Do multinationals really prefer to enter culturally distant countries through greenfields rather than through acquisitions? The role of parent experience and subsidiary autonomy.

Prior research has argued that multinational enterprises (MNEs) prefer to enter culturally distant countries through greenfields rather than through acquisitions, since acquisitions in such countries are costlier to manage. This argument contains two hidden assumptions: (1) the additional costs of acquisitions in culturally distant countries are the same for all MNEs; and (2) such acquisitions have no benefits over their greenfield counterparts. In this paper we relax these two assumptions by arguing that an MNE's preference for greenfields in culturally distant countries depends on its international and host-country experience, and on the level of autonomy it plans to grant the focal subsidiary. Analyzing 171 wholly owned greenfield investments and full acquisitions made by Dutch MNEs in 35 countries, we find that these MNEs prefer to enter culturally distant countries through greenfields, but that this preference is lower when they have little international experience, or plan to grant the focal subsidiary considerable autonomy in marketing. [ABSTRACT FROM AUTHOR]

Do Foreign Greenfields Outperform Foreign Acquisitions or Vice Versa? An Institutional Perspective.

Prior studies of the comparative performance of greenfields and acquisitions have advanced competing arguments, with some arguing that greenfields should outperform acquisitions because acquisitions are costlier to integrate, and others that acquisitions should outperform greenfields because greenfields suffer from a liability of newness. Moreover, while the costs of integration and the liability of newness are at their greatest during a subsidiary's first years, prior studies have tested their competing arguments on samples containing older subsidiaries. We extend these prior studies by (1) developing an institutional theory-based framework that simultaneously considers the costs of integration and the liability of newness, (2) recognizing that both types of costs vary with the level of subsidiary integration, and (3) focusing on the stage of their life during which subsidiaries predominantly incur these costs. To measure subsidiary performance, we ask managers of Dutch multinationals how their ex ante performance expectations compare to the subsidiary's ex post performance during its first two years. Analysing a sample of 191 foreign subsidiaries and controlling for entry mode self-selection and other factors, we find that acquisitions outperform greenfields at low and intermediate levels of subsidiary integration, but that greenfields outperform acquisitions at higher integration levels. [ABSTRACT FROM AUTHOR]

'Leaving Nothing to Chance'?: Joint Tenancies, The 'Right' of Survivorship and Unilateral Severance

The joint tenancy with its inherent right of survivorship is the most prevalent form of co-ownership in the common law world today. Most couples will be joint tenants of a family home, while relations (such as siblings) who purchase property together may opt for this arrangement. Inter vivos acquisitions aside, the huge intergenerational transfer of wealth within families on death can result in a joint tenancy, and it may also be a convenient estate planning device. The fact that property automatically vests in the surviving joint tenants on death is the reason why many people choose this form of co-ownership. However, there is one serious disadvantage. A joint tenancy is an inflexible form of landholding where relationships sour or family circumstances change over time, and co-owners want their respective `shares' of the property to pass to someone else on death. Where consensual severance is not possible, one joint tenant can sever unilaterally. The latter mechanism is vital in terms of giving effect to the wishes of the severing joint tenant, especially in situations of discord or a breakdown in relations with their fellow co-owners. However, unilateral severance also has serious implications for the non-severing joint tenant(s) who expected to inherit property through survivorship, and can impact significantly on ownership of the home and other family property. This article looks at unilateral severance as a means of subverting the right of survivorship. The focus is on personal and inter-family relationships, and the various legal issues and policy considerations associated with unilateral severance across the common law jurisdictions of Britain, Ireland, Australia, Canada, and New Zealand. It assesses the various methods of effecting unilateral severance and proposes specific measures, as well as considering novel arguments for preventing unilateral severance based on contractual agreements to the contrary and proprietary estoppel.

Evolution of Organisational Structure and Capabilities in Internationalising Banks: The CEE Operations of UniCredit's Vienna Office

Cross-border integration is the central management issue for banks that expand internationally, and this is especially true in Central and Eastern Europe, where the pace of internationalisation through mergers and acquisitions has been rapid. A critical challenge in cross-border integration is aligning a multinational company's formal organizational structure with the distribution of capabilities across its subsidiary units, and this issue is explored by tracking the co-evolution of organizational structure and capabilities during the internationalisation of a large banking network into this region. Our focus is the Vienna head office of Bank Austria Creditanstalt, which was acquired first by HypoVereinsbank (Germany) and then UniCredit (Italy). Despite its formal role being downgraded during these changes, the unit continued to develop its distinctive capabilities. The key insight our article offers is that managing cross-border integration is not simply about recognizing the value of the distinctive capabilities of individual units and designing formal structures that successfully align with them. It is also about understanding the need for dynamic interaction between formal corporate structure and individual units' desires to retain power and influence, which have significant implications for the development of their organizational capabilities.

Down with MNE-centric theories! Market entry and expansion as the bundling of MNE and local assets

Both Anderson and Gatignon and the Uppsala internationalization model see the initial mode of foreign market entry and subsequent modes of operation as unilaterally determined by multinational enterprises (MNEs) arbitraging control and risk and increasing their commitment as they gain experience in the target market. OLI and internalization models do recognize that foreign market entry requires the bundling of MNE and complementary local assets, which they call location or country-specific advantages, but implicitly assume that those assets are freely accessible to MNEs. In contrast to both of these MNE-centric views, I explicitly consider the transactional characteristics of complementary local assets and model foreign market entry as the optimal assignment of equity between their owners and MNEs. By looking at the relative efficiency of the different markets in which MNE and complementary local assets are traded, and at how these two categories of assets match, I am able to predict whether equity will be held by MNEs or by local firms, or shared between them, and whether MNEs will enter through greenfields, brownfields, or acquisitions. The bundling model I propose has interesting implications for the evolution of the MNE footprint in host countries, and for the reasons behind the emergence of Dragon MNEs.

China’s National Security Review: a tit-for-tat response?

China is gradually taking its place as a major regulator, exercising concurrent jurisdiction of the national security review along with the US and EU over high-profile cross-border mergers and acquisitions. The National Security Review (NSR) regulatory regime of foreign acquisitions has attracted significant attention recently with the establishment of China's counterpart to the Committee on Foreign Investment in the United States (CFIUS). Due to the intensified activities of sovereign wealth funds (SWFs) that are closely linked with states, CFIUS's broad discretion to deal with China's SWF-based investment may have a far-reaching impact on China's implementation of the newly enacted NSR regime. It is essential to design a mechanism that allows SWFs to maximise their positive attributes while safeguarding the apolitical integrity of the marketplace. Any disproportionate use of the NSR regime would inevitably bring about more unintended consequences, such as tit-for-tat protectionism. This represents an imminent threat to the tenuous recovery from the recent economic crisis, largely because of the increasingly intertwined and interdependent nature of the global financial markets. It is of utmost significance to evaluate the extent to which the updated legislation strikes a reasonable balance between preserving genuine national security interests and maintaining an open environment for investment.

Pseudomonas aeruginosa genotypes acquired by children with cystic fibrosis by age 5-years

Background

We describe Pseudomonas aeruginosa acquisitions in children with cystic fibrosis (CF) aged ≤5-years, eradication treatment efficacy, and genotypic relationships between upper and lower airway isolates and strains from non-CF sources.

Methods

 Of 168 CF children aged ≤5-years in a bronchoalveolar lavage (BAL)-directed therapy trial, 155 had detailed microbiological results. Overall, 201/271 (74%) P. aeruginosa isolates from BAL and oropharyngeal cultures were available for genotyping, including those collected before and after eradication therapy.

Results

Eighty-two (53%) subjects acquired P. aeruginosa, of which most were unique strains. Initial eradication success rate was 90%, but 36 (44%) reacquired P. aeruginosa, with genotypic substitutions more common in BAL (12/14) than oropharyngeal (3/11) cultures. Moreover, oropharyngeal cultures did not predict BAL genotypes reliably.

Conclusions

 CF children acquire environmental P. aeruginosa strains frequently. However, discordance between BAL and oropharyngeal strains raises questions over upper airway reservoirs and how to best determine eradication in non-expectorating children.