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The Impact of Entry Mode Choice on Performance of Firms through Innovation and External Business Network

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  • Eleny Tadele

    (Department of Business Administration, School of Business and Economics, Beijing University of International Business and Economics (UIBE), Chaoyang District Beijing, P.R. China 100029.)

  • Zhou Xiaoyan

    (Department of Business Administration, School of Business, Beijing University of International Business and Economics (UIBE), Beijing, China.)

Abstract

This research empirically examines the mediating effect of innovation and external business network on the association between firm’s entry mode decision and performance. The research employed firm level panel data of 2,824 foreign firms who have an investment in the top ten FDI recipient African countries over the period of 1996-2018. This data is obtained from World Bank Enterprise Survey Indicators (ESI). Findings showed that, firm innovation positively mediate the relationship between high share and wholly owned types of entry mode and performance. While low share of ownership has no mediation effect between the two variables. The result indicates that, firms with high and full ownership have limited risk of opportunistic behavior of their partners than firms with shared ownership Whereas, external business network positively mediate the association between firms with low shares of ownership and performance. This result show when firm’s share the ownership with local partners the linkage attached to the local partner would be shared to them and enhance their network with customers, suppliers, R&D institutes and other actors of host country external business environment. Therefore, Multinational firms should give special emphasis to their entry mode decisions when they enter a new market. This research gives a practical knowledge for multinational firms on the importance of their entry mode decision to enhance their innovation, business network as well as performance.

Suggested Citation

  • Eleny Tadele & Zhou Xiaoyan, 2022. "The Impact of Entry Mode Choice on Performance of Firms through Innovation and External Business Network," International Journal of Science and Business, IJSAB International, vol. 16(1), pages 108-120.
    • Handle: RePEc:aif:journl:v:16:y:2022:i:1:p:108-120
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