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1 – 10 of over 18000Establishment 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…
Abstract
Purpose
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.
Design/methodology/approach
Swedish firms' establishments of wholly owned subsidiaries in Germany, the United Kingdom and the United States were analyzed using a longitudinal approach.
Findings
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.
Research limitations/implications
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.
Practical implications
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.
Originality/value
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.
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Samuel Ato Dadzie and Richard Afriyie Owusu
The purpose of this paper is to analyse the foreign direct investment (FDI) strategies of manufacturing firms in Ghana using the eclectic model in order to understand how…
Abstract
Purpose
The purpose of this paper is to analyse the foreign direct investment (FDI) strategies of manufacturing firms in Ghana using the eclectic model in order to understand how ownership, location and internalization factors impact FDI to developing countries like Ghana.
Design/methodology/approach
The authors use a quantitative methodology in order to statistically explore the relationships between dependent and independent variables. The data comes from a sample of 75 multinational enterprises that invested in the manufacturing sector between 1994 and 2008.
Findings
The results reveal that large firm size, extensive international experience and large market size lead to the choice of acquisition mode of entry, while high cultural distance, high country risk, high proprietary assets and incentives lead to the choice of greenfield mode in the context of Ghana.
Research limitations/implications
The results imply that the different economic, business and legal (locational) conditions of developing countries create different FDI strategies and paths of companies compared to developed markets.
Practical implications
Policy makers in developing countries should make efforts to improve market size, the institutional and regulatory environment, as well as the availability of human capital in order to attract FDI.
Originality/value
FDI studies have mainly analysed establishment mode strategies of firms in advanced markets. There is an increasing amount of research on FDI in emerging markets but very little on developing countries and African markets. Therefore, this study enables the authors to develop implications for existing theory and generate practical implications for firms and policy makers related to African and developing country markets.
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This paper aims to explore how the establishment modes used by emerging economy multinational corporations (EE-MNCs) influence their subsequent experiences of liability of origin…
Abstract
Purpose
This paper aims to explore how the establishment modes used by emerging economy multinational corporations (EE-MNCs) influence their subsequent experiences of liability of origin (LOO) in developed economies based on the causal-model theory of categorization.
Design/methodology/approach
Taking Chinese listed firms' direct investments in developed economies as the sample, this paper utilizes Heckman (1979)'s self-selection model to examine the effect of establishment modes. Besides, when checking the robustness, subsample analyses and 2SLS regressions are used to rule out the alternative explanation associated with LOO mitigation.
Findings
EE-MNCs that enter a developed economy by greenfield investment experience heightened LOO while entries using M&A are associated with the mitigated liability. When EEMNCs enter a more institutionally distant developed country, the establishment modes will be more determinant of their subsequent experiences of this liability. Moreover, the effect of establishment modes can recede when EE-MNCs have established their presence in a developed country for a longer time.
Originality/value
This paper utilizes the causal-model theory of categorization to articulate the underlying mechanisms through which the country-of-origin cue is weakened by the cue transmitted by M&A. It further considers the context-saliency of the cue of M&A and clarifies boundary conditions for the effectiveness of this establishment mode to mitigate LOO.
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Emerging-market multinational enterprises (MNEs) have pushed institutional factors to the cutting-edge of international business research. As for Chinese MNEs, the importance of…
Abstract
Purpose
Emerging-market multinational enterprises (MNEs) have pushed institutional factors to the cutting-edge of international business research. As for Chinese MNEs, the importance of institutions has been strengthened since the Chinese government launched the Belt and Road Initiative (BRI), which seeks to promote a comprehensive platform for cooperation among countries. This study aims to investigate the role played by the BRI as an institutional factor moderating the influence of other institution-, industry- and firm-specific factors on establishment mode choice by Chinese MNEs.
Design/methodology/approach
Drawing on the strategy tripod, a perspective claiming that a firm's strategies are the result of internal, industrial and institutional conditions, this study develops a number of hypotheses that are tested with data on 1,076 outward foreign direct investments (OFDIs) of Chinese MNEs between 2013 and 2021.
Findings
The results show that the BRI moderates the influence of both the firm's prior international acquisition experience and Chinese government's OFDI restrictions on the establishment by means of an acquisition. They also report that this moderating effect does not apply for acquisition experience in the host country nor institutional distance.
Originality/value
This study contributes to reinforce the importance of institutions as the third leg of a strategy tripod when explaining international behavior of Chinese MNEs. It also suggests that the BRI is a diplomatic tool that may act as a substitute for the firm's resources and may mitigate the negative influence of other external factors.
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Dessislava Dikova, Arjen van Witteloostuijn and Simon Parker
Extant work in international business (IB) involves a partial contingency-theoretic perspective: a holistic view of the impact of bundles of contingencies on an outcome variable…
Abstract
Purpose
Extant work in international business (IB) involves a partial contingency-theoretic perspective: a holistic view of the impact of bundles of contingencies on an outcome variable is missing. The purpose of this paper is to adopt a contingency approach to study multinational enterprise (MNE) subsidiary performance in the appropriate context of European transition economies at the beginning of the current millennium.
Design/methodology/approach
Methodologically, the authors introduce abduction as a line of inquiry into IB and management to develop new theoretical insights, and apply the novel empirical general interaction method to estimate bundle effects. In so doing, the authors contribute to the further development of a theoretical and empirical toolkit to revitalize holistic, or configurational, quantitative research in IB and management.
Findings
The authors find that capability fit is a necessary condition for high MNE subsidiary marketing performance, whilst environment fit is particularly critical for high MNE subsidiary financial performance.
Research limitations/implications
A key limitation is that this is a cross-section study.
Practical implications
This study offers insights as to subsidiary fit into Eastern Europe, indicating fitting entry and establishment modes.
Originality/value
This paper offers a novel holistic approach to IB, both in terms of theoretical and empirical methodology.
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Gabriel Vouga Chueke and Felipe Mendes Borini
The purpose of this paper is to examine the influence of institutional distance, firm and industry characteristics on the establishment mode strategy of Brazilian multinationals  
Abstract
Purpose
The purpose of this paper is to examine the influence of institutional distance, firm and industry characteristics on the establishment mode strategy of Brazilian multinationals – the choice between an acquisition and a greenfield investment.
Design/methodology/approach
The authors build upon the recently developed of Institutional Theory an analytical framework, decomposing the institutional distance between formal institutions (economic, financial, political, administrative, demographic, geographic and knowledge distance) and informal institution (cultural distance), and we used control variables related to firm and industry levels.
Findings
The results suggest a possible association between entry by acquisition and factors related to the firm-level and formal institution (financial, political and demographic distance). Findings also suggest a strong relationship between greenfield investments and informal institution (cultural distance) and industry-level factors.
Praticallimitations
The authors believe that the managers of Brazilian companies should use the variables adopted in this study as criteria to identify the factors that influence entry strategy abroad.
Socialimplications
Another possible contribution concerns the scope of the government because results demonstrated the weight that formal institutions place on the entry process into foreign countries.
Originality/value
This study contributes to the ongoing academic discussion regarding entry modes in different ways. First, this study contributes, given the novelty of its proposal: no quantitative studies were found to have analyzed establishment mode choice in Brazil. Another contribution is the finding related to the association between entry mode and institutional distance between countries.
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Maria Cristina Sestu, Antonio Majocchi and Alfredo D’Angelo
Adopting a quantitative explorative research design, we employed a sample of 770 foreign market entries in the period 2005–2015 to investigate whether particular entry mode…
Abstract
Adopting a quantitative explorative research design, we employed a sample of 770 foreign market entries in the period 2005–2015 to investigate whether particular entry mode strategies such as joint venture or wholly owned subsidiary are differently chosen by small- and medium-sized enterprises (SMEs) and large firms. Various tests have been carried out revealing that SMEs show some different features compared to large firms when selecting their entry mode. SMEs react differently to economic downturns, and the diversification level is a crucial determinant for their entry choices while it is not for large firms. Moreover, we found for a set of other factors affecting the entry choice of large firms, not being significant for SMEs. Implications of these findings are discussed.
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