Establishment of wholly owned subsidiaries in a foreign market is central to international marketing because sole ownership and high commitment facilitate firm's marketing in the local market. Drawing on knowledge-based theory, this study extends the current understanding of firm's sequential establishments of wholly owned subsidiaries in a host country.
Swedish firms' establishments of wholly owned subsidiaries in Germany, the United Kingdom and the United States were analyzed using a longitudinal approach.
A firm's broad international experience is associated with an acquisition in any phase, while mode experience and value-adding experience are associated with postinitial acquisitions. There is no association between mode experience and greenfield investments.
Knowledge-based theory explains a firm's choice of establishment mode when establishing in the same host country. Effects of marketing experiences are due to the establishment mode and different experiences explain choices for initial and postinitial establishments.
In choosing between a wholly owned subsidiary in terms of an acquisition or a greenfield investment, for a foreign establishment the firm is advised to consider the impact of marketing experiences and establishment phase.
Research is needed on how experiences affect choices between foreign establishment modes where the firm is the sole owner. This study is the first to focus on the choice between wholly owned subsidiaries in terms of acquisitions and greenfield investments, and the impact of experience and phase of establishment in a particular host country.
