IDEAS home Printed from https://ideas.repec.org/a/spr/manint/v47y2007i4d10.1007_s11575-007-0028-y.html
   My bibliography  Save this article

Determinants of ownership-based entry mode choice of MNEs: Evidence from Mongolia

Author

Listed:
  • Erdener Kaynak

    (Pennsylvania State University at Harrisburg)

  • Mehmet Demirbag

    (University of Sheffield)

  • Ekrem Tatoglu

    (Bahcesehir University)

Abstract

Abstract and Key Results ▪ This paper provides a comprehensive analysis of foreign investors’ ownership strategies in the land-locked transition economy of Mongolia. Drawing broadly on the transaction cost theory and institutional model, a number of investing firm and host country characteristics were identified. Drawing on a sample of 1,033 affiliates of foreign investors with varying levels of foreign ownership, the paper examines the choice between a wholly owned subsidiary (WOS) and a joint venture (JV). ▪ Strong support has been found for the impact of nationality and normative distance on the ownership mode choice of foreign investors. The results show that the main determinants of foreign equity ownership found in previous research also influence the ownership structure offoreign affiliates in Mongolia. The extent of FDI concentration, natural resource intensity of target industry and location of the affiliate have the expected impact on the foreign investor’s choice between a JV and a WOS. However, no support has been found for the impact of capital size of affiliate on the level of equity ownership of foreign affiliates.

Suggested Citation

  • Erdener Kaynak & Mehmet Demirbag & Ekrem Tatoglu, 2007. "Determinants of ownership-based entry mode choice of MNEs: Evidence from Mongolia," Management International Review, Springer, vol. 47(4), pages 505-530, October.
    • Handle: RePEc:spr:manint:v:47:y:2007:i:4:d:10.1007_s11575-007-0028-y
    DOI: 10.1007/s11575-007-0028-y
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11575-007-0028-y
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11575-007-0028-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. John Hagedoorn & Bert Sadowski, 1999. "The Transition from Strategic Technology Alliances to Mergers and Acquisitions: An Exploratory Study," Journal of Management Studies, Wiley Blackwell, vol. 36(1), pages 87-107, January.
    2. Erin Anderson & Hubert Gatignon, 1986. "Modes of Foreign Entry: A Transaction Cost Analysis and Propositions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 17(3), pages 1-26, September.
    3. Hu, Michael Y. & Chen, Haiyang, 1993. "Foreign ownership in Chinese joint ventures: A transaction cost analysis," Journal of Business Research, Elsevier, vol. 26(2), pages 149-160, February.
    4. Charles W. L. Hill & Peter Hwang & W. Chan Kim, 1990. "An eclectic theory of the choice of international entry mode," Strategic Management Journal, Wiley Blackwell, vol. 11(2), pages 117-128, February.
    5. Sushil Vachani, 1995. "Enhancing the Obsolescing Bargain Theory: A Longitudinal Study of Foreign Ownership of U.S. and European Multinationals," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 26(1), pages 159-180, March.
    6. W H Davidson & Donald G McFetridge, 1985. "Key Characteristics in the Choice of International Technology Transfer Mode," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 16(2), pages 5-21, June.
    7. David K Tse & Yigang Pan & Kevin Y Au, 1997. "How MNCs Choose Entry Modes and Form Alliances: The China Experience," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 28(4), pages 779-805, December.
    8. Keith D. Brouthers & Lance Eliot Brouthers, 2000. "Acquisition or greenfield start‐up? Institutional, cultural and transaction cost influences," Strategic Management Journal, Wiley Blackwell, vol. 21(1), pages 89-97, January.
    9. Gomes-Casseres, Benjamin, 1989. "Ownership structures of foreign subsidiaries : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 11(1), pages 1-25, January.
    10. Farok J Contractor, 1990. "Ownership Patterns of U.S. Joint Ventures Abroad and the Liberalization of Foreign Government Regulations in the 1980s: Evidence from the Benchmark Surveys," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 21(1), pages 55-73, March.
    11. Zhao, Hongxin & Zhu, Gangti, 1998. "Determinants of ownership preference of international joint ventures: new evidence from Chinese manufacturing industries," International Business Review, Elsevier, vol. 7(6), pages 569-589, November.
    12. Peter S Davis & Ashay B Desai & John D Francis, 2000. "Mode of International Entry: An Isomorphism Perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 31(2), pages 239-258, June.
    13. Mayrhofer, Ulrike, 2004. "The influence of national origin and uncertainty on the choice between cooperation and merger-acquisition: an analysis of French and German firms," International Business Review, Elsevier, vol. 13(1), pages 83-99, February.
    14. Keith D Brouthers, 2002. "Institutional, Cultural and Transaction Cost Influences on Entry Mode Choice and Performance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(2), pages 203-221, June.
    15. Amemiya, Takeshi, 1981. "Qualitative Response Models: A Survey," Journal of Economic Literature, American Economic Association, vol. 19(4), pages 1483-1536, December.
    16. Yigang Pan, 1997. "The Formation Of Japanese And U.S. Equity Joint Ventures In China," Strategic Management Journal, Wiley Blackwell, vol. 18(3), pages 247-254, March.
    17. Chadee, Doren D. & Qiu, Feng, 2001. "Foreign ownership of equity joint ventures in China: a pooled cross-section-time series analysis," Journal of Business Research, Elsevier, vol. 52(2), pages 123-133, May.
    18. Gatignon, Hubert & Anderson, Erin, 1988. "The Multinational Corporation's Degree of Control over Foreign Subsidiaries: An Empirical Test of a Transaction Cost Explanation," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(2), pages 305-336, Fall.
    19. Donald J Lecraw, 1983. "Performance of Transnational Corporations in Less Developed Countries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 14(1), pages 15-33, March.
    20. Jung Hoon Derick Sohn, 1994. "Social Knowledge as a Control System: A Proposition and Evidence from the Japanese FDI behavior," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 25(2), pages 295-324, June.
    21. Yigang Pan & David K Tse, 2000. "The Hierarchical Model of Market Entry Modes," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 31(4), pages 535-554, December.
    22. Arvind Parkhe, 1993. "Partner Nationality and the Structure-Performance Relationship in Strategic Alliances," Organization Science, INFORMS, vol. 4(2), pages 301-324, May.
    23. Bruce Kogut & Harbir Singh, 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 19(3), pages 411-432, September.
    24. W Chan Kim & Peter Hwang, 1992. "Global Strategy and Multinationals' Entry Mode Choice," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(1), pages 29-53, March.
    25. Anoop Madhok, 1997. "Cost, Value And Foreign Market Entry Mode: The Transaction And The Firm," Strategic Management Journal, Wiley Blackwell, vol. 18(1), pages 39-61, January.
    26. Yadong Luo, 2001. "Determinants of Entry in an Emerging Economy: A Multilevel Approach," Journal of Management Studies, Wiley Blackwell, vol. 38(3), pages 443-472, May.
    27. Shige Makino & Paul W Beamish, 1998. "Performance and Survival of Joint Ventures with Non-Conventional Ownership Structures," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(4), pages 797-818, December.
    28. Emmanuel Cleeve, 1997. "The Motives for Joint Ventures: A Transaction Costs Analysis of Japanese MNES in the UK," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(1), pages 31-43, February.
    29. Mutinelli, Marco & Piscitello, Lucia, 1998. "The entry mode choice of MNEs: an evolutionary approach," Research Policy, Elsevier, vol. 27(5), pages 491-506, September.
    30. Ravi Ramamurti, 2001. "The Obsolescing ‘Bargaining Model’? MNC-Host Developing Country Relations Revisited," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(1), pages 23-39, March.
    31. Lawrence G Franko, 1989. "Use of Minority and 50–50 Joint Ventures by United States Multinationals During the 1970s: The Interaction of Host Country Policies Corporate Strategies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 20(1), pages 19-40, March.
    32. Mark Casson & Jurong Zheng, 1991. "Western joint ventures in China," Journal of International Development, John Wiley & Sons, Ltd., vol. 3(3), pages 293-323.
    33. Benjamin Gomes-Casseres, 1990. "Firm Ownership Preferences and Host Government Restrictions: An Integrated Approach," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 21(1), pages 1-22, March.
    34. Ekrem Tatoglu & Keith W. Glaister & Fuat Erdal, 2003. "Determinants of Foreign Ownership in Turkish Manufacturing," Eastern European Economics, Taylor & Francis Journals, vol. 41(2), pages 5-41, March.
    35. Luo, Yadong, 1998. "Industry Attractiveness, Firm Competence, and International Investment Performance in a Transitional Economy," Bulletin of Economic Research, Wiley Blackwell, vol. 50(1), pages 73-82, January.
    36. Jane W Lu, 2002. "Intra- and Inter-organizational Imitative Behavior: Institutional Influences on Japanese Firms' Entry Mode Choice," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(1), pages 19-37, March.
    37. Weijian Shan, 1991. "Environmental Risks and Joint Venture Sharing Arrangements," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 22(4), pages 555-578, December.
    38. M Krishna Erramilli, 1996. "Nationality and Subsidiary Ownership Patterns in Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 27(2), pages 225-248, June.
    39. Jean-François Hennart & Jorma Larimo, 1998. "The Impact of Culture on the Strategy of Multinational Enterprises: Does National Origin Affect Ownership Decisions?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(3), pages 515-538, September.
    40. Jean-François Hennart, 1991. "The Transaction Costs Theory of Joint Ventures: An Empirical Study of Japanese Subsidiaries in the United States," Management Science, INFORMS, vol. 37(4), pages 483-497, April.
    41. Andrew Delios & Paul W. Beamish, 1999. "Ownership strategy of Japanese firms: transactional, institutional, and experience influences," Strategic Management Journal, Wiley Blackwell, vol. 20(10), pages 915-933, October.
    42. M Krishna Erramilli, 1991. "The Experience Factor in Foreign Market Entry Behavior of Service Firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 22(3), pages 479-501, September.
    43. Chen, Haiyang & Hu, Michael Y., 2002. "An analysis of determinants of entry mode and its impact on performance," International Business Review, Elsevier, vol. 11(2), pages 193-210, April.
    44. Klaus E Meyer, 2001. "Institutions, Transaction Costs, and Entry Mode Choice in Eastern Europe," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(2), pages 357-367, June.
    45. Madhok, Anoop, 1998. "The nature of multinational firm boundaries: Transaction costs, firm capabilities and foreign market entry mode," International Business Review, Elsevier, vol. 7(3), pages 259-290, June.
    46. Sanjeev Agarwal & Sridhar N Ramaswami, 1992. "Choice of Foreign Market Entry Mode: Impact of Ownership, Location and Internationalization Factors," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(1), pages 1-27, March.
    47. Hongxin Zhao & Yadong Luo & Taewon Suh, 2004. "Transaction cost determinants and ownership-based entry mode choice: a meta-analytical review," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 35(6), pages 524-544, November.
    48. Yigang Pan, 1996. "Influences on Foreign Equity Ownership Level in Joint Ventures in China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 27(1), pages 1-26, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ilhan-Nas, Tulay & Okan, Tarhan & Tatoglu, Ekrem & Demirbag, Mehmet & Wood, Geoffrey & Glaister, Keith W., 2018. "Board composition, family ownership, institutional distance and the foreign equity ownership strategies of Turkish MNEs," Journal of World Business, Elsevier, vol. 53(6), pages 862-879.
    2. Ilhan-Nas, Tulay & Okan, Tarhan & Tatoglu, Ekrem & Demirbag, Mehmet & Glaister, Keith W., 2018. "The effects of ownership concentration and institutional distance on the foreign entry ownership strategy of Turkish MNEs," Journal of Business Research, Elsevier, vol. 93(C), pages 173-183.
    3. Arslan, Ahmad & Tarba, Shlomo Y. & Larimo, Jorma, 2015. "FDI entry strategies and the impacts of economic freedom distance: Evidence from Nordic FDIs in transitional periphery of CIS and SEE," International Business Review, Elsevier, vol. 24(6), pages 997-1008.
    4. Jae C. Jung & Paul W. Beamish & Anthony Goerzen, 2010. "Dynamics of Experience, Environment and MNE Ownership Strategy," Management International Review, Springer, vol. 50(3), pages 267-296, June.
    5. Demirbag, Mehmet & Tatoglu, Ekrem & Glaister, Keith W., 2009. "Equity-based entry modes of emerging country multinationals: Lessons from Turkey," Journal of World Business, Elsevier, vol. 44(4), pages 445-462, October.
    6. Liu, Yulong & Yu, Yang, 2018. "Institutions, firm resources and the foreign establishment mode choices of Chinese firms: The moderating role of home regional institutional development," Journal of Business Research, Elsevier, vol. 93(C), pages 111-121.
    7. Zdolsek, Daniel & Kolar, Iztok, 2013. "Management disclosure practices for disaggregated (financial) information in Slovenian unlisted companies," Journal of East European Management Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 18(2), pages 232-263.
    8. Dirk Morschett & Hanna Schramm-Klein & Bernhard Swoboda, 2008. "Entry Modes for Manufacturers’ International After-Sales Service: Analysis of Transaction-specific, Firm-specific and Country-specific Determinants," Management International Review, Springer, vol. 48(5), pages 525-550, November.
    9. Jae C. Jung & Paul W. Beamish & Anthony Goerzen, 2008. "FDI Ownership Strategy: A Japanese-US MNE Comparison," Management International Review, Springer, vol. 48(5), pages 491-524, November.
    10. Rekha Rao-Nicholson & Liudmyla Svystunova, 2020. "Assessing the Role of Host Country Human Rights Protection on Multinational Enterprises’ Choice of Investment Strategy," Management International Review, Springer, vol. 60(2), pages 177-209, April.
    11. Kai Xu & Michael A. Hitt & Stewart R. Miller, 2020. "The ownership structure contingency in the sequential international entry mode decision process: Family owners and institutional investors in family-dominant versus family-influenced firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(2), pages 151-171, March.
    12. Mina Glambosky & Kim Gleason & Joan Wiggenhorn, 2011. "Joint ventures between US MNCs and foreign governments," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 7(3), pages 238-258, June.
    13. Larimo, Jorma & Arslan, Ahmad, 2013. "Determinants of foreign direct investment ownership mode choice: Evidence from Nordic investments in Central and Eastern Europe," Journal of East European Management Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 18(2), pages 232-263.
    14. Foroudi, Pantea & Gupta, Suraksha & Patel, Parth & Batsakis, Georgios & Vaatanen, Juha & Czinkota, Michael, 2023. "The effect of home country characteristics on the internationalization of EMNEs: The moderating role of knowledge stock," International Business Review, Elsevier, vol. 32(2).
    15. Zhi Shen & Francisco Puig & Justin Paul, 2017. "Foreign Market Entry Mode Research: A Review and Research Agenda," The International Trade Journal, Taylor & Francis Journals, vol. 31(5), pages 429-456, October.
    16. Ahmad Arslan, 2012. "Impacts of institutional pressures and the strength of market supporting institutions in the host country on the ownership strategy of multinational enterprises: theoretical discussion and proposition," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(1), pages 107-124, February.
    17. Morschett, Dirk & Schramm-Klein, Hanna & Swoboda, Bernhard, 2010. "Decades of research on market entry modes: What do we really know about external antecedents of entry mode choice?," Journal of International Management, Elsevier, vol. 16(1), pages 60-77, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Canabal, Anne & White III, George O., 2008. "Entry mode research: Past and future," International Business Review, Elsevier, vol. 17(3), pages 267-284, June.
    2. Morschett, Dirk & Schramm-Klein, Hanna & Swoboda, Bernhard, 2010. "Decades of research on market entry modes: What do we really know about external antecedents of entry mode choice?," Journal of International Management, Elsevier, vol. 16(1), pages 60-77, March.
    3. Demirbag, Mehmet & Tatoglu, Ekrem & Glaister, Keith W., 2009. "Equity-based entry modes of emerging country multinationals: Lessons from Turkey," Journal of World Business, Elsevier, vol. 44(4), pages 445-462, October.
    4. Mehmet Demirbag & Ekrem Tatoglu & Keith W. Glaister, 2008. "Factors affecting perceptions of the choice between acquisition and greenfield entry: The case of Western FDI in an emerging market," Management International Review, Springer, vol. 48(1), pages 5-38, February.
    5. Demirbag, Mehmet & Glaister, Keith W. & Tatoglu, Ekrem, 2007. "Institutional and transaction cost influences on MNEs' ownership strategies of their affiliates: Evidence from an emerging market," Journal of World Business, Elsevier, vol. 42(4), pages 418-434, December.
    6. Montserrat Álvarez, 2003. "Wholly-Owned Subsidiaries Versus Joint Ventures: The Determinant Factors in the Catalan Multinational Manufacturing Case," Working Papers 2003/5, Institut d'Economia de Barcelona (IEB).
    7. Tsang, Eric W.K., 2005. "Influences on foreign ownership level and entry mode choice in Vietnam," International Business Review, Elsevier, vol. 14(4), pages 441-463, August.
    8. Mehmet Demirbag & Martina McGuinness & Hüseyin Altay, 2010. "Perceptions of Institutional Environment and Entry Mode," Management International Review, Springer, vol. 50(2), pages 207-240, April.
    9. Mehmet Demirbag & Ekrem Tatoglu & Keith W. Glaister, 2010. "Institutional and Transaction Cost Influences on Partnership Structure of Foreign Affiliates," Management International Review, Springer, vol. 50(6), pages 709-745, December.
    10. Larimo, Jorma & Arslan, Ahmad, 2013. "Determinants of foreign direct investment ownership mode choice: Evidence from Nordic investments in Central and Eastern Europe," Journal of East European Management Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 18(2), pages 232-263.
    11. Zdolsek, Daniel & Kolar, Iztok, 2013. "Management disclosure practices for disaggregated (financial) information in Slovenian unlisted companies," Journal of East European Management Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 18(2), pages 232-263.
    12. Sels, A.T.H., 2006. "Foreign direct investment as an entry mode. An application in emerging economies," Other publications TiSEM 583ca9b5-1691-425d-8f77-0, Tilburg University, School of Economics and Management.
    13. Chen, Ming-Yuan & Chang, Jing-Yun, 2011. "The choice of foreign market entry mode: An analysis of the dynamic probit model," Economic Modelling, Elsevier, vol. 28(1), pages 439-450.
    14. Anil, Ibrahim & Tatoglu, Ekrem & Ozkasap, Gaye, 2014. "Ownership and market entry mode choices of emerging country multinationals in a transition country: evidence from Turkish multinationals in Romania," Journal of East European Management Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 19(4), pages 413-452.
    15. Youngok Kim & Sidney J. Gray, 2008. "The impact of entry mode choice on foreign affiliate performance: The case of foreign MNEs in South Korea," Management International Review, Springer, vol. 48(2), pages 165-188, April.
    16. Chen, Ming-Yuan & Chang, Jing-Yun, 2011. "The choice of foreign market entry mode: An analysis of the dynamic probit model," Economic Modelling, Elsevier, vol. 28(1-2), pages 439-450, January.
    17. Keith D. Brouthers & Liang Chen & Sali Li & Noman Shaheer, 2022. "Charting new courses to enter foreign markets: Conceptualization, theoretical framework, and research directions on non-traditional entry modes," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(9), pages 2088-2115, December.
    18. Javalgi, Rajshekhar (Raj) G. & Deligonul, Seyda & Ghosh, Amit K. & Lambert, Douglas M. & Cavusgil, S. Tamer, 2010. "Foreign market entry mode behavior as a gateway to further entries: The NAFTA experience," International Business Review, Elsevier, vol. 19(3), pages 209-222, June.
    19. Li, Peng-Yu & Meyer, Klaus E., 2009. "Contextualizing experience effects in international business: A study of ownership strategies," Journal of World Business, Elsevier, vol. 44(4), pages 370-382, October.
    20. Anne-Wil Harzing & Markus Pudelko, 2016. "Do We Need to Distance Ourselves from the Distance Concept? Why Home and Host Country Context Might Matter More Than (Cultural) Distance," Management International Review, Springer, vol. 56(1), pages 1-34, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:manint:v:47:y:2007:i:4:d:10.1007_s11575-007-0028-y. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.