Greenfield investment vs. merger and acquisition as an entry strategy in Mexico - The case of Austrian companies

Abstract

Over recent decades, Mexico has become a very attractive destination for FDI. When opening a wholly-owned subsidiary, firms can either establish local presence through greenfield investment or merger and acquisition. The aim of this paper is to make recommendations to Austrian companies that want to establish a wholly-owned subsidiary in Mexico. An empirical study in the form of qualitative semi-structured interviews was conducted in order to learn from the experiences of Austrian firms that have already taken the step into the Latin American nation. The size and the location of the Mexican market are the main motivation for Austrian companies to establish local presence; hence, Austrian investors can be defined as market-seekers. Also, the cost advantage is an important driver. Moreover, it is more common to build up the subsidiary from scratch. The ratio of greenfield investment to M&A is nine to one, simply because the value chains are not as developed yet in Mexico.