment mode choice and the moderating impact of cultural distance on these relationships. We validate our theoretical framework by a meta-analysis (integrating 31 studies with 13,559 establishment mode choices) and find that knowledge-based resources enhance a firms propensity for greenfield investments, while experience-based resources more likely lead to acquisitions. Further, cultural distance increases knowledge-intensive firms’ preference for greenfield investments.

Planned Marketing Adaptation and Multinationals' Choices Between Acquisitions and Greenfields

International marketing studies have extensively examined the antecedents of firms’ marketing standardization/ adaptation decisions. However, it is unclear whether such decisions, once planned, codetermine the choice between buying and building foreign subsidiaries. Analyzing a sample of 150 foreign entries by Dutch firms, the authors find that the level of marketing adaptation planned for a wholly owned subsidiary is positively related to the likelihood that the subsidiary will be established through an acquisition rather than through a greenfield investment. Moreover, the authors find substantial evidence that this positive relationship is stronger for firms that (1) are establishing relatively larger subsidiaries, (2) have less experience with the industry entered, or (3) are entering less developed countries. The findings show that firms pursuing higher levels of marketing adaptation assign more value to the marketing adaptation advantages of acquisitions over greenfields, especially if the risks associated with implementing the planned adaptation level are high. In addition, firms typically strive for a fit between their international marketing strategy and their mode of foreign establishment.

Influences of Institutional Distance and MNEs’ Host Country Experience on the Ownership Strategy in Cross-Border M&As in Emerging Economies

This article analyzes ownership strategy in cross-border mergers and acquisitions (CB M&As) undertaken by the multinational enterprises (MNEs) in emerging economies. We use new institutional economics and organizational learning theories to hypothesize and empirically analyze the influence of formal and informal institutional distance, and MNEs’ host country experience on the MNEs’ choice between full and partial CB M&As. The empirical analysis is based on a sample of 184 CB M&As launched by MNEs in emerging economies. Our empirical results revealed that high formal and informal institutional distances lead to a preference for partial CB M&As; however, MNEs’ host country experience moderated the relationship between institutional distance and the MNEs’ choice between full and partial CB M&As. We found that MNEs with prior investment experience in the focal emerging market opted for full CB M&As over partial CB M&As despite high formal and informal institutional differences.

Reflections on organizational team diversity research

Purpose – Research on organizational team diversity operates under the assumption that team diversity matters for organizational team behavior. The purpose of this paper is to outline this assumption by referring to three aspects which this type of research has conventionally employed, that is, the conceptual definition, IPO logic, and the concept’s operationalization. The authors subsequently search for its logical support. Design/methodology/approach – The search covers several pieces of information: the possible origins of organizational team diversity research, models on group composition, and models on collective behavior. Findings – The authors do not find strong evidence in favor of the field’s assumption. Originality/value – The implications of this are put into context with contemporary research practices and diversity’s popularity.

Improving Innovation: Are Internal and External Sources of Knowledge Complements or Substitutes?

I theorize and test the concept that searching for knowledge that a firm acquires internally and externally are substitutive activities. Firms need to manage their knowledge sources to reduce costs while improving innovation performance by focusing on either an internal or external knowledge source. Alternatively, I also argue that searching for knowledge internally and externally are complementary activities; the benefits of investing in both exceed the costs involved leading to superior innovation performance outcomes. I find that internal and external sources are substitutes, but sourcing knowledge internally or externally has a different impact on incremental and radical innovation performance.

THE EFFECT OF ACQUISITION EXPERIENCE, INSTITUTIONAL CONTEXT AND NATIONAL CULTURE ON CROSS-BORDER MERGER ABANDONMENT AND COMPLETION.

In this study, we offer a first attempt to explain two phenomena that, to the best of our knowledge, were ignored in the literature: (a) the likelihood that an announced M&A deal will be abandoned ...

25 Years of Real Option Empirical Research in Management: 25 Years of Real Option Research

For several decades, management scholars have extolled the virtues of using real option logic when making decisions under uncertainty. Real option logic suggests that in such situations, firms might be better off deferring or staging investments, reducing potential financial losses, while at the same time securing an option to grow (or abandon) the investment when uncertainty abates. Our analysis of the empirical research published in leading management journals over the past 25 years suggests that while some progress has been made, much more work needs to be done. We still do not have the answers to critical questions such as: Which entrepreneurial/managerial traits impact the identification or exploitation of real options? Do multiple types of uncertainties interact with each other and influence real option decisions? Addressing these and other issues identified in our study can help improve our understanding of the usefulness of real option logic in management.

Performance Effects of Internationalization: Contingency Theory Analysis of Emerging Market MNEs

In this paper we challenge the notion that internationalization in isolation can produce an impact on performance that is generalizable across all firms. We focus on internationalizing firms from R...