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The effect of corruption distance and market orientation on the ownership choice of MNEs: Evidence from China

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  • Duanmu, Jing-Lin
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    Abstract

    Motivated by previous studies on the effect of corruption on entry strategies of Multinational Enterprises (MNEs), this research examines how corruption distance influences the choice between wholly owned subsidiary (WOS) and joint venture (JV) for MNEs operating in China. We found that MNEs from countries which are less corrupt than China prefer WOS over JV; the higher corruption distance it is between these countries and China, the higher probability their MNEs choose WOS over JV. In contrast, MNEs from equally and more corrupt countries do not prefer WOS over JV; nor the corruption distance affects their entry mode decision. Market orientation has a universal and powerful effect on the entry mode choice regardless which group of countries MNEs are from. It also weakens the tendency for MNEs from less corrupt countries to choose WOS over JV.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1075425311000160
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    Article provided by Elsevier in its journal Journal of International Management.

    Volume (Year): 17 (2011)
    Issue (Month): 2 (June)
    Pages: 162-174

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    Handle: RePEc:eee:intman:v:17:y:2011:i:2:p:162-174
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    Keywords: Corruption distance Market orientation Ownership choice MNEs China;

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    Cited by:

    1. Karhunen, Päivi & Ledyaeva, Svetlana, 2012. "Corruption Distance, Anti-corruption Laws and International Ownership Strategies in Russia," Journal of International Management, Elsevier, vol. 18(2), pages 196-208.
    2. Wu, Jay, 2013. "Accumulated choices, cultural triangle and economic growth," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 47(C), pages 158-169.
    3. Di Guardo, Maria Chiara & Marrocu, Emanuela & Paci, Raffaele, 2016. "The effect of local corruption on ownership strategy in cross-border mergers and acquisitions," Journal of Business Research, Elsevier, vol. 69(10), pages 4225-4241.
    4. Petrou, Andreas P., 2015. "Arbitrariness of corruption and foreign affiliate performance: A resource dependence perspective," Journal of World Business, Elsevier, vol. 50(4), pages 826-837.
    5. Lv, Ping & Spigarelli, Francesca, 2015. "The integration of Chinese and European renewable energy markets: The role of Chinese foreign direct investments," Energy Policy, Elsevier, vol. 81(C), pages 14-26.
    6. 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.
    7. Li, Dan & Miller, Stewart R. & Eden, Lorraine & Hitt, Michael A., 2012. "The Impact of Rule of Law on Market Value Creation for Local Alliance Partners in BRIC Countries," Journal of International Management, Elsevier, vol. 18(4), pages 305-321.
    8. Petrou, Andreas P. & Thanos, Ioannis C., 2014. "The “grabbing hand” or the “helping hand” view of corruption: Evidence from bank foreign market entries," Journal of World Business, Elsevier, vol. 49(3), pages 444-454.
    9. Fainshmidt, Stav & White, George O. & Cangioni, Carole, 2014. "Legal Distance, Cognitive Distance, and Conflict Resolution in International Business Intellectual Property Disputes," Journal of International Management, Elsevier, vol. 20(2), pages 188-200.

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