Acquisition versus greenfield investment – the impact on the competitiveness of polish companies

Abstract

There are many entry modes which help companies to develop overseas markets. Foreign direct investment (FDI) is one of them, usually described to be the most advanced choice. Foreign expansion by FDI requires two strategic decisions regarding the organizational form of its foreign activity. Firstly, the company has to choose the level of control over its overseas operation, such as full ownership or joint venture. Secondly, the company has to determine the mode of entry, whether to acquire an existing local company (acquisition) or to set up a new venture (greenfield investment). Undoubtedly the selected entry mode determines benefits which foreign operations generate. The purpose of this paper is to show essential issues referring to the role of international activities in the form of foreign direct investment in developing the competitiveness of companies. Special attention is drawn to the issue of the impact of two alternative entry modes of foreign direct investment on the competitiveness of investors and the identification of the main fields of internationalization advantages. The results prove the existence of the differences of FDI impact on competitive potential dependent on the form of FDI. They also show that nature of benefits from the international expansion by acquisition differs considerably from the other selected groups.