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Host environmental uncertainty and equity-based entry mode dilemma: The role of market linking capability

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  • Tseng, Chiung-Hui
  • Lee, Ruby P.
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    Abstract

    Over the last two decades or so, researchers have sought to understand foreign ownership choice of firms entering an overseas market. Interestingly, however, extant studies based on transaction cost analysis and an experience perspective have yielded inconsistent arguments as to whether wholly owned subsidiary or joint venture is more appropriate for expanding into an uncertain environment. This paper suggests that, by taking into account a firm's market linking capability, an ability to sense and manage international markets, the prior discrepancy in entry mode preference could be resolved. Hypotheses were tested using data collected from manufacturers in Taiwan, one of the fast growing emerging economies. The authors find that a multinational that has strong market linking capability is more likely to use wholly owned subsidiary to enter a foreign market that is characterized by higher levels of market turbulence and regulatory unpredictability. More results along with their implications are discussed.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 19 (2010)
    Issue (Month): 4 (August)
    Pages: 407-418

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    Handle: RePEc:eee:iburev:v:19:y:2010:i:4:p:407-418

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    Related research

    Keywords: Emerging economies Environmental uncertainty Entry mode Market linking capability;

    References

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    Cited by:
    1. García-Villaverde, Pedro M. & Ruiz-Ortega, María J. & Parra-Requena, Gloria, 2012. "Towards a comprehensive model of entry timing in the ICT industry: Direct and indirect effects," Journal of World Business, Elsevier, vol. 47(2), pages 297-310.
    2. Shieh, Bih-Lian & Wu, Tzong-Chen, 2012. "Equity-based entry modes of the Greater Chinese Economic Area's foreign direct investments in Vietnam," International Business Review, Elsevier, vol. 21(3), pages 508-517.
    3. Svendsen, Mons Freng & Haugland, Sven A., 2011. "Host country institutional pressures and cross-border relationship governance," International Business Review, Elsevier, vol. 20(3), pages 324-337, June.
    4. Marlene Grande & Aurora A. C. Teixeira, 2011. "Linking entry mode choices of MNCs with countries’ corruption. A review," OBEGEF Working Papers 008, OBEGEF - Observatório de Economia e Gestão de Fraude & OBEGEF Working Papers on Fraud and Corruption.
    5. Hallin, Christina & Holmström Lind, Christine, 2012. "Revisiting the external impact of MNCs: An empirical study of the mechanisms behind knowledge spillovers from MNC subsidiaries," International Business Review, Elsevier, vol. 21(2), pages 167-179.

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