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The influence of industry structure on the entry mode choice of overseas entrants in manufacturing industries

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  • Elango, B.
  • Sambharya, Rakesh B.

Abstract

This study examines the impact of industry structure on the foreign direct investment (FDI) entry mode decisions by multinational enterprises (MNEs) in manufacturing industries. We explore the notion that firms would seek to balance the risks due to industry structural barriers and liabilities of foreignness while seeking entry in international markets. A multinomial logistic regression model is used to test 336 entry decisions from 18 countries entering the United States over the period 1989-1994. Empirical evidence shows that underlying industries' structural characteristics influence a firm's preference for entry mode alternatives such as greenfield investments, acquisitions, and joint ventures. In concentrated and high-growth industries, foreign firms prefer entry by setting up greenfield operations rather than pursuing acquisitions or joint ventures. However, in industries characterized by high gross profits or higher plant scale, the preference is for joint ventures or acquisitions as an entry mode over greenfield operations.

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  • Elango, B. & Sambharya, Rakesh B., 2004. "The influence of industry structure on the entry mode choice of overseas entrants in manufacturing industries," Journal of International Management, Elsevier, vol. 10(1), pages 107-124.
    • Handle: RePEc:eee:intman:v:10:y:2004:i:1:p:107-124
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    Cited by:

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    7. Witteloostuijn, Adriaan van & Dikova, Desislava, 2005. "Acquisition versus greenfield foreign entry : diversification mode choice in Central and Eastern Europe," Research Report 04G26, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    8. Leyla Orudzheva & Manjula S. Salimath & Robert Pavur, 2020. "Vortex of Corruption: Longitudinal Analysis of Normative Pressures in Top Global Companies," Journal of Business Ethics, Springer, vol. 163(3), pages 529-551, May.
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    10. Mukherjee Subhasree & Dhayanithy Deepak, 2017. "Effect of Inter-organizational Network on TMT – Entry Mode Choice relationship," Working papers 246, Indian Institute of Management Kozhikode.
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    12. 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.
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    14. Canabal, Anne & White III, George O., 2008. "Entry mode research: Past and future," International Business Review, Elsevier, vol. 17(3), pages 267-284, June.
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    20. 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.

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