Characteristics of national cultures have frequently been claimed to influence the selection of entry modes. This article investigates this claim by developing a theoretical argument for why culture should influence the choice of entry. Two hypotheses are derived which relate culture to entry mode choice, one focusing on the cultural distance between countries, the other on attitudes towards uncertainty avoidance. Using a multinomial logit model and controlling for other effects, the hypotheses are tested by analysing data on 228 entries into the United States market by acquisition, wholly owned greenfield, and joint venture. Empirical support for the effect of national culture on entry choice is found.

/pdf/the-effect-of-national-culture-on-the-choice-of-entry-mode-10bj2vv2pl.pdf

The Effect of National Culture on the Choice of Entry Mode

The formation of organizations that are international from inception—international new ventures—is an increasingly important phenomenon that is incongruent with traditionally expected characteristics of multinational enterprises A framework is presented that explains the phenomenon by integrating international business, entrepreneurship, and strategic management theory That framework describes four necessary and sufficient elements for the existence of international new ventures: (1) organizational formation through internalization of some transactions, (2) strong reliance on alternative governance structures to access resources, (3) establishment of foreign location advantages, and (4) control over unique resources

/pdf/toward-a-theory-of-international-new-ventures-3c7ptrb09r.pdf

Toward a theory of international new ventures

This paper compares the perspectives of transaction costs and strategic behavior in explaining the motivation to joint venture. In addition, a theory of joint ventures as an instrument of organizational learning is proposed and developed. Existing studies of joint ventures are examined in light of these theories. Data on the sectoral distribution and stability of joint ventures are presented.

https://www.jstor.org/stable/pdfplus/2486268.pdf

Joint ventures: Theoretical and empirical perspectives

World Investment Report

Firms are social communities that specialize in the creation and internal transfer of knowledge. The multinational corporation arises not out of the failure of markets for the buying and selling of knowledge, but out of its superior efficiency as an organizational vehicle by which to transfer this knowledge across borders. We test the claim that firms specialize in the internal transfer of tacit knowledge by empirically examining the decision to transfer the capability to manufacture new products to wholly owned subsidiaries or to other parties. The empirical results show that the less codifiable and the harder to teach is the technology, the more likely the transfer will be to wholly owned operations. This result implies that the choice of transfer mode is determined by the efficiency of the multinational corporation in transferring knowledge relative to other firms, not relative to an abstract market transaction. The notion of the firm as specializing in the transfer and recombination of knowledge is the foundation to an evolutionary theory of the multinational corporation

/pdf/knowledge-of-the-firm-and-the-evolutionary-theory-of-the-1tiiwlm1vu.pdf

Knowledge of the Firm and the Evolutionary Theory of the Multinational Corporation

Managing the multinational enterprise

Managing the multinational enterprise : organization of the firm and ownership of the subsidiaries

One of the outcomes of negotiation between multinationals and host governments in developing countries—the extent of foreign ownership of subsidiaries—is influenced by the bargaining power of the two parties. Foreign ownership, measured in various ways, appears to be affected by the level of technology of the multinational, the degree to which a multinational attempts to differentiate its products, the extent to which a subsidiary's output is exported to other parts of the multinational, the diversity of products offered by the multinational, and the extent of competition by other multinationals. The relationship between some of these variables and ownership is not a simple one. One variable that others have mentioned as probably affecting bargaining power—size of the investment in question—appears not to play a significant role in government policies toward ownership, but many large projects tend to be located in countries that have lenient ownership policies.

Bargaining power of multinationals and host governments

In the past decade, a number of Third World countries have emerged from their economic status as sources of raw materials or as sweatshops in which low-wage, low-skilled workers produced goods for the richer nations Now they are themselves manufacturing and consuming high-quality, high-technology products and are establishing foreign subsidiaries, most often in other developing countries This book is the first to study the significant-growth in foreign direct investment by such countries and its impact on the international economic order Third World Multinationals explores the question of why firms based in developing countries have chosen to invest in branches, joint ventures, and wholly-owned subsidiaries overseas rather than simply export goods or enter into licensing arrangements abroad In addition to the cost of transport, tariff barriers, and import restrictions, it identifies a number of less apparent factors, such as the motivations of managers in wanting to go abroad, the meshing of technological levels, ethnic ties, and the desire to protect proprietary processes and competitive advantages The book compares the similarities and differences between these firms and their more established counterparts from the industrialized countries, both large and small It examines the implications of these developments on the relations between specific home and host countries, and on North-South relations and South-South relations in general In the face of scarce and unreliable figures, the author has compiled a considerable amount of validated data and viable estimates from numerous world sources The cases and examples are taken mainly from South America and South and Southeast Asia, those regions that have put forth the largest number of multinational offshoots

Third World Multinationals: The Rise of Foreign Investments from Developing Countries

In the past decade, a number of Third World countries have emerged from their economic status as sources of raw materials or as sweatshops in which low-wage, low-skilled workers produced goods for the richer nations. Now they are themselves manufacturing and consuming high-quality, high-technology products and are establishing foreign subsidiaries, most often in other developing countries. This book is the first to study the significant-growth in foreign direct investment by such countries and its impact on the international economic order. Third World Multinationals explores the question of why firms based in developing countries have chosen to invest in branches, joint ventures, and wholly-owned subsidiaries overseas rather than simply export goods or enter into licensing arrangements abroad. In addition to the cost of transport, tariff barriers, and import restrictions, it identifies a number of less apparent factors, such as the motivations of managers in wanting to go abroad, the meshing of technological levels, ethnic ties, and the desire to protect proprietary processes and competitive advantages. The book compares the similarities and differences between these firms and their more established counterparts from the industrialized countries, both large and small. It examines the implications of these developments on the relations between specific home and host countries, and on North-South relations and South-South relations in general. In the face of scarce and unreliable figures, the author has compiled a considerable amount of validated data and viable estimates from numerous world sources. The cases and examples are taken mainly from South America and South and Southeast Asia, those regions that have put forth the largest number of multinational offshoots.

Louis T. Wells

Papers

Managing the multinational enterprise

Managing the multinational enterprise : organization of the firm and ownership of the subsidiaries

Bargaining power of multinationals and host governments

Third World Multinationals: The Rise of Foreign Investments from Developing Countries

Third World Multinationals: The Rise of Foreign Investments from Developing Countries