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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.

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.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:iburev:v:19:y:2010:i:4:p:407-418
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    References listed on IDEAS

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    Cited by:

    1. Chen, Kaui-Hwang & Wang, Chun-Hsien & Huang, Shi-Zheng & Shen, George C., 2016. "Service innovation and new product performance: The influence of market-linking capabilities and market turbulence," International Journal of Production Economics, Elsevier, vol. 172(C), pages 54-64.
    2. repec:pal:marecl:v:20:y:2018:i:1:d:10.1057_s41278-016-0045-5 is not listed on IDEAS
    3. 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.
    4. Agnieszka Glodowska & Bozena Pera & Krzysztof Wach, 2016. "The International Environment and Its Influence on the Entrepreneurial Internationalization of Firms: The Case of Polish Businesses (Miedzynarodowe srodowisko i jego wplyw na miedzynarodowa przedsiebi," Problemy Zarzadzania, University of Warsaw, Faculty of Management, vol. 14(62), pages 107-130.
    5. Chun Ju Lin, 2015. "How Information from Taiwan-based Enterprises in China Influences Investment Decisions of China-based Service Enterprises in Taiwan," Journal of Enterprising Culture (JEC), World Scientific Publishing Co. Pte. Ltd., vol. 23(02), pages 167-197, June.
    6. 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.
    7. Bartels, Frank L. & Napolitano, Francesco & Tissi, Nicola E., 2014. "FDI in Sub-Saharan Africa: A longitudinal perspective on location-specific factors (2003–2010)," International Business Review, Elsevier, vol. 23(3), pages 516-529.
    8. 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.
    9. repec:eee:jbrese:v:84:y:2018:i:c:p:114-124 is not listed on IDEAS
    10. López-Duarte, Cristina & González-Loureiro, Miguel & Vidal-Suárez, Marta M. & González-Díaz, Belén, 2016. "International strategic alliances and national culture: Mapping the field and developing a research agenda," Journal of World Business, Elsevier, vol. 51(4), pages 511-524.
    11. repec:kap:asiapa:v:35:y:2018:i:1:d:10.1007_s10490-017-9514-3 is not listed on IDEAS
    12. 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.
    13. 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.

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