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Wholly Owned Subsidiary Versus Technology Licensing in the Worldwide Chemical Industry

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Author Info

  • Ashish Arora

    (Carnegie Mellon University)

  • Andrea Fosfuri

    (Universidad Carlos II de Madrid)

Abstract

This paper empirically analyzes the determinants of the choice between wholly owned subsidiary and technology licensing as a strategy for expansion abroad. We use a new and comprehensive database on worldwide plant level investments in the chemical industry during the 1981 – 1991 period. We find that both cultural distance and the presence of other potential licensors favor the use of licensing as a strategy for expanding abroad, whereas, prior experience favors the choice of wholly owned subsidiary. An implication of this study is that competition in the market for technology can foster the international diffusion of technology through the use of arm's length agreements.© 2000 JIBS. Journal of International Business Studies (2000) 31, 555–572

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

Volume (Year): 31 (2000)
Issue (Month): 4 (December)
Pages: 555-572

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Handle: RePEc:pal:jintbs:v:31:y:2000:i:4:p:555-572

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Cited by:
  1. 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.
  2. Mendi, Pedro, 2005. "Contracting for the transfer of technology within multinational corporations: Empirical evidence from Spain," IESE Research Papers D/607, IESE Business School.
  3. Castellani, Davide & Zanfei, Antonello, 2004. "Choosing international linkage strategies in the electronics industry: the role of multinational experience," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 447-475, April.
  4. López-Duarte, Cristina & Vidal-Suárez, Marta M., 2010. "External uncertainty and entry mode choice: Cultural distance, political risk and language diversity," International Business Review, Elsevier, vol. 19(6), pages 575-588, December.
  5. Canabal, Anne & White III, George O., 2008. "Entry mode research: Past and future," International Business Review, Elsevier, vol. 17(3), pages 267-284, June.
  6. Gooris, Julien & Peeters, Carine, 2014. "Home–Host Country Distance in Offshore Governance Choices," Journal of International Management, Elsevier, vol. 20(1), pages 73-86.
  7. Youngok Kim & Sidney Gray, 2009. "An assessment of alternative empirical measures of cultural distance: Evidence from the Republic of Korea," Asia Pacific Journal of Management, Springer, vol. 26(1), pages 55-74, March.
  8. Nakamura, Masao, 2005. "Joint venture instability, learning and the relative bargaining power of the parent firms," International Business Review, Elsevier, vol. 14(4), pages 465-493, August.
  9. Manolopoulos, Dimitris & Söderquist, Klas Eric & Pearce, Robert, 2011. "Coordinating decentralized research and development laboratories: A survey analysis," Journal of International Management, Elsevier, vol. 17(2), pages 114-129, June.
  10. Burpitt, William J. & Rondinelli, Dennis A., 2004. "Foreign-owned companies' entry and location strategies in a U.S. market: a study of manufacturing firms in North Carolina," Journal of World Business, Elsevier, vol. 39(2), pages 136-150, May.
  11. Hitt, Michael A. & Franklin, Victor & Zhu, Hong, 2006. "Culture, institutions and international strategy," Journal of International Management, Elsevier, vol. 12(2), pages 222-234, June.
  12. López-Duarte, Cristina & Vidal-Suárez, Marta M., 2013. "Cultural distance and the choice between wholly owned subsidiaries and joint ventures," Journal of Business Research, Elsevier, vol. 66(11), pages 2252-2261.
  13. Papageorgiadis, Nikolaos & Cross, Adam R. & Alexiou, Constantinos, 2013. "The impact of the institution of patent protection and enforcement on entry mode strategy: A panel data investigation of U.S. firms," International Business Review, Elsevier, vol. 22(1), pages 278-292.
  14. Malik, Tariq H., 2013. "National institutional differences and cross-border university–industry knowledge transfer," Research Policy, Elsevier, vol. 42(3), pages 776-787.
  15. Julien Gooris & Carine Peeters, 2012. "Home-Host Country Distance and Governance Choices in Service Offshoring," Working Papers ECARES ECARES 2012-007, ULB -- Universite Libre de Bruxelles.
  16. Tseng, Chiung-Hui & Lee, Ruby P., 2010. "Host environmental uncertainty and equity-based entry mode dilemma: The role of market linking capability," International Business Review, Elsevier, vol. 19(4), pages 407-418, August.
  17. Preet S Aulakh & Marshall S Jiang & Yigang Pan, 2010. "International technology licensing: Monopoly rents, transaction costs and exclusive rights," Journal of International Business Studies, Palgrave Macmillan, vol. 41(4), pages 587-605, May.
  18. 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.
  19. Dhikra Chebbi Nekhili & Mehdi Nekhili & Frédéric Nlemvo, 2009. "Gouvernance des activités de R&D à l’étranger par les firmes multinationales:contribution de la théorie fondée sur les ressource," Working Papers CREGO 1090502, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.

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