Choosing between wholly‐owned subsidiaries and joint ventures of MNCs from an emerging market

Abstract

Purpose

The purpose of this paper is to examine the impact that three sets of variables – derived from transaction cost theory (TCT), the resource‐based view (RBV), and institutional environment – have on choice of entry strategies of multinational corporations (MNCs) from an emerging market.

Design/methodology/approach

The sample consisted of 819 Taiwanese firms which were investigated using a national survey, and logistic regression analysis was used for testing the hypotheses.

Findings

The empirical findings confirm that the following factors affect this decision: firm‐specific assets, international experience, whether a firm is investing abroad in pursuit of a particular customer, whether a firm seeks complementary assets abroad, and the perceived institutional differences (PEDs) between a firm's home country and the host country. The findings also suggest that PEDs have a moderating effect on foreign market entry.

Research limitations/implications

As MNCs from emerging markets make the decision of entry mode strategies, they must carefully consider not only the related variables in terms of TCT and the RBV, but also the influence of institutional factors in host countries.

Originality/value

This paper explores the modes of entry chosen by Taiwanese firms investing in China on the basis of TCT, institutional environment, and the RBV.

Citation

Chiao, Y., Lo, F. and Yu, C. (2010), "Choosing between wholly‐owned subsidiaries and joint ventures of MNCs from an emerging market", International Marketing Review, Vol. 27 No. 3, pp. 338-365. https://doi.org/10.1108/02651331011047998