Cross-border acquisitions vs. Greenfield investment: A comparative performance analysis in Greece § Antonios Georgopoulos a, *, Heinz Gert Preusse b,1 a Department of Business Administration, University of Patras, Greece b Department of Economics, University of Tuebingen, Germany 1. Introduction Foreign TNCs have the option to choose between two competing modes of FDI in order to penetrate foreign markets. One is Greenfield investment, the other one is taking over an existing local firm. TNCs opting for Greenfield FDI and international acquisition, respectively are facing different types of implementation costs and may show different degrees of economic performance in the host country during the post-entry period (Caves & Mehra, 1986; Dunning, 2000; Harzing, 2002).The aim of this study is to shed some light on the question whether one of the two modes of entry is associated with a better performance of the affiliate on the local market later on. By offering a comparative performance evaluation of the two FDI modes at the affiliate level, we add a new aspect to the existing bibliography. In contrast, most of the international business literature approaches the Greenfields vs. acquisitions issue from the point of view of the parent company and its decision- making procedures (e.g., Barkema & Vermeulen, 1998; Brouthers & Brouthers, 2000; Elango & Sambharya, 2004; Harzing, 2002; Hennart & Park, 1993; Larimo, 2003; Mudambi & Mudambi, 2002).Another novelty is that we depart from the common survival literature which concentrates on the subsidiary level and analyses survival vs. failure (e.g., Caves, 1996; Li, 1995; Li & International Business Review 18 (2009) 592–605 ARTICLE INFO Article history: Received 15 March 2007 Received in revised form 22 June 2009 Accepted 8 July 2009 Keywords: Cross-border acquisition Greenfield FDI Mode of entry Performance Transnational Corporation ABSTRACT This paper compares cross-border acquisition with Greenfield foreign direct investment (FDI). It investigates the impact of these two FDI modes on the long-term performance of foreign subsidiaries. By focusing on the performance of the foreign affiliate, it departs from the rich survival literature and for the first time explores the precise performance of these ventures over a longer period of time. In particular, by drawing on the theory of industrial organization (IO), we empirically examine to which extent the two different forms of market entry help to explain the development of leading positions of affiliates in the host country. Our field research is based on a wide original sample of 179 manufacturing subsidiaries of foreign transnational corporations (TNCs) located in Greece. The econometric results indicate that acquisitions exhibit specific signs of excellence in terms of market share, firm size, capital intensity and product differentiation. We ascertain that at least as far as market share and capital intensity are concerned, the superiority of the cross-border acquisitions rests on both the fact that TNCs are eager to acquire the most efficient firms in the host country, and actively engage in assisting these firms in their up- grading procedures. ß 2009 Elsevier Ltd. All rights reserved. § We gratefully acknowledge the comments of two anonymous referees. * Corresponding author. Tel.: +30 2610 996139. E-mail addresses: georgop@upatras.gr (A. Georgopoulos), preusse@uni-tuebingen.de (H.G. Preusse). 1 Tel.: +49 7071 2974150. Contents lists available at ScienceDirect International Business Review journal homepage: www.elsevier.com/locate/ibusrev 0969-5931/$ – see front matter ß 2009 Elsevier Ltd. All rights reserved. doi:10.1016/j.ibusrev.2009.07.005