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Local complementary inputs as drivers of entry mode choices: The case of US investments in Brazil

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  • Hennart, Jean-François
  • Sheng, Hsia Hua
  • Pimenta, Gustavo

Abstract

The theory of entry mode choice has modeled that choice as solely determined by the foreign investor. Hennart's bundling model, on the other hand, argues that foreign entry into a host market involves the bundling of intangibles contributed by the foreign investor with local complementary inputs contributed by local actors, and that the chosen mode of entry will be the one that maximizes the joint gains of both parties. That chosen mode will depend on the relative efficiency of the various markets on which intangibles and complementary assets can be bundled. We test the model on a sample of US entries into Brazil. We find that the number of available suppliers of local complementary assets and the degree of concentration of the Brazilian industry are significant determinants of the choice US investors make between joint ventures and wholly-owned subsidiaries, and between greenfields and acquisitions, thus providing support for the model.

Suggested Citation

  • Hennart, Jean-François & Sheng, Hsia Hua & Pimenta, Gustavo, 2015. "Local complementary inputs as drivers of entry mode choices: The case of US investments in Brazil," International Business Review, Elsevier, vol. 24(3), pages 466-475.
  • Handle: RePEc:eee:iburev:v:24:y:2015:i:3:p:466-475
    DOI: 10.1016/j.ibusrev.2014.10.005
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    References listed on IDEAS

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    Cited by:

    1. Maria Cristina Sestu & Antonio Majocchi, 2020. "Family Firms and the Choice Between Wholly Owned Subsidiaries and Joint Ventures: A Transaction Costs Perspective," Entrepreneurship Theory and Practice, , vol. 44(2), pages 211-232, March.
    2. Desislava Dikova & Keith Brouthers, 2016. "International Establishment Mode Choice: Past, Present and Future," Management International Review, Springer, vol. 56(4), pages 489-530, August.
    3. Dahms, Sven, 2019. "Foreign-owned subsidiary knowledge sourcing: The role of location and expatriates," Journal of Business Research, Elsevier, vol. 105(C), pages 178-188.
    4. Cavanagh, Andrew & Freeman, Susan & Kalfadellis, Paul & Herbert, Kendall, 2017. "Assigned versus assumed: Towards a contemporary, detailed understanding of subsidiary autonomy," International Business Review, Elsevier, vol. 26(6), pages 1168-1183.
    5. Seok Jin Ko, 2019. "The Differing Foreign Entry Mode Choices for Sales and Production Subsidiaries of Multinational Corporations in the Manufacturing Industry," Sustainability, MDPI, Open Access Journal, vol. 11(15), pages 1-18, July.
    6. Chris Changwha Chung & Simon Shufeng Xiao & Jeoung Yul Lee & Jingoo Kang, 2016. "The Interplay of Top-down Institutional Pressures and Bottom-up Responses of Transition Economy Firms on FDI Entry Mode Choices," Management International Review, Springer, vol. 56(5), pages 699-732, October.
    7. Parente, Ronaldo C. & Geleilate, José-Mauricio G. & Rong, Ke, 2018. "The Sharing Economy Globalization Phenomenon: A Research Agenda," Journal of International Management, Elsevier, vol. 24(1), pages 52-64.

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