Adapt to the wild: the effect of dynamic capabilities on international entry mode

Abstract The literature about the relationship between an emerging market enterprise (EME)’s dynamic capabilities and its international entry modes, such as cross-border mergers and acquisitions (M&A) and Greenfield investment, is limited. This study offers a model based on the dynamic capability perspective complemented by the industry-based view and institutional theory. The proposed hypotheses are tested using binary logistic models with survey data from 303 Chinese outward foreign direct investment firms. The findings confirm that an EME’s adaptive dynamic capabilities that are contingent upon industry and institutional actors influence its international entry mode strategic choices. Results show that adaptive dynamic capability can positively affect the likelihood of an EME opting for a Greenfield foreign direct investment (FDI) rather than cross-border M&A. The host country’s institutional quality and home country industry conditions-–industry research and development (R&D) input–-also can positively influence an EME to opt for Greenfield investment. Suggestions for future research and managerial implications are also discussed.