Shih-Fen S. Chen, Ming Zeng
Multinational enterprises (MNEs) can either start up new ventures or acquire existing firms to enter foreign markets. Although many reputable brands have changed hands in international acquisitions, no previous studies have systematically verified the proposition that MNEs choose acquisitions over startups to overcome reputation barriers abroad. In this study, we hypothesize that the choice of acquisitions vs. startups also depends on investors' prior advertising outlays as well as the reputation barriers they face in the foreign industry entered. We compile a vector of variables that distinguish between firm-specific advertising investments and industry-specific reputation barriers to analyze Japanese manufacturers' entry strategies into the US. Our results show that Japanese investors facing higher reputation barriers in the target industry are more inclined to acquire existing firms, whereas those spending more on advertising prior to an entry are more likely to start up new ventures. © 2004 Elsevier B.V. All rights reserved.
International Business School, Brandeis University, Waltham, MA 02454, Mailstop 032, United States; INSEAD, Singapore, Singapore
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