Acquisition vs. Internal Development as Modes of Market Entry

Strategic Management Journal Vol. 31, No.2, pp. 140-158, 2009

19 Pages Posted: 3 Sep 2011

See all articles by Gwendolyn K. Lee

Gwendolyn K. Lee

University of Florida - Warrington College of Business Administration

Marvin B. Lieberman

UCLA Anderson School of Management

Date Written: July 22, 2009

Abstract

An established firm can enter a new product market through acquisition or internal development. Predictions that the choice of market entry mode depends on ‘relatedness’ between the new product and the firm’s existing products have repeatedly failed to gain empirical support. We resolve ambiguity in prior work by developing dynamic measures of relatedness, and by making a distinction between entries inside vs. outside a firm’s primary business domain. Using a fine-grained dataset on the telecommunications sector, we find that inside a firm’s primary business domain, acquisitions are used to fill persistent gaps near the firm’s existing products, whereas outside that domain, acquisitions are used to extend the enterprise in new directions.

Keywords: market entry mode, relatedness, capability relevance

Suggested Citation

Lee, Gwendolyn K. and Lieberman, Marvin, Acquisition vs. Internal Development as Modes of Market Entry (July 22, 2009). Strategic Management Journal Vol. 31, No.2, pp. 140-158, 2009, Available at SSRN: https://ssrn.com/abstract=1921434

Gwendolyn K. Lee (Contact Author)

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States

HOME PAGE: http://warrington.ufl.edu/contact/profile.asp?WEBID=2519

Marvin Lieberman

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

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