Individualism-Collectivism in China: Effects on Greenfield or Acquisition Decisions in International Expansion

This study aims to examine the effects of within-country subnational individualism–collectivism culture on the establishment entry mode choices (acquisition vs. greenfield) of firms from regions in China and the corresponding performance implications of acquisition entry mode. Greenfield entry mode provides firms with freedom and autonomy, whereas acquisition requires cooperation with local partners. Drawing from the cultural psychological perspective, an inverted-U-shape relationship is proposed between subnational collectivism and the likelihood of choosing acquisition mode. The reasoning behind is that for firms from an extreme individualism or collectivism region, greenfield is preferred over acquisition. The highest likelihood of choosing acquisition occurs at a balanced level of individualism–collectivism. Moreover, for firms that have chosen the acquisition mode, collectivism impedes intercultural cooperation; thus, the level of subnational collectivism is negatively associated with acquisition efficiency. China is used as an empirical context. Subnational collectivism index is operationalized by using rice–wheat paddy distributions following a publication in Science to find support for the hypotheses in this study.