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1 – 10 of over 1000Michael J. Mueller, Guus Hendriks and Arjen H.L. Slangen
In this chapter, we aim to shed more light on the role of formal institutional distance in firms’ foreign entry mode choices by accounting for the direction of that distance…
Abstract
In this chapter, we aim to shed more light on the role of formal institutional distance in firms’ foreign entry mode choices by accounting for the direction of that distance. Specifically, we distinguish between foreign entries where the host country is institutionally less developed than the investing firm’s home country (negative institutional distance) and those where the host country’s institutions are comparatively more developed (positive institutional distance), and explore whether these different types of entries are implemented through different equity-based modes. We take an information economics perspective to develop hypotheses on the effects of positive and negative formal institutional distance on firms’ choices between greenfields and acquisitions, and between full and partial ownership of greenfield and acquired subsidiaries. We test our hypotheses on a sample of 1,070 foreign entries made by 796 emerging market multinationals originating from 14 countries. Controlling for the host country’s formal institutional quality and other factors, we find that negative institutional distance increases the likelihood that a foreign entry takes the form of a greenfield investment rather than an acquisition and that positive institutional distance decreases that likelihood. We also find that negative institutional distance increases the chances that firms choose greenfield joint ventures over wholly owned greenfields and full over partial acquisitions. Finally, we find that positive institutional distance does not affect firms’ ownership stake choices, neither for greenfields nor for acquisitions. Overall, these findings argue for a nuanced, contingency view of the role of formal institutional distance in foreign entry mode choices. To the best of our knowledge, this study is the first to use information economics to construct a holistic picture of firms’ equity-based entry mode choices, taking into account both establishment and ownership modes.
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This paper introduces a conceptual framework to assess the foreign market entry behavior of emerging market multinationals (EMMs). By introducing strategic cognition as the…
Abstract
This paper introduces a conceptual framework to assess the foreign market entry behavior of emerging market multinationals (EMMs). By introducing strategic cognition as the underlying theoretical perspective, this paper postulates that different levels of institutional voids in home markets shape the strategic cognition of EMMs, influencing their market entry behavior due to the prevalence of organizational imprinting in the early stages of internationalization. The paper aims to contribute to the strategic cognition literature by introducing emerging markets as a relevant context in which to apply and extend current thinking. Additionally, it aims to contribute to the institutional voids literature by providing a cognitive framework of behavioral patterns that is rationalized by institutional voids. Finally, the paper contributes to the entry mode literature by proposing strategic cognition as a relevant moderator for foreign entry mode choices, particularly those of EMMs.
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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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This paper reviews extant contemporary literature in the area of entry mode choice in service firms and analyzes 14 empirical studies conducted in the area. The review is limited…
Abstract
This paper reviews extant contemporary literature in the area of entry mode choice in service firms and analyzes 14 empirical studies conducted in the area. The review is limited to articles which focus specifically on entry mode choice and the determinants of such a choice. The publication time frame covers the period from 1977 to 2003. The review observations in relation to factors such as the origin of the research, the theoretical frameworks underpinning existing entry mode research, methodological approaches and other relevant patterns are presented. The analysis highlights the paucity of empirical research in the area, which in turn has been largely fragmentary and exploratory in nature. It suggests that research sites need to be extended into Europe, alternative research designs need to be considered and the opportunity to conduct some form of collaborative research warrants exploration.
In order to be able to advance scientific knowledge, researchers should consciously explore and critically evaluate alternative explanations of the phenomena under investigation…
Abstract
In order to be able to advance scientific knowledge, researchers should consciously explore and critically evaluate alternative explanations of the phenomena under investigation. We feel that research in the area of entry-mode choice has neglected these recommendations where it concerns the impact of cultural distance (CD) on entry-mode choice. In this article, we argue that sample idiosyncrasies, coupled with an almost blind confidence in one specific measurement of CD, have led researchers in this field to systematically overestimate the role of CD in entry-mode decisions. We argue that specific home and/or host-country characteristics are equally plausible explanatory factors for entry-mode decisions as CD and plead for a more sophisticated treatment of culture in the entry-mode choice literature.
Alain Verbeke and Jenny Hillemann
We discuss Professor Jean-François Hennart’s key contributions to international strategic management theory, with a special focus on his integrative, 2009 Journal of International…
Abstract
We discuss Professor Jean-François Hennart’s key contributions to international strategic management theory, with a special focus on his integrative, 2009 Journal of International Business Studies article, ‘Down with MNE-centric theories! Market entry and expansion as the bundling of MNE and local assets’. In Hennart’s (2009) model, complementary assets co-determine the MNE’s initial entry mode choice and the subsequent evolution of the MNE foreign operations’ governance. Hennart (2009) describes this perspective on MNE governance as one based on asset bundling. We focus on the paper’s conceptual insights and discuss how Hennart’s model of foreign market entry informs managerial practice in the realm of international strategy.
Olivier Bertrand, Marie-Ann Betschinger, Nina Bertschy and Roman Shidlauskas
We focus on the determinants of the choice between international joint ventures and acquisitions when entering emerging countries. We empirically explore if subregional variation…
Abstract
We focus on the determinants of the choice between international joint ventures and acquisitions when entering emerging countries. We empirically explore if subregional variation in the political regime matters for the entry mode decision of foreign investors. Based on an analysis of 151 foreign entries into Russia for the period 2002–2008, our results indicate that the entry mode choice is linked to regional variation in the level of democracy. Foreign entries in more democratic regions are more likely to take the form of joint ventures, and vice versa.
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Xiaoyan Luo and Michał K. Lemański
To understand the rationale for foreign direct investment of Chinese electronic companies, their location decisions and entry mode choices
Abstract
Purpose
To understand the rationale for foreign direct investment of Chinese electronic companies, their location decisions and entry mode choices
Methodology/approach
Secondary data on foreign direct investment of the top 100 companies in China’s electronics industry are analysed. The first part covers an exploratory analysis of the industry and the second part presents a comparative longitudinal analysis of three case studies of representative companies: Haier, Huawei, and Lenovo.
Findings
The three key findings are: (1) market-seeking is the primary motivation for foreign direct investment of Chinese companies in the electronics industry, yet the strategic-asset-seeking gains importance as the internationalization of the company advances; (2) foreign investment path normally starts at adjacent foreign markets, but more distant markets are gradually targeted and become more important for the company; (3) wholly owned investments are the preferred market entry modes in the international expansion.
Research limitations/implications
This research is based on secondary data, and more in-depth, interview-based studies are needed to explore the perceptions of decision-makers, and a plethora of contextual factors, which result in specific market entry decisions. As only the 100 largest companies were studied, future research should put under scrutiny also internationalization of smaller firms.
Practical implications
Implications of such findings are discussed in the light of classic internationalization theories as well as the current research on internationalization of companies from emerging/developing countries.
Originality/value
Provides an account of foreign direct investment in a context of a substantial and growing importance for the practice of international business, and identifies an agenda for promising future scholarly inquiries.
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Simone Guercini and Andrea Runfola
This paper deals with the international expansion of manufacturing small- and medium-sized enterprises (SMEs) through the opening of retail outlets in foreign countries. The paper…
Abstract
Purpose
This paper deals with the international expansion of manufacturing small- and medium-sized enterprises (SMEs) through the opening of retail outlets in foreign countries. The paper develops and discusses five research questions.
Methodology/approach
The paper discusses emerging data from the analysis of a database set up in recent years. In particular, it deals with 1,419 retail operations regarding 246 Italian fashion brands in 77 foreign markets during the period from 2005 and 2010.
Findings
The paper points out that retail operations are largely used by Italian fashion SMEs to internationalize. This form of entry in foreign markets is used to develop in both mature and emerging markets and it seems related to the brand potential of Italian fashion SMEs abroad.
Research limitations
The paper is limited to the case of Italian fashion brands and to the period 2005–2010.
Originality/value
The paper considers an unexplored area of the internationalization theory of SMEs, that of the development abroad through retail store openings. The paper offers insights on the extent to what this strategy is used by Italian fashion brands.
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