1 Introduction

There is a strong consensus that growth plays an important role in the long-term survival and prosperity of organizations (Goold 1999). To exploit growth opportunities, companies can, in general, utilize three different modes: internal development, mergers and acquisitions (M&A), and partnerships (Stettner and Lavie 2014).

Internal development, often labeled as organic growth, refers to organizational actions that create value by recombining existing resources and capabilities or developing new ones (Yang et al. 2010; Zou et al. 2010). M&A comprise inter-firm linkages that lead to the integration of two formerly separate entities (Li 1995; Hoffmann and Schaper-Rinkel 2001). When entering partnerships, whether equity-based or not, firms remain legally independent, but they cooperate by exchanging complementary resources and services (Garette and Dussauge 2000; Lioukas et al. 2016).

As each growth mode requires an investment commitment that leverages a firm’s finite repertoire of resources (Teece 1982; Batsakis and Mohr 2017), they are often regarded as alternatives (Harzing 2002; van de Vrande et al. 2006). Thus, the pursuit of one mode usually eliminates the adoption of another (Yang et al. 2010). Hence, it is crucial to understand when to choose one mode over another (Bradley and Gannon 2000; Chang and Rosenzweig 2001). This “build, buy, or partner” choice is considered an essential dimension of corporate strategy (Canals 2001) and requires the careful consideration of each mode’s characteristics and constraints (Yip 1982), advantages and disadvantages (Tseng 2017), and performance implications (Li 1995).

How practitioners reach this decision, and which ex-ante determinants exert influence on it, has intrigued scholars for decades. However, the associated research landscape is dispersed and fragmented, given that most empirical studies employ varying comparative models, such as “acquisition vs. alliance” (e.g., Villalonga and McGahan 2005; Wang and Zajac 2007; Blevins et al. 2016), “greenfield investment vs. acquisition” (e.g., Zejan 1990; Harzing 2002; Drogendijk and Slangen 2006), and “wholly-owned subsidiary vs. joint venture” (e.g., Gomes-Casseres 1990; Makino and Neupert 2000; Kuo et al. 2012). Despite some researchers, such as Shaver (2013) or Yang et al. (2010), scrutinizing this dichotomy and calling for a more comprehensive perspective, only few studies investigate trichotomous choice sets incorporating all three growth modes (e.g., Elango and Sambharya 2004; Kogut and Singh 1988; Moatti 2009).

This review aims to combine and synthesize the hitherto separate research streams on growth mode choice and its determining factors. Following the call of Hoffmann and Schaper-Rinkel (2001) and based on the theoretical foundations of strategic decision-making (SDM) research, a holistic research framework is developed to systematically assess and reconcile all decision antecedents under one conceptual roof. Thereby, this review overcomes limitations of previous reviews that provide detailed insights into individual growth modes (e.g., Jansen et al. 2006; Haleblian et al. 2009; Xie et al. 2017), but lack a synthesized discussion of the choice between different growth modes.

Such knowledge is closer to business reality and has the potential to greatly advance the performance of strategic decision-making. When exploiting growth opportunities, organizations have various modes at their disposal and decision-makers need to choose the one that maximizes the likelihood of success (Brouthers 2002). Hence, a consolidated view of the most important aspects in growth mode selection can facilitate the alignment of an organization’s growth strategy with its contextual circumstances, and the beneficial effects of flexible, multidexterous strategies underpin this necessity (Busija et al. 1997; Yin and Shanley 2008).

Further, this review makes two important contributions to extant literature. First, it provides a structured overview and holistic discussion of empirical research across the various research streams on growth mode choice. Such cross-silo findings facilitate the exchange of knowledge and the development of a more coherent understanding of this key strategic decision (Parola et al. 2013; Brouthers and Brouthers 2000). Second, several paths for future research endeavors are provided that help guide the theoretical and empirical development of the topic. For instance, scholars might take a closer look at the role of personal and top management team characteristics in this choice and investigate mode interdependencies and their impact on firm performance in more detail.

The remainder of this paper proceeds as follows. Section 2 describes the review methodology and the applied research framework. In Sect. 3, the literature analysis is presented. After synthesizing and discussing the main findings in Sect. 4, Sect. 5 presents an agenda to guide future research. Finally, Sect. 6 concludes the paper.

2 Review methodology

2.1 Research process

In this study, I employ a systematic review approach. A systematic literature review (SLR) is particularly well suited to the objectives of this study, as it enables the capture of a mature domain’s body of knowledge (Cook et al. 1997; Webster and Watson 2002) and the integration of findings from fragmented research fields (Booth et al. 2016; Denyer and Tranfield 2009).

To collate an exhaustive but distinctive literature sample, a keyword technique is employed to draw from the Business Source Complete (EBSCO) and ABI/Inform ProQuest databases. For an article to be included in the preliminary sample, a reference to growth modes as well as the decision between them was required in the title or abstract. The search terms used for the text function are provided in the Appendix. The search scope is limited to peer-reviewed journal articles published in English. The review of journal articles only is appropriate given the maturity of the topic and the fact that “they can be considered validated knowledge and are likely to have the highest impact in the field” (Hutzschenreuter and Kleindienst 2006, p. 674).

Book chapters, working papers, and conference articles are excluded. The output is further constrained to publication dates between January 1, 1980 and May 31, 2022. Using 1980 as the lower boundary seemed reasonable, as the most cited empirical papers that fundamentally sharpened our understanding of growth modes were written in the decade that followed (e.g., Wilson 1980; Yip 1982; Kogut and Singh 1988). This is consistent with other reviews that identified the study by Wilson (1980) as a suitable starting point (Slangen and Hennart 2007). The keyword search yields a preliminary sample of 1574 articles and after elimination of duplicates, 1172 unique articles remain.

To narrow down the initial search output, a stepwise selection process using clear and replicable inclusion criteria is followed.Footnote 1 Initially, the analysis was confined to empirical contributions.Footnote 2 This filter is appropriate given the research focus on ex-ante determinants that warrant empirical investigation (1022 articles remaining). Moreover, results are restricted to periodicals with a 5-year social science citation index journal impact factor of ≥ 1.7 or a VHB-Jourqual 3 ranking of ≥ C (506 articles remaining). These quality thresholds are consistent with similar SLRs (e.g., Bouncken et al. 2015) and are well suited to long-standing research domains, such as growth strategies. To check for substantial relevance, the titles and abstracts of each article are subsequently screened, and false positives were eliminated (61 articles remaining). The extant articles are read in their entirety, which leads to the removal of further publications that did not examine the topic under consideration. This was mainly the case for articles that do not investigate either contextual factors or one of the targeted decision situations. As such, studies investigating the antecedents of individual growth modes (i.e., not addressing any decision between two or three growth modes) are not included in this review. Ultimately, this procedure results in an interim sample of 50 articles that met the inclusion criteria and predefined research scope. Finally, the output is complemented through residual search (adding 20 articles) and cross-referencing (adding 4 articles). Table 1 provides an overview of the selection process.

Table 1 Steps and results of the applied literature search process
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The final sample comprises 74 articles from 32 journals. The main outlets are the Journal of International Business Studies (23%) and the Strategic Management Journal (17%). A closer look at the publication dates reveals a strong research interest in growth mode decisions between 1990 and 2009. The articles published in these two decades account for 77% of the entire sample. With respect to geographical coverage, most studies (31%) investigate the growth mode decisions of firms from North America, followed by 24% of articles focusing on Europe and 16% on Asia–Pacific; 28% use a global sample. The industry focus of most research is noteworthy. While 50% of the references rely on a cross-industry sample, 26% cover manufacturing firms only, with 24% covering other sectors.

2.2 Research framework

To systematically assess any given body of research, it is instructive to develop an analytical review scheme (Ginsberg and Venkatraman 1985). Such a scheme allows to discern the overarching themes, as well as commonalities and differences, from a diverse set of studies. As the growth mode choice is considered a key strategic decision (Agarwal and Ramaswami 1992), the SDM literature provides a solid foundation for developing such a scheme. Essentially, SDM scholars identify four main groups of antecedents that impinge on strategic decisions: external environment, internal organization, top management team (TMT), and decision-specific characteristics (Shepherd and Rudd 2014; Elbanna et al. 2020).

While this categorization is beneficial for a general understanding of contextual influences, it warrants further customization to the researched decision. As such, the contextual factors that are investigated in the sample are extracted and grouped into mutually exclusive factors. This approach leads to the renaming and rearranging of the generic SDM antecedents into broad sets of internal, external, and decision-specific factors.Footnote 3 Internal factors entail organizational variables, as well as those related to the decision-making entity; external factors include both macroenvironmental and microenvironmental variables; decision-specific factors contain growth objectives as well as partner or target characteristics. Figure 1 illustrates this integrative research framework. In the next section, the framework is employed to structure the findings of the review and finer grained variables within each category in more detail.

Fig. 1
figure 1

Integrative framework to research antecedents of growth mode decisions

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3 Results

3.1 Literature overview

According to Webster and Watson (2002), a concept matrix can be a very helpful means of grouping, discussing, and synthesizing prior research in a structured way. As such, the articles in the sample are categorized according to various conceptual, methodological, and thematic dimensions. Table 2 presents this matrix in a simplified form by focusing on (a) the antecedents and (b) the growth mode decision examined in each article. Organizational, macroenvironmental, and microenvironmental factors are presented and discussed at the most granular level, given their high attention and conceptual diversity in prior studies.

Table 2 Thematic clustering of publications, ordered alphabetically
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As the results show, 64% of the publications in the sample examined dichotomous decision models. Thereof, 44% focus on the “build vs. buy” choice, while the decisions of “buy vs. partner” and “build vs. partner” are addressed in 31 and 25% of the studies, respectively. Thirty-six percent of all articles investigate a more holistic choice, including all three growth modes. This rather dispersed research landscape is in line with previous observations (Yang et al. 2010; Schellenberg et al. 2018) and underpins the importance of an integrated review.

With respect to the antecedents, the findings reveal great differences in how often certain factors are addressed in the literature. The most frequently researched variables are firm resources (84%), general industry characteristics (74%), and firm experience (69%). In contrast, only a minor share of publications examined variables related to the decision-making entity (7%), firm performance (23%), or firm strategy (30%). In particular, the omittance of the decision-making entity is highly surprising given that SDM literature emphasizes the importance of individual or team-related traits in the decision process (Shepherd and Rudd 2014). Moreover, only 51% of the reviewed articles incorporate antecedents from all three groups (internal, external, and decision-specific).

3.1.1 Antecedents of growth mode decisions

In this section, I present the main results of the literature review. To do so, the research framework is employed to structure the findings, and the antecedents are discussed successively: first, internal factors including the organization as well as decision-making entity; second, external factors including macroenvironmental and microenvironmental variables; third, decision-specific factors including growth objectives as well as partner or target characteristics.

3.1.2 Internal factors

A substantial amount of research addresses internal factors, that is, the organization as well as the decision-making entity. The former is the most frequently studied group of antecedents and is approached mainly from a resource-based or transaction cost perspective. The latter is widely neglected and constitutes a major opportunity for future research.

3.1.2.1 Organization

Research emphasizes the significant influence that organizational factors exert on strategic decisions relative to other contextual variables (Leiblein and Miller 2003; Datta et al. 2002; Elbanna and Child 2007). Thus, it is not surprising that firm characteristics have attracted a great deal of attention. Based on the reviewed articles, they can be classified into resources, performance, experience, and strategy.


Resources

Research suggests that resources are the foremost factor to be examined when choosing growth strategies (Dyer et al. 2004) and that their nature, availability, and composition are important determinants (Carayannopoulos and Auster 2010; Andersson and Svensson 1994). While high internal resources reduce the need for external growth (Kim and Jin 2017), they are equally important for its realization (Hoffmann and Schaper-Rinkel 2001). Generally, resources are heterogeneously distributed and typically include all assets, processes, capabilities, and knowledge owned by a firm (Barney 1991; Zhou et al. 2009). In the reviewed literature, three major types of resource are distinguished: financial, human, and technological.

Financial resources are often approximated using company size, based on revenues, full-time employees, or assets (Shepherd and Rudd 2014). In general, there is strong consent that firm size is significantly and positively related to the decision to acquire vis-à-vis internal development (Yip 1982; Andersson and Svensson 1994; Hoffmann and Schaper-Rinkel 2001; Chang and Singh 1999) or alliances (Hennart and Reddy 1997; Zhou et al. 2009). The underlying assumption is that larger organizations are likely to possess greater financial resources and thus, have a greater capacity to finance capital-intensive acquisitions and absorb risks (Agarwal 1994; Drogendijk and Slangen 2006). Some researchers similarly find a positive relationship between financial resources and the use of full control modes when entering foreign markets (e.g., Datta et al. 2009; Erramilli 1991; Bradley and Gannon 2000; Ingham and Thompson 1994; Parola et al. 2013). Other measures of financial resources include stock market valuation, cash flow, and leverage. A high valuation is found to be significantly linked to acquisitive growth, as it can be readily exploited in exchange for an acquired firm’s stock (Chatterjee 1990). A higher cash flow, in contrast, supports a greater reliance on internal development (Lee and Lieberman 2009), as it can be much more easily applied than stock market capital. Last, findings related to a firm’s degree of leverage are mixed or insignificant, which researchers attribute to endogenous effects related to institutional circumstances (Hennart and Park 1993; Chang and Singh 1999).

Human resources in a broader and managerial resources in a narrower sense represent the second dimension of firm resources. They are found to be a key determinant of growth mode decisions, especially those that involve high complexity and substantial investments (Brouthers and Brouthers 2000). In such situations, organizations are likely to engage in acquisitions versus self-reliant modes, in order to avoid a shortage of managerial resources (Hennart and Park 1993). This alludes to Penrose (2009) who assumes that there is a maximum rate at which managers can be recruited and trained. Since acquisitions provide access to new human resource endowments, they ease the managerial burden (Caves and Mehra 1986) and hence, constitute the preferred mode of growth. Dyer et al. (2004), however, argue that the complexity of integrating human resources post-merger might discourage acquisitive growth. Similarly, some researchers argue from an absorptive capacity perspective (Cohen and Levinthal 1990) that an organization’s ability to learn and adapt might influence its relative tendency towards acquisitions or alliances (Hoffmann and Schaper-Rinkel 2001). This is in line with organizational learning theory that stresses the importance of consistent knowledge management for rapid capability build-up in foreign environments (Hagedoorn and Duysters 2002). The way organizations group individual into collective knowledge and foster information sharing among their employees can have a considerable impact on its organizational choices (Barkema and Vermeulen 1998; Carayannopoulos and Auster 2010). Effective learning mechanisms have hence been shown to be crucial for successful entry mode choice and subsequent implementation (Datta et al. 2002).


Last, technological resources are well documented as an important driver of “build, buy, or partner” decisions. They are mainly operationalized as an organization’s R&D intensity, that is the percentage of sales devoted to R&D activities. A great part of the foreign direct investment literature suggests that firms with strong technological capabilities are more likely to internationalize through internal development modes, such as greenfield ventures, as opposed to acquisitions or alliances (e.g., Hennart and Park 1993; Kogut and Singh 1988; Makino and Neupert 2000). These results support the transaction cost perspective and are closely related to the high specificity of technological assets. Specificity refers to resources or assets that lose value in alternative use (Williamson 1975), which is generally the case with proprietary content and high-tech resources. For such resources, the threat of opportunistic behavior, free-riding, or dissemination looms large (Brouthers and Brouthers 2000; Agarwal 1994). Consequently, firms are more likely to engage in growth modes that provide full ownership and control (Bradley and Gannon 2000; Kim and Hwang 1992; Brouthers et al. 2008). Moreover, the cost of internal development is significantly lower for firms with a stronger base in R&D (Lee and Lieberman 2009). However, there is contradictory evidence. Some scholars find that strong technological resources enforce acquisitive growth (López-Duarte and García-Canals 2002; Villalonga and McGahan 2005; Andersson and Svensson 1994) and hypothesize that technology-intensive firms might lack market knowledge and seek to tap those local skills through takeovers (Caves and Mehra 1986; Kogut and Singh 1988; Barkema and Vermeulen 1998). Capron and Mitchell (2004), based on dynamic capabilities perspectives (Henderson and Cockburn 1994), explain this tendency with a better aptitude to assimilate external technological resources.

Performance


Firm performance has attracted limited attention as a growth mode antecedent in empirical research, as only 23% of the papers in the sample account for performance measures. Lee and Lieberman (2009), for instance, find that firms with high profitability are less likely to use acquisition as a means to grow. This finding is consistent with the earlier discussion that higher cash flows support reliance on internal development. Hall (2002) argues that, in build vs. buy decisions, funding plays a decisive role in the relative cost and thus, the choice between both modes; while acquisitions can be financed by various mechanisms (e.g., exchange of stock, accumulated cash reserves, debt, or some combination), internal development is mostly funded by current cash flow. However, evidence is rather weak, as other studies fail to find any significant relationship between profitability and growth mode preference (e.g., Ingham and Thompson 1994; Moatti 2009; Tong and Li 2011), or even points in the opposite direction (Chang and Singh 1999). Other studies consider competitive positions or sales growth as other types of performance measures. While the former is found to significantly increase a firm’s prospects of self-reliant modes (Yip 1982), the latter does not seem to be a relevant determinant of growth mode choice (Chatterjee 1990; Datta et al. 2009).


Experience

Experience is one of the most investigated antecedents of growth mode decisions (Brouthers and Brouthers 2000), and 69% of the reviewed articles incorporated experience measures. Based on transaction cost economics, the role of experience is described as reducing the inherent uncertainty and risk associated with any growth initiative (Arregle et al. 2006). Conceptually, research distinguishes between international, country-specific, and mode-related experiences (Padmanabhan and Cho 1999; Dow and Larimo 2009; Parola et al. 2013).

International experience refers to a firm’s experience of managing business activities in foreign locations and is operationalized as years, number of countries, or percentage of foreign assets (Dow and Larimo 2009). Grounded in the Uppsala internationalization model and the concept of incremental commitment (Johanson and Vahlne 1977), cumulative international experience is found to significantly increase an organization’s ability to handle risk, and hence its preference for modes involving greater investment and control, both organic (e.g., Arregle et al. 2006; Gomes-Casseres 1990; Andersson and Svensson 1994; Agarwal 1994; Barkema and Vermeulen 1998) and acquisitive in nature (e.g., Andersson and Svensson 1994; Harzing 2002). Kuo et al. (2012) show that this tendency seems to be even stronger for family firms. In contrast, newly internationalizing firms often cede control to locals that have the necessary knowledge and networks and hence, prefer cooperative growth modes (Agarwal and Ramaswami 1992; Gatignon and Anderson 1988).

Many empirical studies depart from an aggregated measure of international experience and focus on country-specific experiences (Dow and Larimo 2009). Earlier contributions, however, fail to detect any significant influence on the decision between acquisitions and greenfield ventures (Hennart and Park 1993; Kogut and Singh 1988; Zejan 1990). One possible reason for this might lie in an offsetting effect: while companies with considerable experience in a country may possess all the required knowledge to successfully operate in that country and thus, have less need for local acquisitions, they may, in fact, feel more comfortable about making acquisitions (Drogendijk and Slangen 2006). Some scholars observe a tendency toward acquisitive growth modes, arguing that country-specific experience mitigates the difficulty of integrating labor forces (Hennart and Reddy 1997; Barkema and Vermeulen 1998) or that takeovers can serve as an instrument for reducing competitive pressure on established operations in the very same country (Andersson and Svensson 1994). Their findings are in line with transaction cost considerations and other studies that found country-specific experience to increase the probability of choosing wholly owned subsidiaries as opposed to joint ventures (Amankwah-Amoah et al. 2022; Parola et al. 2013; Yiu and Makino 2002; Mutinelli and Piscitello 1998).


Another interesting tranche of research investigates the impact of prior mode experience. In analogy to technological path dependencies (Arthur 1989), scholars approach such decisions as idiosyncratic behavior, whereby companies are locked into particular mode preferences. Hagedoorn and Duysters (2002), for instance, examine such repetitive momentum for strategic alliances and acquisitions and their results indicate that companies develop a systematic preference over time. This is consistent with the resource-based view and the organizational learning theory. When engaging in a particular mode, firms accumulate specialized knowledge, competencies, and routines (Padmanabhan and Cho 1999; Dyer et al. 2004). Such learning can be applied in subsequent initiatives, which increases an organization’s confidence and hence, the likelihood of engaging in the very same mode in the future (Wang and Zajac 2007). Such institutionalized approaches are corroborated in numerous empirical studies and seem to behave in similar ways for build, buy, or partner strategies alike (e.g., Arregle et al. 2006; Yiu and Makino 2002; White 2000; Brouthers and Brouthers 2000). Interestingly, researchers identify experience spillovers across governance forms, yet they seem to behave asymmetrically. Villalonga and McGahan (2005, p. 1200), for instance, find that “governance specialization is important for moves toward greater integration, but not vice versa.” Experience related to acquisitions tends to see companies opt for further acquisitions, but knowledge of alliances and divestitures seems applicable for acquisitions as well (Vanhaverbeke et al. 2002). Chang and Rosenzweig (2001) and Moatti (2009) endorse this view, suggesting that partnerships can be considered an option for acquisition. Finally, there is considerable evidence that different types of experiences mutually reinforce each other. For instance, Blevins et al. (2015) find that for every acquisition in a country, the likelihood of entering into another transaction in the same country is about 200% greater.


Strategy

Similar to performance, only a small fraction of the reviewed articles (30%) incorporates strategy-related antecedents. In this vein, a company’s diversification strategy, both from a geographic and product perspective, has attracted the most attention.

With respect to geographic diversification, scholars differentiate between global and domestic strategies (Harzing 2002). Based on the integration-responsiveness-framework of Prahalad and Doz (1987), they find that companies with global strategies aim for high levels of integration and low levels of local differentiation, while the reverse is true for firms following multi-domestic strategies (Parola et al. 2013; Dikova and van Witteloostujin 2007; Drogendijk and Slangen 2006). As takeovers provide access to local firms that have an established network and are locally responsive, organizations following a multidomestic strategy preferably opt for acquisitive growth, while firms with a global strategy favor greenfield investments. Similarly, Kim and Hwang (1992) observe globally diversified firms to prefer high-control modes, as they allow better management of strategic relationships and exploit synergistic effects between different foreign operations.

Empirical evidence regarding product diversification strategies is somewhat contradictory. While some studies observe that greater product diversity increases the probability of firms choosing acquisitive growth modes (Wilson 1980; Zejan 1990), others describe a tendency toward internal development (Brouthers and Brouthers 2000) or fail to find any significant impact (Harzing 2002). Barkema and Vermeulen (1998) propose a curvilinear relationship between product diversity and the propensity to expand through greenfield ventures vis-à-vis acquisitions. They argue that greater product diversity expands a company’s exposure to different competitive forces (e.g., rivals, suppliers, partners, and customers) and hence, amplifies its learning and capability building. The enhanced capabilities will, in turn, reinforce a firm’s propensity to grow organically. However, at a certain point, companies meet organizational constraints on information sharing, which necessitates firm structures with relatively autonomous businesses that can be easily acquired externally.

Another stream of research accounts for business strategy variables. However, varying conceptualizations have led to inconclusive and hardly comparable results. Datta et al. (2009) draw on the concept of Miles et al. (1978), which states that organizations exhibit four different strategies (prospectors, defenders, analyzers, and reactors) as they adapt to changes in the external environment. Their findings indicate a strong relationship between business strategy orientation and choice of market entry mode. Prospectors, such as innovative, venturesome, and growth-oriented companies, are more likely to settle for equity and full-ownership entry modes, such as acquisitions and greenfields, rather than partnership-based modes (Datta et al. 2009). Other researchers model business strategies as a result of different push-and-pull factors. Erramilli and Rao (1993) find that firms with market-seeking and client-following strategies differ significantly in their entry mode choice. Gerpott and Jakopin (2008) observe that new ventures were preferred to acquisitions when multinationals pursued a “follower” as opposed to a “pioneer” strategy.

3.1.2.2 Decision-making entity

The second category of internal factors relates to the decision-making entity, that is, the team or individual that ultimately makes the growth mode decision. As managerial cognition literature suggests, strategic choices are determined by top executives’ cognitive diagnoses and interpretations (Ginsberg 1994; Tseng 2017). Hence, it is all the more surprising that only six percent of all reviewed papers account for personal or TMT-related factors.

The top management team is the coalition of an organization’s most senior executives and is responsible for setting its overall strategic direction (Shepherd and Rudd 2014; Hambrick and Mason 1984). The growth mode literature, however, largely disregards the role of the TMT and to the best of my knowledge, no study focuses on TMT characteristics as antecedents of growth mode decisions. Hence, investigating such variables constitutes a fruitful path for future empirical investigations (Herrmann and Datta 2006).

Little attention is paid to personal factors, even though managers’ perceptions are widely considered a key driver of SDM (Johanson and Vahlne 1977). Although some studies (e.g., Sambharya 1996; Smith and White 1987) shed light on the relationship between executive characteristics and firm strategies, few do so in the context of growth mode decisions (Drogendijk and Slangen 2006). Based on upper echelons theory (Hambrick and Mason 1984) and the strategic choice paradigm (Child 1972), Herrmann and Datta (2002) explore how CEO characteristics interfere with the choice of foreign market entry mode. Consistent with theoretical arguments, they find CEOs’ preferences for full-control entry strategies, such as acquisitions and greenfield ventures, to increase with position tenure, stronger “throughout” backgrounds (accounting, operations, process R&D), and international experience. The authors hypothesize that these variables are associated with greater legitimacy, confidence, and knowledge, which might result in CEOs being more inclined to select full-control entry options, typically involving higher levels of risk, resource commitments, and information processing requirements. These suggestions are corroborated, at least to a large extent, in their similar but slightly more nuanced study in 2006 (Herrmann and Datta 2006). Yiu and Makino (2002) investigate how market development choices are bound by the cognitive mindsets of decision makers. Based on institutional theory and the concept of “representative heurism” by Tversky and Kahneman (1974), they find that growth mode decisions are affected by similar previous events with high cognitive legitimacy, that is, managers imitate other organizations’ choices (external mimicry) or rely on historical norms and previously made choices (internal mimicry). Such behavior is adopted to cope with situations of high uncertainty, but, at the same time, it can elude the conscious awareness of other, more suitable alternatives. More research is needed to advance our understanding of decision-makers’ cognitive constraints and biases in growth mode choices.

3.1.3 External factors

Strategic decision-making research suggests that environmental context has a substantial impact on a multiplicity of strategic decisions (Papadakis et al. 2010). According to the reviewed literature, it seems reasonable to distinguish between macro and microenvironmental factors. The former comprises target country-specific and socio-cultural factors and is the subject of 68% of the studies in the sample. The latter encompasses general industry variables, as well as those related to the competitive environment. They were incorporated into 79% of the reviewed articles.

3.1.3.1 Macroenvironment

Target country

Scholars stress the influence of political, economic, and legal factors on the choice and success of growth strategies (Wilson 1980; Herrmann and Datta 2002). These factors pertain to the country in which a company aims to grow in and are found to play a key role in determining strategic decisions, for example, when entering new markets (Kim and Hwang 1992). Many scholars study the influence of country risk, that is, the degree of political and economic volatility (Agarwal 1994) and found that companies tend to avoid markets with high investment risks and environmental constraints (Agarwal and Ramaswami 1992; Blevins et al. 2016). However, if they enter such markets, they favor conservative exporting (Li and Xiong 2022) or partnership modes instead of wholly owned models (Gatignon and Anderson 1988; Kim and Hwang 1992; Contractor and Kundu 1998). López-Duarte and García-Canals (2002) similarly show that when entering risky countries, firms prefer joint ventures over full or partial acquisitions. The authors argue that foreign companies likely lack the required knowledge to handle high degrees of country-specific risk and uncertainty. As such, they turn to cooperative modes and entrust local partners with the management and supervision of employees, clients, and suppliers.

Similarly, empirical evidence suggests that a country’s degree of development, often operationalized as the gross domestic product per capita, is positively and significantly associated with a tendency toward acquisitions vis-à-vis other growth modes (Zejan 1990; Andersson and Svensson 1994). Scholars hypothesize that in developed countries, the maturity and concentration of markets are higher, which, in turn, increase the probability of finding suitable acquisition targets (Wilson 1980). In addition, the process of target search, negotiation, and post-acquisition restructuring is facilitated (Dikova and van Witteloostuijn 2007). As such, M&A tends to occur in favorable economic contexts and more attractive locations (Erramilli 1991; Moatti 2009).


Moreover, the regulatory regime may also affect growth mode selection (Drogendjik and Slangen 2006). In some countries, certain growth modes are enforced (e.g., joint ventures) or exacerbated (e.g., foreign acquisitions) by national legislation on cross-holdings, voting rights, and institutional control (Gomes-Casseres 1990; Gatignon and Anderson 1988). When such entry barriers exist, firms tend to utilize less integrated modes as means to circumventing regulatory constraints and protecting their technological properties (Brouthers 2002; Moatti 2009; Yiu and Makino 2002).


Socio-cultural factors

When organizations expand internationally, the characteristics of their home country and the targeted country significantly influence their mode choice. These socio-cultural factors have been investigated extensively, and most studies relied on the multidimensional construct of “cultural distance” which describes the extent to which shared norms and values in one country differ from those in another (Hofstede 1989; Drogendijk and Slangen 2006).Footnote 4

The theoretical reason why (cultural) distance affects growth mode choice is twofold. First, organizational and managerial practices and communication styles are fundamentally driven by culture (Kogut and Singh 1988). As such, cultural distance significantly decreases managerial effectiveness by leveraging firm-specific advantages in different countries (Hofstede 1989; Dunning 1993). Second, the psychic distance stimulus is considered a cause of internal uncertainty and based on their risk orientation, cultures differ substantially in how they approach such uncertainty (Agarwal 1994). Empirical results on the impact of cultural distance on growth mode choice are ambiguous (Dow and Larimo 2009). Many studies show that with increasing cultural distance, firms prefer partnership modes with shared control over full ownership modes, such as acquisitions and internal development (e.g., Gatignon and Anderson 1988; Erramilli 1991; Erramilli and Rao 1993; Datta et al. 2009; Kogut and Singh 1988; Yiu and Makino 2002). This is in line with transaction cost considerations: collaborative modes elude the difficulties and costs associated with integrating different labor forces, which are prevalent in acquisitions (Garette and Dussauge 2000). A similar argument is made by another stream that examines the decision between self-reliant and acquisitive growth modes. The higher the cultural distance, the higher the probability that firms choose greenfield ventures vis-à-vis acquisitions (e.g., Barkema and Vermeulen 1998; Harzing 2002; Ruiz-Moreno et al. 2007; Chang and Rosenzweig 2001). In culturally distant countries, organic growth modes allow companies to maximize firm-specific advantages and introduce their practices to a carefully selected workforce (Hennart and Park 1993). Similarly, they increase a firm’s freedom of action and provide them with an opportunity to widen their knowledge base (Blomstermo et al. 2006). Moreover, firms from high-uncertainty-avoiding countries tend to opt for greenfield ventures, while acquisitions are the preferred mode for companies from countries where change is accepted as a common aspect of SDM (Brouthers and Brouthers 2000; Elango 2005).

3.1.3.2 Microenvironment

Microenvironmental variables relate to the industry or market in which an organization operates. Numerous studies show considerable differences in mode preferences between sector types, such as manufacturing and services (Brouthers et al. 2008; Erramilli and Rao 1993). According to this review, these differences can be explained by general industry or market characteristics (technological trajectories, relatedness, and potential), as well as associated competitive forces (concentration and competitor behavior).

Technological trajectories in a given sector are well documented as an influence on organizations’ growth mode decisions (Hagedoorn and Duysters 2002). Some contributions, such as Dikova and van Witteloostuijn (2007) and Anand and Delios (2002), observe that in high-tech sectors, companies tend to prefer acquisitive over organic growth. Such results support the notion of technological capabilities as “strategic assets” that firms aim to internalize via acquisitions (Elango 2005). However, high-tech industries are often prone to dynamic changes and high environmental uncertainty. To cope with such uncertainty, firms might also prefer more flexible growth modes, such as partnerships and vis-à-vis full integration modes (Hoffmann and Schaper-Rinkel 2001). Looser organizational linkages are beneficial in fast-changing environments, as they allow access to complementary resources, while at the same time, they are easier to reverse and allow for risk and investment sharing (Mutinelli and Piscitello 1998). Following this logic, researchers find that companies prefer alliances (Moatti 2009) or corporate venture capital (Tong and Li 2011), as they provide options for picking up majority stakes after uncertainty recedes later (Dyer et al. 2004).

Another strand of research explores the impact of industry relatedness, that is, closeness to the core products of a company. Some studies observe a preference for self-reliant modes versus acquisitions if relatedness is high (e.g., Wilson 1980; Barkema and Vermeulen 1998; Chang and Singh 1999). The underlying rationale is that relatedness decreases the operating costs associated with organic market development because a firm can utilize its established and readily applicable resource endowments to overcome barriers to entry (Yip 1982; Chatterjee 1990). Acquisitions, in contrast, might be useful for obtaining tacit knowledge, which is not yet available to the company, but is much needed to successfully operate in a new industry (Drogendijk and Slangen 2006; Barkema and Vermeulen 1998). Some studies identify industry relatedness to be positively and significantly associated with acquisitive growth (Lee and Lieberman 2009; Blevins et al. 2016). This confirms the transaction cost theory: first, companies can more easily monitor and assess the value of acquisition candidates in their primary business domain; second, a firm’s absorptive capacity can be enhanced because targets from a related industry are likely to draw on a similar resource pool, which facilitates integration processes (Cohen and Levinthal 1990). Moreover, intra-industry deals lessen competition, which yields another incentive for engaging in transactions (Yang et al. 2010). When deciding between partnerships and acquisitions, the former might be the preferred mechanism in unrelated markets, which inhere greater information asymmetry and hence, bear higher costs in evaluating complementary assets (Tong and Li 2011).

Another industry factor is market potential, which is approximated using market growth. Fast-growing markets increase demand and hence, the room for capacity expansion via greenfield entries (Andersson and Svensson 1994). In steady or declining markets, capacity expansion is at the expense of incumbents’ market shares, which is likely to trigger competitive retaliation and as such, increase opportunity costs (Drogendijk and Slangen 2006). Therefore, acquisitions are found to be the preferred growth mode when capacity expansion is undesirable (Brouthers and Brouthers 2000). In high-potential markets, firms lean toward organic growth (Elango and Sambharya 2004; Yip 1982; Zejan 1990; Chang and Singh 1999), thus achieving economies of scale (Taylor et al. 1998) and establishing a long-term market presence (Agarwal and Ramaswami 1992). Nevertheless, some scholars suggest that acquisitions as a reasonable means in high-growth markets as they allow for faster entry, as the long lead time of organic expansion increases the opportunity cost (Hennart and Park 1993; Hennart and Reddy 1997). If market potential is volatile or uncertain, firms turn to collaborative modes, such as joint ventures vis-à-vis wholly owned subsidiaries (Li and Li 2010). This corroborates the real option theory and enables firms to stage their investments (Brouthers et al. 2008).

When turning to competitive forces, industry concentration is the most frequently investigated antecedent. However, evidence is inconclusive, and some studies argue in favor of either growth mode. In general, the higher the concentration of a certain market, the higher the competitiveness and thus, the barrier to entry (Pugel 1985; McClain 1983). To circumvent such barriers, some researchers suggest that firms prefer acquisitive over direct entry (Chang and Rosenzweig 2001; Yip 1982; Chatterjee and Singh 1999). However, Parola et al. (2013) and Tong and Li (2011) find that companies prefer joint ventures and corporate venture capital, respectively, if market concentration is high. Similarly, Elango and Sambharya (2004) indicate industry concentration to discourage acquisitive entry. According to White (2000) and Kim and Hwang (1992), industry competitiveness leads companies to opt for internal development, as opposed to joint development or licensing agreements. Overall, more research is needed to disentangle the impact of market concentration on growth mode choice.

Finally, there is considerable evidence of imitative decisions in response to competitor behavior. Moatti (2009) and Yiu and Makino (2002) find that the decision to engage in M&A or alliances is significantly influenced by the number of similar moves conducted by competitors, especially over the past 2 years. Such mimetic decisions are explained by isomorphism theory (DiMaggio and Powell 1983): organizations seek guidance from the practices and experiences of companies in comparable situations (Yiu and Makino 2002; Arregle et al. 2006). This is especially true for oligopolistic market structures in which firms tend to respond closely to competitors’ moves (Knickerbocker 1973; Yu and Ito 1988).

3.1.4 Decision-specific factors

Strategic decision-making research suggests that decision-specific characteristics play a pivotal role in organizational choices (Shepherd and Rudd 2014; Elbanna and Child 2007). According to this review, two types of decision-specific factors impact growth mode choice: the objectives, that is, the overarching goals a firm aims to achieve by choosing certain modes, and target or partner characteristics, which are key in the decision between buy or partner strategies.

3.1.4.1 Growth objectives

Growth modes differ in many ways, and these differences are likely to be reflected when firms decide upon which pathway to follow (Datta et al. 2009). The most decisive characteristics are control, risk, flexibility, and speed (Lee and Lieberman 2009; Chang and Rosenzweig 2001; Datta et al. 2002). These are labelled as growth objectives, following Bradley and Gannon (2000), as they determine, to a large degree, how conducive a mode is to the exploitation of certain growth opportunities. Such objectives are set at the corporate level and “go beyond the narrow calculus of choosing the most efficient […] mode” (Kim and Hwang 1992, p. 35). As my review shows, growth objectives are widely interconnected and subject to considerable trade-off considerations, but comparably little is known to date: only 34% of the studies address growth objectives.

Many firms consider control over certain resources and their associated value is an essential prerequisite of competitive advantage (Agarwal and Ramaswami 1992). Thus, they rule out partnerships in advance and rely on either internal resources only (Yang et al. 2010) or concentrate on the dichotomous decision between internal development and acquisitions (Capron and Mitchell 2012). This is in line with the great part of market entry literature that links control with the more tangible notion of ownership and classified growth modes into full control (internal development and acquisitions) and shared control options (partnerships) (e.g., Erramilli and Rao 1993). Control constitutes a key objective if tacit or proprietary knowledge (Ingham and Thompson 1994), personal relationships, on-site research, or closeness to markets are important (Blomstermo et al. 2006). It is of minor relevance, however, if transaction-specific investments are limited, if behavioral uncertainty is low, or if appropriability regimes are strong (Hoffmann and Schaper-Rinkel 2001). Meanwhile, high-control modes necessitate considerable resource commitments, which is why control is considered the most important determinant of a mode’s risk and return (Barkema and Vermeulen 1998). More research is needed to explore how the appraisal of control affects the choice of growth mode.

Several studies closely examine the risk exposure of growth modes and how companies account for it in their decision-making (Agarwal and Ramaswami 1992; Pan and Tse 2000). It is generally agreed that partnerships come with the least degree of risk, while acquisitions and internal development entail greater amounts of risk (Dyer et al. 2004; Andersson and Svensson 1994). This finding is closely connected to the notion of control and investment required to assume such control (Herrmann and Datta 2002). While acquisitions come with a significant one-time investment comprising an acquisition premium, as well as transaction and integration costs, internal development investments are rather incremental and spread across multiple project parts. Therefore, the risk associated with a failed acquisition is likely to be greater than that of a terminated internal development project (Lee and Lieberman 2009). Partnership modes reduce the necessary resource commitment (Ingham and Thompson 1994), which is why they are the preferred growth option when firms perceive high levels of investment risk (Brouthers 2002). Researchers also describe some sort of risk familiarization in market development strategies, that is, firms tend to enter foreign markets using low-risk modes, such as exporting or joint venturing, and increasingly turn to riskier modes, such as greenfield ventures or acquisitions, over time (Kogut and Singh 1988). This is consistent with real options theory and the finding of Tong and Li (2011): if risk reduction is desired, companies stage commitments and defer internalization by undertaking corporate venture capital investments.

Research on the role and importance of flexibility in growth-mode decisions is sparse. Some scholars tie this to the wide adoption of transaction cost economics, which largely ignores the concept of strategic flexibility (Brouthers et al. 2008). However, there are some situations in which flexibility is found to be a key determinant of growth mode decisions. For example, if environmental uncertainty is high, resource endowments are limited or knowledge is dispersed (Hoffmann and Schaper-Rinkel 2001). In such instances, companies exhibit a greater tendency toward flexible growth modes, such as alliances, as they allow for easier adaptability and organizational learning (Hoffmann and Schaper-Rinkel 2001). As such, the need for flexibility should be a central consideration for maintaining responsiveness when opportunities or threats emerge (Brouthers et al. 2008; Li and Li 2010).

The speed of growth modes is considered a highly important determinant of organizational choice (Chatterjee and Singh 1999). Research identifies a clear tendency toward acquisitive growth if timely strategic action is required (Lee and Lieberman 2009). Internal development efforts, such as building a subsidiary from scratch, take considerably more time than buying up-and-running businesses (Hennart and Reddy 1997; Andersson and Svensson 1994). Thus, firms tend to engage in transactions if the opportunity cost of delaying growth is high (Hennart and Park 1993). This might be the case when a market is growing rapidly or if companies need to respond quickly to competitive threats (Moatti 2009). In such cases, fast strategic action is needed to maintain or restore competitive balance (Wilson 1980).

3.1.4.2 Interfirm linkages

Firms’ boundary choices of partnering or acquiring are greatly affected by interfirm linkages and the characteristics and roles of potential partners or targets (Vanhaverbeke et al. 2002; Yang et al. 2010; Wang and Zajac 2007). This review suggests that two categories of partner or target characteristics are most relevant: asset digestibility and similarity.

Research prompts that the asset digestibility, that is, whether and to what extent the desired assets of a partner or target are commingled with other, unneeded assets (Hennart 1988), is a key driver of the “buy vs. partner” decision. If the partner or target is large and not divisionalized, the desired assets are hard to disentangle from non-desired assets, and firms will prefer partnerships over acquisitions (Hennart and Reddy 1997; Hoffmann and Schaper-Rinkel 2001). Consequently, acquisitions are the mode of choice if the partner or target is small or organized in quasi-independent divisions that can be acquired separately from the rest of the firm. These findings are consistent with other studies investigating firm size separately. Generally, a firm’s tendency toward partnerships increases with partner or target size (Carayannopoulos and Auster 2010). This preference was found to hold true for joint ventures (Makino and Neupert 2000; Hennart and Reddy 1997) and alliances (Villalonga and McGahan 2005).

Some scholars acknowledge the stark impact that the similarity of the partner or target has on a firm’s propensity for certain modes (Kim and Jin 2017). The greater the differences between both companies, be it resource, knowledge, or status, the more information asymmetries will loom and the more difficult it is to assess the value of assets and capabilities (Balakrishnan and Koza 1993). As partnerships are efficient vehicles for reducing such information asymmetries, firms tend to prefer alliances over acquisitions if the dissimilarity is high. Conversely, based on synergy considerations, a higher level of similarity increases value-creating opportunities and hence, the propensity toward acquisitions (Villalonga and McGahan 2005; Tseng 2017). Dissimilarity, especially regarding the compatibility of strategic intentions, nurtures behavioral uncertainty and the perception of opportunistic threats (Brouthers et al. 2008). Thus, if appropriability regimes are weak, acquisitions are favored over alliances (Hoffmann and Schaper-Rinkel 2001). Technological complementarity plays a special role in consideration of similarity. If firms’ technological resources are neither too similar nor too different, their absorptive capacities are increased and mutual learning is facilitated (Cohen and Levinthal 1990; Dyer and Singh 1998). In these instances, alliances provide both valuable flexibility and the capacity to coordinate technologies simultaneously. Yang et al. (2010) suggest a curvilinear relationship between technical overlap and the decision to ally or acquire. While firms opt for alliances if their technological domains are moderately distant, acquisitions are the preferred growth mode in situations with a lower or greater distance, that is, when synergy potentials are high or the prospects of new technologies override inherent risks.

4 Synthesis and discussion of findings

This systematic review is the first to provide an integrated understanding of the contextual factors that influence an organization’s decision of how to exploit growth opportunities. Previous reviews (e.g., Jansen et al. 2006; Haleblian et al. 2009; Xie et al. 2017) focus on individual growth modes only. The integration of largely separated research streams provides a consolidated perspective and unveils critical gaps to be addressed in future research.

4.1 Synthesis of findings

Table 3 summarizes and synthesizes the empirical evidence of prior research. From this integrated view, two salient patterns emerge. First, there are some striking differences in how growth-mode antecedents are treated in the literature. Some antecedents, particularly the decision-making entity, are not systematically examined in prior research. This finding is surprising given that managerial diagnoses and interpretations considerably impact strategic choices (Ginsberg 1994; Tseng 2017). The rare but noteworthy examples in this direction are Drogendijk and Slangen (2006), Herrmann and Datta (2002, 2006), and Yiu and Makino (2002). Similarly, how organizational variables, in particular those related to resources, performance, and strategy, influence partnership selection is not researched in much detail. Studies covering organizational variables mainly stem from entry mode literature and use the binary choice of greenfield investment versus acquisition (e.g., Zejan 1990; Harzing 2002), thereby excluding partnership options. Moreover, some antecedents are approached from various conceptual angles, which greatly nuanced our understanding of their effects. The role of firm resources, for instance, is investigated using the resource-based view (Tseng 2017), transaction cost economics (Brouthers 2002), organizational learning theory (Barkema and Vermeulen 1998), and real option theory (Tong and Li 2011), among many others. Other antecedents (e.g., socio-cultural factors) are treated in a narrower way and mainly leverage transaction cost or institutional theory, which led to rather monothematic results.

Table 3 Synthesis of findings: antecedents and their impact on growth mode choice. Differentiating, indicative, and ambiguous factors in black, blue, and red, respectively
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Table 4 Applied search terms and retrieved output of the database screening
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Table 5 Publications included in sample, ordered alphabetically
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Second, and even more important, many of the findings are characterized by inconsistencies and lack of consensus, thereby limiting our insights on the decisiveness of antecedents for growth mode selection. While some factors are evidenced to clearly encourage certain growth modes (“differentiating”), others point toward two (“indicative”), or either mode simultaneously (“ambiguous”). For instance, companies tend to choose organic growth modes if they have abundant cash available, possess a clear competitive edge or pursue a global diversification strategy. Similarly, organizations opt for takeovers in technologically advanced industries, if their competitors operate in the same way (which necessitates rapid strategic response), or if potential targets are divisionalized and technologically complementary. Likewise, if potential targets are too large and only moderately divisionalized to be easily “digestible,” collaboration seems to be the preferred growth mode.

With respect to some antecedents, however, empirical evidence is less clear and indicative. For instance, high technological capabilities and high resource specificity may encourage organic or inorganic growth. Similarly, while transaction cost and organizational-learning perspectives would predict that companies with long-lasting international experience opt for internal development modes, a large part of the empirical evidence points toward acquisitive (e.g., Andersson and Svensson 1994; Harzing 2002) or either of the two growth modes (e.g., Barkema and Vermeulen 1998; Brouthers and Brouthers 2000).

4.2 Discussion of potential causes

This paper argues that the highly varied treatment of some antecedents, as well as the lack of empirical consensus, can be attributed to four (partly interconnected) causes: omitted variables, incorrect model specifications, divergent operationalization of variables, and unrecognized moderating effects.

As the review shows, numerous internal, external, and decision-specific factors influence a firm’s growth mode selection. However, only half (51%) of the reviewed articles incorporate antecedents from all three categories. The omittance of relevant variables in the estimation is likely to pave the way for distorted models and alternative explanations. The disregard of the decision-making entity may loom large in particular, since only four out of 74 studies accounted for managerial influences on the individual or TMT level.

Moreover, empirical dissent might be due to incorrect model specifications. Erramilli (1991), for instance, relates the conflicting evidence on the impact of experience on entry mode choice to the use of linear models, while the relationship might be U-shaped. Similarly, Barkema and Vermeulen (1998) show a curvilinear effect of product diversity on the tendency toward organic growth modes, and Yang et al. (2010) between technical overlap and the choice between alliances and acquisitions. Altogether, these results indicate that models need to be specified and tested with due care, also taking into account non-linear relationships.

Further, divergent operationalizations of both explanatory and response variables might well be another source of inconclusiveness. The measurement of international experience, for instance, ranges from the number of foreign subsidiaries (Andersson and Svensson 1994), foreign-to-total sales ratio (Gerpott and Jakopin 2008), number of countries with subsidiaries (Barkema and Vermeulen 1998), number of years a firm has been operating abroad (Erramilli 1991), export ratio (Brouthers and Brouthers 2000), managerially perceived location familiarity (Kim and Hwang 1992), and a combination of other breadth and depth metrics (Kuo and Chang 2012). A similar lack of conceptual clarity can be observed for the specification of the dependent variable: while some studies interrelate the decisions between growth modes and ownership structures (e.g., Kogut and Singh 1988; Anand and Delios 2002; Chang and Rosenzweig 2001), others treat them independently (e.g., Barkema and Vermeulen 1998; Hennart and Park 1993). Such inconsistent operationalizations are likely to introduce biases and exacerbate the comparability of the results.

Finally, previous studies largely rely on measuring direct effects between contextual factors and mode choice, thereby neglecting the plethora of contingency factors and moderating effects in between (Datta et al. 2002). As the review shows, greater size and multinationality of firms might encourage organic growth modes in culturally distant countries, while ceteris paribus and partnerships seem to be the preferred mode, as they can reduce uncertainties due to cultural distance. Similarly, the appropriability regime is critical for how the dissimilarity of a partner or target is perceived and whether companies opt for acquisitive (weak regimes) or collaborative modes (strong regimes). There might be numerous other moderating effects that have not yet been examined at sufficient depth. Vermeulen and Barkema (2001), for instance, stress the importance of accounting for the motivation or rationale of growth endeavors. Likewise, Slangen and Hennart (2008) call for a closer investigation of contingency effects in internationalization strategies: an organization’s country-specific experience and its desired level of subsidiary integration might both moderate the impact of cultural distance on mode selection.

5 Future research agenda

As the literature review shows, there are ample opportunities to advance our understanding of the growth mode decision and its antecedents. Based on the synthesized findings and the discussion of their potential causes, seven recommendations are put forward to guide future research efforts (see Fig. 2).

Fig. 2
figure 2

Derivation of future research agenda from synthesized literature overview

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First, research might investigate more holistic decision models. By utilizing multidimensional models that incorporate relevant variables from all major categories of antecedents, researchers can explore the variance and differential impact of contextual factors. Calls from scholars for a more integrated view underpin this necessity (Parola et al. 2013; Gerpott and Jakopin 2008) and emphasize the potential gain in validity and robustness of the results (Arregle et al. 2006). Moreover, holistic decision models must account for comprehensive choice options. While most papers constrained the decision model to dichotomous choices, only 36% considered all three growth vehicles simultaneously. This approach might come closer to business reality and could greatly benefit practitioners facing the choice between several growth modes.

Second, academics should systematically assess the role of decision-making entities in growth mode decisions. Such research seems overdue, as only seven percent of the papers in the sample incorporate TMT or individual decision-maker variables. This is also in line with previous studies (Schellenberg et al. 2018; Herrmann and Datta 2006). The SDM literature suggests that managers’ decision-making is considerably affected by their educational background, functional expertise, bounded rationality, defined organizational roles, and other aspects (Dean and Sharfman 1993; Zhao and Decker 2004). Thus, future research might investigate how such characteristics, both at the individual and team levels, influence growth mode decisions. Empirical results substantiate the importance of such insights, as firms that align their strategy with executive background characteristics exhibit superior performance (Thomas et al. 1991; Datta and Rajagopalan 1998). Further, the mode dependencies caused by managerial biases constitute another interesting research avenue. Despite rational preparations, managers often base their decisions on emotional tendencies and normative preferences (Neumann 2017; Hoffmann and Schaper-Rinkel 2001); that is, they are influenced by their previous strategic decisions and associated outcomes (Herrmann and Datta 2002). Consistent with this, Bradley and Gannon (2000) found that only 36% of managers systematically reviewed alternative growth modes before deciding. Therefore, longitudinal research might connect decision-makers’ previous growth decisions and their success rates with subsequent choices. When researching personal variables, a perceptual approach seems favorable, as this is considered closer to business reality (managers make decisions based on their perceptions, not objective measures) and yields significantly stronger results (Dow and Larimo 2009; White 2000). Perceptual measures facilitate the close reflection of theoretical constructs and thus, effectively reduce biases—a highly relevant issue for complex influences, such as technological capabilities or market entry barriers, which are difficult to grasp using factual or archival data (Slangen and Hennart 2007).

Third, consistent with the aforementioned points, scholars might expand the theoretical repertoire. Most studies associate antecedents with distinct theoretical perspectives, a tendency that is well described in broader empirical SDM research (Shepherd and Rudd 2014). Dominant theories, such as the resource-based view (Penrose 2009) or transaction-cost economics (Williamson 1975), focus only on certain aspects, while disregarding other important ones. As no single theory may be sufficient to explain organizational growth mode selection, scholars should deliberately integrate and complement different conceptual lenses. Broadening the approaches beyond traditional strategic management theories would enable researchers to explore the predictive power of theoretical views and forestall the omittance of potentially relevant variables. For instance, the application of behavioral perspectives using cognitive or emotional factors from psychology research could greatly enhance our understanding of the relationship between the decision-making entity and growth mode choice.

Fourth, future investigations may benefit from a greater methodological variety. To date, prior research has largely relied on cross-sectional and coarse-grained methodologies (Datta et al. 2002). Qualitative and longitudinal methods, as well as case studies and field experiments, would be particularly useful in assessing the validity of previous findings (Elango and Sambharya 2004; Herrmann and Datta 2002) and to study the conjunction with the decision-making process in growth mode selection. Moreover, prior research widely evaluates isolated phenomena, such as experience (Kuo et al. 2012), strategy (Kim and Hwang 1992), socio-cultural distance (Drogendijk and Slangen 2006), and institutional factors (Yiu and Makino 2002). However, some articles already examine certain moderating effects, such as firm-specific factors on socio-cultural distance (Agarwal 1994; Slangen and Hennart 2008), institutional variables (Li and Xiong 2022; Dikova and van Witteloostuijn 2007), and asset specificity (Erramilli and Rao 1993). Such research is particularly interesting, as it sheds light on seemingly contradictory effects (Brouthers 2002). To do so, the adoption of non-traditional methods, such as configurational (e.g., fuzzy set qualitative comparative analysis) or multi-attribute decompositional approaches (e.g., conjoint analysis), might prove instructive. Finally, scholars need to specify applied models with due care, in order to capture curvilinear and U-shaped relationships.

Fifth, in line with the calls of several SDM researchers (e.g., Elbanna 2006; Papadakis et al. 2010), a closer integration of the actual decision-making process might be an interesting research vein. To the best of my knowledge, no study has yet examined how ex-ante determinants are accounted for in the decision-making process. Researchers might seize upon the ongoing scholarly debate on whether growth mode decisions are based on rational analytical (Caves 1982) or cybernetic decision strategies (Kumar and Subramanian 1997). While the rational-analytical model assumes a simultaneous consideration of all growth modes and impact factors (White 2000; Kim and Hwang 1992), cybernetic models posit that managers structure the decision into a multi-level hierarchy and consider only a few critical (and different) factors at each level (Pan and Tse 2000; Gatignon and Anderson 1988). Studies on market development strategies suggest, for instance, that decision makers might follow a stage-gate process, in which they first choose between equity and non-equity modes of entry and subsequently, drill down into sub-categories of modes (Kumar and Subramanian 1997). Whether such hierarchical decision-making processes are the dominant logic and if so, which antecedents exert influence at which stage of the decision tree, is a highly interesting avenue for future research. Closely connected to this, scholars might explore how contextual factors are operationalized as decision criteria and how they are evaluated in the selection process. Given the concurrent and interdependent nature of growth mode decisions (Batsakis and Mohr 2017), companies need to apply comprehensive decision models based on clearly defined criteria (Forcadell 2007). However, Dyer et al. (2004) found that only 14% of firms possess specific guidelines or criteria for selecting between alliances and acquisitions. Examining the importance weights of contextual factors (especially those with influence in opposite directions) and how they are subject to trade-off considerations could prove beneficial to both academia and practice (Brouthers 2002; Dikova and van Witteloostuijn 2007). Similarly, researchers might examine the opportunistic element in growth mode decisions, that is, whether and under which circumstances the decision between growth opportunities and modes are taken jointly together. Firms can take a particular course of action without a formal decision having been made, often “in response to the external environment, rather than as a result of a systematic decision process” (Shepherd and Rudd 2014, p. 341). As such, it might well be that the emergence of an acquisition target triggers the decision to grow inorganically, rather than a deliberate way round.

Sixth, scholars have hitherto ignored the notions of mode interdependencies, that is, how combinations and complementarities of growth modes impact corporate decision-making. Some rare exceptions surface from this review, such as the expansion of alliances into acquisitions (Wang and Zajac 2007; Hoffmann and Schaper-Rinkel 2001), the use of acquisitions to bolster internal development capabilities (Lee and Lieberman 2009; Capron and Mitchell 2004), or sequential engagement in different modes to enter foreign markets (Pan and Tse 2000; Johanson and Vahlne 1977). More research in this domain is critical, as previous findings indicate a beneficial impact of multidexterous growth strategies (Busija et al. 1997; Stettner and Lavie 2014) and the overwhelming influence of mode experiences on subsequent decisions (Carayannopoulos and Auster 2010; Blevins et al. 2016). To do so, scholars might take a corporate strategy perspective and explore the relationship of growth mode decisions between lines of businesses pertaining to the same corporate parent. So far, studies have looked at each growth decision independently (Arregle et al. 2006), disregarding “the importance of conceiving the firm as a collection of businesses rather than as a monolithic entity” (Chang and Rosenzweig 2001, p. 769). As such, future research should consider how spillover effects and strategic interdependencies within the corporate portfolio might serve as decision antecedents (Datta et al. 2002; Villalonga and McGahan 2005). For instance, acquisitions might be both beneficial and detrimental to firms’ innovative capabilities (Barkema and Vermeulen 1998) and divestitures might motivate dynamic growth processes, in which firms reconfigure their businesses and redeploy resources to organic or acquisitive growth efforts (Lee and Lieberman 2009). In addition, strategic business units’ mode choices might be isomorphic in response to pressures from the internal institutional environment, that is, the parent organization (Davis et al. 2000).

Last, research could examine the interplay of antecedents and performance measures more closely and thereby, capture this SDM process from an end-to-end perspective. As this review shows, a considerable number of antecedents impinge on the decision between different growth modes. How they impact performance outcomes, either on decision (e.g., speed, quality, satisfaction, effectiveness), mode (e.g., return on investment, growth rate), or organizational level (e.g., financially, non-financially), also constitutes an interesting research domain. Some scholars have already started building bridges (e.g., Stettner and Lavie 2014; Wiklund and Shepherd 2009; Tihanyi et al. 2005), yet with a rather focused scope. Future work could build on the conceptual foundations of SDM research (Hutzschenreuter and Kleindienst 2006; Papadakis et al. 2010), which already acknowledges the significant implications on decision outcomes (Shepherd and Rudd 2014) and organizational performance (Covin et al. 2001). Such insights have the potential to greatly improve the effectiveness of corporate decision-making (Yang et al. 2010), given the unsatisfactory outcome of the majority of acquisitions and alliances evidenced by prior research (e.g., King et al. 2004; Garette and Dussauge 2000; Kale et al. 2002).

6 Conclusion

How organizations decide between buy, build, or partner modes to pursue growth opportunities is of vital interest to strategic management scholars. Researchers have tried to explain the determining factors of this decision from various angles and theoretical perspectives, which has led to the emergence of a widely scattered research landscape. Motivated by this fragmentation and the decision’s pivotal importance for practitioners, this review seeks to provide a holistic understanding of the different antecedents that impinge on growth mode selection. To do so, a comprehensive research framework was built to systematically reconcile and integrate relevant empirical contributions. The findings corroborate the view that different internal, external, and decision-specific factors are decisive in choosing certain growth modes. Based on the synthesized results, seven promising avenues for future investigations were derived, which focus on the comprehensiveness of decision models, mode interdependencies, the actual decision-making process, the role of the decision-making entity, the impact on performance measures, and a greater methodological variance. While it should be acknowledged that such intersectional research does not come without losing some conceptual granularity, it is still hoped that this consolidated view provides practitioners with a structured overview of decision-relevant factors and facilitates the theoretical and empirical development of the topic.