Technological asymmetry among foreign investors and mode of entry.
How does the preferred entry mode of foreign investors depend on their technological capability relative to that of their rivals? This article develops a simple model of entry mode choice and evaluates its main testable implication using data on foreign investors in Eastern European countries and th...
| Main Authors: | , |
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| Format: | Journal article |
| Language: | English |
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Western Economic Association
2010
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| _version_ | 1797066253374849024 |
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| author | Javorcik, B Saggi, K |
| author_facet | Javorcik, B Saggi, K |
| author_sort | Javorcik, B |
| collection | OXFORD |
| description | How does the preferred entry mode of foreign investors depend on their technological capability relative to that of their rivals? This article develops a simple model of entry mode choice and evaluates its main testable implication using data on foreign investors in Eastern European countries and the successor states of the Soviet Union. The model considers competition between two asymmetric foreign investors and captures the following trade-off: while a joint venture (JV) helps a foreign investor secure a better position in the product market vis-à-vis its rival, it also requires that profits be shared with the local partner. The model predicts that the efficient foreign investor is less likely to choose a JV and more likely to enter directly relative to the inefficient investor. Our empirical analysis supports this prediction: foreign investors with more sophisticated technologies and marketing skills (relative to other firms in their industry) tend to prefer direct entry to JVs. This empirical finding is robust to controlling for host country–specific effects and other commonly cited determinants of entry mode. |
| first_indexed | 2024-03-06T21:39:48Z |
| format | Journal article |
| id | oxford-uuid:47876e90-0bd5-4897-b45b-d3d71c3be3cc |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-06T21:39:48Z |
| publishDate | 2010 |
| publisher | Western Economic Association |
| record_format | dspace |
| spelling | oxford-uuid:47876e90-0bd5-4897-b45b-d3d71c3be3cc2022-03-26T15:20:33ZTechnological asymmetry among foreign investors and mode of entry.Journal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:47876e90-0bd5-4897-b45b-d3d71c3be3ccEnglishDepartment of Economics - ePrintsWestern Economic Association2010Javorcik, BSaggi, KHow does the preferred entry mode of foreign investors depend on their technological capability relative to that of their rivals? This article develops a simple model of entry mode choice and evaluates its main testable implication using data on foreign investors in Eastern European countries and the successor states of the Soviet Union. The model considers competition between two asymmetric foreign investors and captures the following trade-off: while a joint venture (JV) helps a foreign investor secure a better position in the product market vis-à-vis its rival, it also requires that profits be shared with the local partner. The model predicts that the efficient foreign investor is less likely to choose a JV and more likely to enter directly relative to the inefficient investor. Our empirical analysis supports this prediction: foreign investors with more sophisticated technologies and marketing skills (relative to other firms in their industry) tend to prefer direct entry to JVs. This empirical finding is robust to controlling for host country–specific effects and other commonly cited determinants of entry mode. |
| spellingShingle | Javorcik, B Saggi, K Technological asymmetry among foreign investors and mode of entry. |
| title | Technological asymmetry among foreign investors and mode of entry. |
| title_full | Technological asymmetry among foreign investors and mode of entry. |
| title_fullStr | Technological asymmetry among foreign investors and mode of entry. |
| title_full_unstemmed | Technological asymmetry among foreign investors and mode of entry. |
| title_short | Technological asymmetry among foreign investors and mode of entry. |
| title_sort | technological asymmetry among foreign investors and mode of entry |
| work_keys_str_mv | AT javorcikb technologicalasymmetryamongforeigninvestorsandmodeofentry AT saggik technologicalasymmetryamongforeigninvestorsandmodeofentry |