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Entry mode and equity level: A multilevel examination of foreign direct investment ownership structure

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  • Sudha Mani
  • Kersi D. Antia
  • Aric Rindfleisch

Abstract

Over the last two decades, strategy researchers have sought to understand the ownership structure of firms' foreign direct investments (FDI) as reflected in entry mode and equity level. However, prior FDI research has ignored the interrelated nature of these key FDI decisions. In addition, prior research does not fully account for the fact that individual ownership structure decisions occur within the context of a firm's broader FDI portfolio, and thus reflect a wide and frequently unobserved range of parent firm and host nation effects. Our research seeks to address both of these limitations. Using a rich dataset of 4,459 subsidiaries established by 858 Japanese firms across 38 countries over a 9‐year period, we specify a conditional bivariate, cross‐classified multilevel model of FDI ownership structure. Our model enables the joint estimation of entry mode and equity level, accounts for the portfolio nature of FDI, and compares the relative predictive power of transaction cost‐ and experience‐based explanatory variables across both facets of ownership structure. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Sudha Mani & Kersi D. Antia & Aric Rindfleisch, 2007. "Entry mode and equity level: A multilevel examination of foreign direct investment ownership structure," Strategic Management Journal, Wiley Blackwell, vol. 28(8), pages 857-866, August.
    • Handle: RePEc:bla:stratm:v:28:y:2007:i:8:p:857-866
    DOI: 10.1002/smj.611
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    Cited by:

    1. Chong Wu & Fang Huang & Caihong Huang & Huiming Zhang, 2018. "Entry Mode, Market Selection, and Innovation Performance," Sustainability, MDPI, vol. 10(11), pages 1-24, November.
    2. Qing Xie & Hua Yin, 2023. "Institutional Differences and the Choice of Outward Foreign Direct Investment Mode under the “Belt and Road” Initiative: Experience Analysis Based on China’s Manufacturing Enterprises," Sustainability, MDPI, vol. 15(9), pages 1-26, April.
    3. Kadokawa, Kazuo, 2011. "Applicability of Marshall’s Agglomeration Theory to Indus-trial Clustering in the Japanese Manufacturing Sector: An Exploratory Factor Analysis Approach," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 41(2), pages 1-18.
    4. Ming-Chang Huang & Tian-Jyun Gong & Shih-Ping Sun & Ping-Hsin Lin, 2023. "Obstacles or catalysts? A balanced view of formal institutional risks on FDI location choice," Asian Business & Management, Palgrave Macmillan, vol. 22(5), pages 2077-2105, November.
    5. Tariq H. Malik, 2024. "Legal and Cultural Contingencies in the Foreign Portfolio Versus Foreign Direct Investment Decisions Across Countries: An Institutional Fit Perspective," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 10748-10780, September.
    6. Changjun Yi & Xiaoyang Zhao & Ying Huang & Jie Yu & Jipeng Zhang, 2022. "Migration networks and subsidiary survival of EMNCs: The mediating effect of entry mode," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2299-2310, September.
    7. Hu, Tiancheng & Guo, Rui & Ning, Lutao, 2022. "Intangible assets and foreign ownership in international joint ventures: The moderating role of related and unrelated industrial agglomeration," Research in International Business and Finance, Elsevier, vol. 61(C).
    8. George Peng & Paul Beamish, 2014. "The effect of host country long term orientation on subsidiary ownership and survival," Asia Pacific Journal of Management, Springer, vol. 31(2), pages 423-453, June.
    9. Patrícia Lopes Costa & Ana Margarida Graça & Pedro Marques-Quinteiro & Catarina Marques Santos & António Caetano & Ana Margarida Passos, 2013. "Multilevel Research in the Field of Organizational Behavior," SAGE Open, , vol. 3(3), pages 21582440134, August.
    10. Sena, Vania & Duygun, Meryem & Lubrano, Giuseppe & Marra, Marianna & Shaban, Mohamed, 2018. "Board independence, corruption and innovation. Some evidence on UK subsidiaries," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 22-43.
    11. Cui, Lin & Meyer, Klaus E. & Hu, Helen Wei, 2014. "What drives firms’ intent to seek strategic assets by foreign direct investment? A study of emerging economy firms," Journal of World Business, Elsevier, vol. 49(4), pages 488-501.
    12. Li, Kun-Sha & Xiong, Yong-Qing, 2022. "Host country’s environmental uncertainty, technological capability, and foreign market entry mode: Evidence from high-end equipment manufacturing MNEs in emerging markets," International Business Review, Elsevier, vol. 31(1).
    13. Driffield, Nigel & Love, James H. & Yang, Yong, 2016. "Reverse international knowledge transfer in the MNE: (Where) does affiliate performance boost parent performance?," Research Policy, Elsevier, vol. 45(2), pages 491-506.
    14. Xie, Qing & Yin, Hua, 2024. "Business environment and the choice of entry mode of OFDI: Evidence from China," Journal of Asian Economics, Elsevier, vol. 92(C).
    15. Barbopoulos, Leonidas & Marshall, Andrew & MacInnes, Cameron & McColgan, Patrick, 2014. "Foreign direct investment in emerging markets and acquirers’ value gains," International Business Review, Elsevier, vol. 23(3), pages 604-619.
    16. Wen Luo & Oi-Man Kwok, 2010. "Proportional Reduction of Prediction Error in Cross-Classified Random Effects Models," Sociological Methods & Research, , vol. 39(2), pages 188-205, November.
    17. Likitwongkajon, Napaporn & Vithessonthi, Chaiporn, 2020. "Do foreign investments increase firm value and firm performance? Evidence from Japan," Research in International Business and Finance, Elsevier, vol. 51(C).
    18. Yong Yang & Pedro S. Martins & Nigel Driffield, 2013. "Multinational Performance and the Geography of FDI," Management International Review, Springer, vol. 53(6), pages 763-794, December.
    19. Liu, Xiaohui & Lu, Jiangyong & Chizema, Amon, 2014. "Top executive compensation, regional institutions and Chinese OFDI," Journal of World Business, Elsevier, vol. 49(1), pages 143-155.

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