The Impact of Entry Mode Choice On Foreign Affiliate Performance: The Case of Foreign Mnes in South Korea

Zusammenfassung

---

This study examines the performance impacts of entry mode choice based on the perceptions of managers of a large sample of foreign MNEs in South Korea. Using an extended transaction costs model, an evaluation of performance relative to predicted entry mode is carried out. The authors find that affiliate performance is a multidimensional and complex phenomenon, which may be properly explained by multiple factors, including the coordination and control of the affiliate by the MNE, that go beyond initial entry mode choices. Foreign MNEs following the entry mode predicted by the extended transaction costs model showed poorer performance than non-followers in respect of non-financial performance. However, no significant differences were found for financial performance. The findings appear to reinforce a recent call to re-examine transaction costs theory and lend further support for incorporating additional potentially important determinants of affiliate performance.

Siehe den Gesamtinhalt dieses Dokumentes

Auszug

---

The Impact of Entry Mode Choice On Foreign Affiliate Performance: The Case of Foreign Mnes in South Korea

Introduction

International entry mode selection has been one of the most extensively researched topics in international business. Substantial prior research has been undertaken in the field to explain why firms select a particular mode of entry into international markets. While developed home and host countries were almost an exclusive domain of interest in earlier entry mode studies (e.g., Gatignon/Anderson 1988, Kogut/Singh 1988, Hennart 1991, Kim/Hwang 1992), more recently transition host economies, with their growing economic significance, have attracted increasing attention from researchers in the field (e.g., Tse/Pan/Au 1997, Brouthers/Brouthers 2001, Chen/Hu 2002). The purpose of this study is to build on existing research by examining the extent to which the foreign affiliates of MNEs in South Korea (Korea hereafter) make theoretically optimal entry mode decisions and whether or not this entry mode choice is related to enhanced performance compared to alternatives.

A variety of entry mode choices are available to firms expanding internationally, ranging from exporting, contractual arrangements (e.g., licensing), through to FDI (either joint venture or wholly owned subsidiary). This variety of choices is well reflected in entry mode studies that are broadly classified into three main categories depending on their focus of interest, i.e., whether studies examine: i) the choice between equity and non-equity modes (e.g., Buckley/Casson 1976, Rugman 1981, cited in Rugman/Verbeke 2003); ii) the choice between shared and full control modes (e.g., Hennart 1982, Padmanabhan/Cho 1996, Brouthers/Brouthers 2001); or iii) the choice between greenfield operations and acquisitions (e.g., Kogut/Singh 1988, Chang/Rosenzweig 2001, Harzing 2002). The difference in focus often makes a simple or outright comparison of the results not only difficult and complex but also problematic (Kogut/Singh 1988).

Entry mode studies have also been extended to explore the performance implications of entry mode choice (Root 1987, Woodcock et al. 1994, Li 1995). The underlying position of these studies is that entry mode choice for the international affiliate has a critical impact on its performance as the parent strategically selects a mode that generates better performance than alternatives. However, contrary to extensive research found in the area of international entry mode selection, there has been a relative dearth of studies linking entry mode to performance (Woodcock et al. 1994, Brouthers et al. 1999). In addition, the majority of extant performance studies involving entry mode choice do not go beyond simple comparisons of performance between alternative modes of entry, albeit with some recent exceptions (e.g., Shaver 1998, Brouthers et al. 199...

Siehe den Gesamtinhalt dieses Dokumentes

---