Revisit the CD Paradox in Entry Model Choice: Toward the Perspective of Strategic Fit

2018 ◽  
Vol 18 (3) ◽  
pp. 86-103
Keyword(s):  
Joint Venture ◽  
Cultural Distance ◽  
Model Choice ◽  
Outward Fdi ◽  
Strategic Fit ◽  
Market Expansion ◽  
Technological Competence ◽  
Entry Model ◽  
Wholly Owned Subsidiary ◽  
Strategic Motives

The effect of cultural distance (CD) on the entry mode choice (EMC) has been intensively studied but the empirical results are mixed. This study adopts the strategic fit perspective to examine how firms’ strategic motives and technological ownerships may influence the EMC in face of different cultural distances. Analyzing Taiwanese outward FDI cases from 2004 to 2007, this study found that firms entering the culture-distant countries would choose the wholly-owned subsidiary (WOS) mode when emphasizing more about the protection of technological competence than market expansion, or else would choose the joint-venture (JV) mode when the market expansion is prioritized.

scholarly journals The Influence of Cultural Distance when Choosing a Suitable Foreign Direct Investment for the Internationalization Process of Companies. A theoretcal overviewhttp://dx.doi.org/10.5585/riae.v10i1.1712

2011 ◽  
Vol 10 (1) ◽  
pp. 147-169
Author(s):  
Ivani Ferreira
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Joint Venture ◽  
Cultural Distance ◽  
Country Risk ◽  
International Joint Venture ◽  
Internationalization Process ◽  
Organizational Capability ◽  
Moderator Variable ◽  
Wholly Owned Subsidiary

The present study is theoretical analysis on the influence that cultural distance (CD) may possess on the process of internationalization of companies, and country cost representing this variable; comparing the arguments of the transaction cost theory and the organizational capability theory, with the purpose of determining which form of foreign direct investment (FDI) is most appropriate when companies are directed to culturally distant countries. Two types of FDI strategies are discussed in this study: a WOS (Wholly Owned Subsidiary), for companies wishing to expand their business into culturally distant countries, but with a lower risk; and an IJV (International Joint Venture), for companies wishing to expand their business into culturally distant countries, but with a higher risk to the company. This study describes two opposing positions attempting to converge when a moderator variable is included: country risk. Thus, we shall look to build a thorough model of analysis, where the earlier theories are complemented to explain the entrepreneurial performance following various scenarios, in which the involved variables are, concurrently, the cultural distance and country risk.

Outward FDI Type and Ownership Mode: The Effect on Home Country Exports

2016 ◽  
Vol 3 (2) ◽  
Author(s):  
Neelam Singh
Keyword(s):  
Multinational Enterprises ◽  
Joint Venture ◽  
Home Country ◽  
Outward Fdi ◽  
Differential Impact ◽  
Firm Level ◽  
Capability Building ◽  
Wholly Owned Subsidiary ◽  
The Empirical Analysis ◽  
Auto Component

The influence of outward foreign direct investment (OFDI) by emerging economy multinational enterprises (EMNEs) on the parent company and home economy are relatively under-researched areas. The OFDI-heterogeneity dimensions such as the ownership mode as wholly-owned subsidiary (WOS) or international joint venture (JV) - have received little attention in the empirical analysis. This study examines the firm-level determinants of exports by auto component companies in India. Considering the prior recent OFDI flows by the firm, we distinguish among the effects of having manufacturing-JV, manufacturing-WOS and non-manufacturing OFDI. Thus exploring the differential impact of JV versus WOS ownership mode of manufacturing abroad, adds to the limited literature on the effects of OFDI by OFDI-type. Consistent with the expectation of greater capability building, the JV mode of overseas production is found to lead to relatively more exports by the investing firm. We also estimate the separate effects of magnitude of manufacturing and non-manufacturing OFDI flows.

scholarly journals The Paths of Internationalization of Chinese Innovative Firms

2020 ◽  
Vol 12 (6) ◽  
pp. 2575
Author(s):  
Hongping Du ◽  
Liliana Mitkova ◽  
Na Wang
Keyword(s):  
Developing Countries ◽  
Joint Venture ◽  
Mode Choice ◽  
Entry Mode ◽  
Developed Countries ◽  
Future Research ◽  
Entry Mode Choice ◽  
Market Location ◽  
Wholly Owned Subsidiary ◽  
Entry Speed

Innovative enterprises from emerging markets, such as China, are a group of understudied enterprises, which could generate new and important views on internationalization. Some unique characteristics of Chinese innovative enterprises are creating new ideas that help to a better understanding of entry mode choice, market location choice, and entry speed in the paths of internationalization. Drawing on an unbalanced panel of Chinese innovative enterprises’ outward foreign direct investment (OFDI) event data, we analyzed the tendency of the paths of internationalization of Chinese innovative enterprises and the determining factors that influence the Chinese innovative enterprises’ choice in entry mode, market location, and entry speed. The results show that: (1) Chinese innovative enterprises are more likely to choose developing countries than developed countries. (2) When these firms conduct investment activities in developed countries, the probability rank (from high to low) of entry mode choice is acquisition, along with the wholly-owned subsidiary, exporting and joint venture. When these firms expand the business in developing countries, the entry mode of export is most likely to be chosen and the acquisition is least likely to be chosen. (3) This tendency and paths choice of internationalization in entry mode, market location and entry speed are influenced by the international experience, the multidimensional proximity, psychic distance, internationalization motivation, ownership structure, and innovation ability. Finally, we discuss these contributions and make some suggestions for future research.

Family Firms and the Choice Between Wholly Owned Subsidiaries and Joint Ventures: A Transaction Costs Perspective

2018 ◽  
Vol 44 (2) ◽  
pp. 211-232 ◽  
Author(s):  
Maria Cristina Sestu ◽  
Antonio Majocchi
Keyword(s):  
Transaction Costs ◽  
Family Involvement ◽  
Family Firms ◽  
Joint Venture ◽  
Entry Modes ◽  
Family Control ◽  
The Family ◽  
Wholly Owned Subsidiary ◽  
Transaction Costs Economics

We examine the effects of family control on entry mode choice by integrating Transaction Costs Economics with the family business literature. Using a dataset of 951 foreign investments, we investigate the role of family involvement on entry modes. After controlling for endogeneity, we find that if both the investing and the local firm are family firms, forming a joint venture is preferred, while if only the investing firm is a family firm, a wholly owned subsidiary is more likely. Results show that family control has an important impact on entry modes, an hypothesis that has not yet been fully explored.

The Role of Cultural Distance Across Quantiles of International Joint Venture Longevity

2019 ◽  
Vol 27 (4) ◽  
pp. 3-21 ◽  
Author(s):  
Annette P. Tower ◽  
Kelly Hewett ◽  
Anton P. Fenik
Keyword(s):  
Cultural Differences ◽  
Joint Venture ◽  
Cultural Distance ◽  
Methodological Approach ◽  
International Marketing ◽  
Cultural Dimensions ◽  
International Joint Venture ◽  
International Joint ◽  
The Impact

Rapid global economic development and liberalization have increased the motivation and opportunities for firms to enter into international joint venture (IJV) agreements. Numerous studies in the international marketing literature have examined the impact of international partners’ cultural differences on IJV longevity; however, results are inconclusive, potentially due to limitations in the methods used. While this study examines the varied impact of cultural differences on IJV longevity based on the IJV’s age, it uses quantile regression, enabling the detection of varying effects’ strengths across the dependent variable’s entire distribution. The results demonstrate variations in the role of cultural differences across individual cultural dimensions as well as variations in the patterns of association between cultural differences and IJV longevity dependent on the IJV’s age. Implications for theory and the practice of international marketing are offered as well as potential applications of this study’s methodological approach.

Paradoxes of psychic distance and market entry by software INVs

2015 ◽  
Vol 27 (1) ◽  
pp. 34-59 ◽  
Author(s):  
Paresha Sinha ◽  
Mingyang (Ana) Wang ◽  
Joanna Scott-Kennel ◽  
Jenny Gibb
Keyword(s):  
Market Entry ◽  
Cultural Distance ◽  
New Ventures ◽  
Open Economies ◽  
Secondary Data ◽  
International New Ventures ◽  
Psychic Distance ◽  
Small Open Economies ◽  
Content Type ◽  
Market Expansion

Purpose – This paper aims to examine the role of psychic distance during the process of international market entry by software international new ventures (INVs) from small, open economies. Specifically, we investigate how home market and global industry contexts influence market-entry strategies, and how psychic distance influences initial then subsequent market-entry choice decisions. Design/methodology/approach – Using Atlas.ti7 software, this paper adopts a qualitative, multi-case analysis of ten software INVs based in New Zealand. Thematic coding of interview and secondary data revealed three core processes: pre-entry considerations, market selection criteria and post-entry evaluation, across the stages of initial and subsequent market entry. Findings – In the context of the global software industry, the key driver of proactive market entry by INVs from small, open economies is market size rather than psychic distance. During the process of market expansion, firms encounter the psychic distance paradox (PDP). A second paradox arises when, despite experiential learning, managerial perceptions of psychic distance increase, making entry into more distant markets less, rather than more, likely and reactive, rather than proactive. Originality/value – This paper addresses contextual differences in software versus more traditional sectors, and the influence of psychic distance on market entry rather than outcomes. Specifically, extending our understanding of the PDP, we find perceptual psychic and cultural distance ignored as criteria for initial market-entry decisions, and initial positive attitudes toward risk-taking become less apparent during subsequent entries.

The joint effect of investment motives and institutional context on Russian international acquisitions

2016 ◽  
Vol 11 (4) ◽  
pp. 674-692 ◽  
Author(s):  
Desislava Dikova ◽  
Andrei Panibratov ◽  
Anna Veselova ◽  
Lyubov Ermolaeva
Keyword(s):  
Negative Binomial ◽  
Cultural Distance ◽  
Institutional Distance ◽  
Future Research ◽  
Foreign Direct Investments ◽  
Outward Fdi ◽  
Foreign Investments ◽  
Data Set ◽  
Content Type ◽  
Cross Border

Purpose The purpose of this paper is to advance knowledge about factors that influence the location of Russian foreign direct investments. In particular, it focusses on the role of institutional distance (represented by corruption perception distance, political distance and cultural distance) as a moderator of the relationships between traditional investment motives and the number of M&A deals made by Russian companies in a specific country. Design/methodology/approach The analysis is conducted on panel data of Russian cross-border M&As launched in 46 countries during the period 2007-2013. The final data set includes 322 observations. Due to the nature of dependent variable and the results of pre-tests, negative binomial regression is used in the main analysis. Findings The key finding of the study reveals the importance of institutional distance, in particular, the moderating effect of different dimensions of institutional distance on the relationships between internationalization motives and the number of Russian M&As. Corruption, political and cultural differences show different effects in terms of both direction and strength, but all three were found to be significant. Research limitations/implications The major concern stems from the type of secondary data used in the paper. This indicates the necessity to improve data collection methods which could allow for better transparency of Russian foreign investments, would facilitate more sophisticated research and probably more accurate business forecasts. Originality/value By conducting a systematic examination of Russian cross-border M&As the authors contribute to the literature on emerging markets firms by addressing the important yet under-researched domain of Russian foreign direct investments. Building on the macroeconomic and institutional logic proposed in this study, future research on Russian cross-border activities could add to the understanding by providing more generalizable and critical evidence. The study provides a point of departure from prior studies on Russian outward FDI which the authors hope to inspire future research to further analyze the drivers of Russian M&As and foreign investments in general.

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