Acquisition or greenfield start-up? Institutional, cultural and transaction cost influences

In this paper, we develop and test a model of diversification mode choice ( how firms decide between acquisitions and greenfield start-up ventures) whi ch includes institutional, cultural, and transaction cost variables. Using a sample of Japanese firms entering western Europe, our results show the mo del correctly predicts over eighty-seven percent of the mode choices. Thus, we provide strong initial evidence to support using institutional, cultura l and transaction cost variables to predict firms' choices between acquisit ions and greenfield start-lips in international expansion. Our findings als o suggest that organizations which have developed strong intangible capabil ities may be able to more readily leverage these capabilities through green field startups. Copyright (C) 2000 John Wiley & Sons, Ltd.