Hostname: page-component-586b7cd67f-g8jcs Total loading time: 0 Render date: 2024-11-25T17:19:49.240Z Has data issue: false hasContentIssue false
  • English
  • Français

Subnational differences and entry mode performance: Multinationals in east and west China

Published online by Cambridge University Press:  29 November 2017

Anran Li ,
Brent Burmester  and
Peter Zámborský
Anran Li*
Affiliation:
Department of Management, School of Business, The Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong
Brent Burmester
Affiliation:
Department of Management and International Business, School of Business, The University of Auckland, Auckland, New Zealand
Peter Zámborský
Affiliation:
Department of Management and International Business, School of Business, The University of Auckland, Auckland, New Zealand
*
Corresponding author: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

We compare the influence of entry mode choice on subsidiary performance in two developmentally-differentiated regions of a developing host country. Analysis of 113 subsidiaries located in two provinces of China indicates that wholly owned subsidiaries outperform joint ventures in the developed region, whereas joint ventures outperform wholly owned subsidiaries in the less developed region. However, the smaller performance gap between wholly owned subsidiaries and joint ventures in the developed region indicates that the magnitude of influence of entry mode choices on performance varies across subnational regions. Firms must therefore be more discriminating in formulating entry strategies to regionally heterogeneous countries.

Keywords

Chinese contextentry mode selectionfinancial performancesubnational heterogeneity
Type
Research Article
Information
Journal of Management & Organization , Volume 26 , Issue 4 , July 2020 , pp. 426 - 444
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2017

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Allen, F. (1993). Strategic management and financial markets. Strategic Management Journal, 14(Suppl 2), 11–22.CrossRefGoogle Scholar
Anderson, E., & Gatignon, H. (1986). Modes of foreign entry: A transaction cost analysis and propositions. Journal of International Business Studies, 17(3), 1–26.CrossRefGoogle Scholar
Ang, S. H., Benischke, M. H., & Doh, J. P. (2015). The interactions of institutions on foreign market entry mode. Strategic Management Journal, 36(10), 1536–1553.CrossRefGoogle Scholar
Barton, D., Chen, Y., & Jin, A. (2013, June). Mapping China’s middle class. McKinsey Quarterly. Retrieved August 1, 2017, from http://www.mckinsey.com/industries/retail/our-insights/mapping-chinas-middle-class.Google Scholar
Bascle, G. (2008). Controlling for endogeneity with instrumental variables in strategic management research. Strategic Organization, 6(3), 285–327.CrossRefGoogle Scholar
Beamish, P. W., & Banks, J. C. (1987). Equity joint ventures and the theory of the multinational enterprise. Journal of International Business Studies, 18(2), 1–16.CrossRefGoogle Scholar
Ben-Ner, A., McCall, B. P., Stephane, M., & Wang, H. (2009). Identity and in-group/out-group differentiation in work and giving behaviors: Experimental evidence. Journal of Economic Behavior and Organization, 72(1), 153–170.CrossRefGoogle Scholar
Beugelsdijk, S., & Mudambi, R. (2013). MNEs as border-crossing multi-location enterprises: The role of discontinuities in geographic space. Journal of International Business Studies, 44(5), 413–426.CrossRefGoogle Scholar
Brouthers, K. D. (2002). Institutional, cultural and transaction cost influences on entry mode choice and performance. Journal of International Business Studies, 33(2), 203–221.CrossRefGoogle Scholar
Brouthers, K. D. (2013). A retrospective on: Institutional, cultural and transaction cost influences on entry mode choice and performance. Journal of International Business Studies, 44(1), 14–22.CrossRefGoogle Scholar
Brouthers, K. D., Brouthers, L. E., & Werner, S. (2003). Transaction cost-enhanced entry mode choices and firm performance. Strategic Management Journal, 24(12), 1239–1248.10.1002/smj.362CrossRefGoogle Scholar
Brouthers, K. D., & Hennart, J. F. (2007). Boundaries of the firm: Insights from international entry mode research. Journal of Management, 33(3), 395–425.CrossRefGoogle Scholar
Buckley, P. J., & Casson, M. C. (1998). Analyzing foreign market entry strategies: Extending the internalization approach. Journal of International Business Studies, 29(3), 539–561.CrossRefGoogle Scholar
Canabal, A., & White, G. O. (2008). Entry mode research: Past and future. International Business Review, 17(3), 267–284.CrossRefGoogle Scholar
Chan, C. M., Makino, S., & Isobe, T. (2010). Does subnational region matter? Foreign affiliate performance in the United States and China. Strategic Management Journal, 31(11), 1226–1243.CrossRefGoogle Scholar
Chang, S. J., Chung, J., & Moon, J. J. (2013). When do wholly owned subsidiaries perform better than joint ventures? Strategic Management Journal, 34(3), 317–337.CrossRefGoogle Scholar
Chen, T. J. (2006). Liability of foreignness and entry mode choice: Taiwanese firms in Europe. Journal of Business Research, 59(2), 288–294.CrossRefGoogle Scholar
Chen, M. Y. (2012). Entry mode choice and performance: Evidence from Taiwanese FDI in China. Emerging Markets Finance and Trade, 48(3), 31–51.CrossRefGoogle Scholar
Cheng, L. K., & Kwan, Y. K. (2000). What are the determinants of the location of foreign direct investment? The Chinese experience. Journal of International Economics, 51(2), 379–400.CrossRefGoogle Scholar
Cooper, D. R., Schindler, P. S., & Sun, J. (2006). Business research methods ((Vol. 9) New York: McGraw-Hill Irwin.Google Scholar
Delios, A., & Beamish, P. W. (2001). Survival and profitability: The roles of experience and intangible assets in foreign subsidiary performance. Academy of Management Journal, 44(5), 1028–1038.Google Scholar
Delios, A., & Henisz, W. J. (2003). Political hazards, experience, and sequential entry strategies: The international expansion of Japanese firms, 1980–1998. Strategic Management Journal, 24(11), 1153–1164.CrossRefGoogle Scholar
Erramilli, M. K., & Rao, C. P. (1993). Service firms’ international entry-mode choice: A modified transaction-cost analysis approach. Journal of Marketing, 57(3), 19–38.Google Scholar
Fan, C. C., & Scott, A. J. (2003). Industrial agglomeration and development: A survey of spatial economic issues in East Asia and a statistical analysis of Chinese regions. Economic Geography, 79(3), 295–319.CrossRefGoogle Scholar
Fang, T., Worm, V., & Tung, R. L. (2008). Changing success and failure factors in business negotiations with the PRC. International Business Review, 17(2), 159–169.CrossRefGoogle Scholar
Galvin, P. (2014). A new vision for the Journal of Management & Organization: The role of context. Journal of Management & Organization, 20(1), 1–5.CrossRefGoogle Scholar
Gomes-Casseres, B. (1990). Firm ownership preferences and host government restrictions: An integrated approach. Journal of International Business Studies, 21(1), 1–22.CrossRefGoogle Scholar
Gomes-Casseres, B., Jenkins, M., & Zámborský, P. (2018). Profitability of joint ventures abroad: explaining a new empirical puzzle. In F. J., Contractor, & J. J., Reuer (Eds.), The Cambridge Handbook of Strategic Alliances. Cambridge: Cambridge University Press. (forthcoming).Google Scholar
Goodman, D. S. (Ed.) 2013). China’s regional development. London, UK: Routledge.CrossRefGoogle Scholar
Granneman, A., & van Dijk, M. P. (2015). Foreign direct investment in China, the factors determining a preference for investing in eastern or western provinces. Modern Economy, 6, 924–936.10.4236/me.2015.68087CrossRefGoogle Scholar
Han, J., Jo, G. S., & Kang, J. (2016). Is high-quality knowledge always beneficial? Knowledge overlap and innovation performance in technological mergers and acquisitions. Journal of Management & Organization, 1–21. doi:10.1017/jmo.2016.35.Google Scholar
Harzing, A. W. (2002). Acquisitions versus greenfield investments: International strategy and management of entry modes. Strategic Management Journal, 23(3), 211–227.CrossRefGoogle Scholar
He, C. (2002). Information costs, agglomeration economies and the location of foreign direct investment in China. Regional Studies, 36(9), 1029–1036.10.1080/0034340022000022530CrossRefGoogle Scholar
He, J., & Huang, Z. (2011). Board informal hierarchy and firm financial performance: Exploring a tacit structure guiding boardroom interactions. Academy of Management Journal, 54(6), 1119–1139.CrossRefGoogle Scholar
He, L., & Fang, J. (2016). Subnational institutional contingencies and executive pay dispersion. Asia Pacific Journal of Management, 33(2), 371–410.CrossRefGoogle Scholar
Hennart, J. F., & Slangen, A. H. (2015). Yes, we really do need more entry mode studies! A commentary on Shaver. Journal of International Business Studies, 46(1), 114–122.CrossRefGoogle Scholar
Hult, G. T. M., Ketchen, D. J., Griffith, D. A., Chabowski, B. R., Hamman, M. K., Dykes, B. J., Pollitte, W. A., & Cavusgil, S. T. (2008). An assessment of the measurement of performance in international business research. Journal of International Business Studies, 39(6), 1064–1080.CrossRefGoogle Scholar
Inglehart, R., & Baker, W. E. (2000). Modernization, cultural change, and the persistence of traditional values. American Sociological Review, 65(1), 19–51.CrossRefGoogle Scholar
Johnson, J., & Tellis, G. J. (2008). Drivers of success for market entry into China and India. Journal of Marketing, 72(3), 1–13.CrossRefGoogle Scholar
Krugman, P. (1991). Increasing returns and economic geography. Journal of Political Economy, 99(3), 483–499.CrossRefGoogle Scholar
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. W. (2000). Agency problems and dividend policies around the world. The Journal of Finance, 55(1), 1–33.CrossRefGoogle Scholar
Lenartowicz, T., & Roth, K. (2001). Does subculture within a country matter? A cross-cultural study of motivational domains and business performance in Brazil. Journal of International Business Studies, 32(2), 305–325.CrossRefGoogle Scholar
Li, J., & Xie, Z. (2011). Global R&D strategies in an emerging economy: The development and protection of technological competencies. European Management Review, 8(3), 153–164.CrossRefGoogle Scholar
Luo, Y., & Tung, R. L. (2007). International expansion of emerging market enterprises: A springboard perspective. Journal of International Business Studies, 38(4), 481–498.CrossRefGoogle Scholar
Ma, X., & Delios, A. (2010). Host-country headquarters and an MNE’s subsequent within-country diversifications. Journal of International Business Studies, 41(3), 517–525.CrossRefGoogle Scholar
Ma, X., Tong, T. W., & Fitza, M. (2013). How much does subnational region matter to foreign subsidiary performance? Evidence from Fortune Global 500 Corporations’ investment in China. Journal of International Business Studies, 44(1), 66–87.CrossRefGoogle Scholar
Martin, X. (2013). Solving theoretical and empirical conundrums in international strategy research: Linking foreign entry mode choices and performance. Journal of International Business Studies, 44(1), 28–41.10.1057/jibs.2012.29CrossRefGoogle Scholar
McEvily, B., & Zaheer, A. (1999). Bridging ties: A source of firm heterogeneity in competitive capabilities. Strategic Management Journal, 20(12), 1133–1156.3.0.CO;2-7>CrossRefGoogle Scholar
Meeker, W. Q., & Escobar, L. A. (2014). Statistical methods for reliability data. United States: John Wiley & Sons.Google Scholar
Meyer, K. E., & Nguyen, H. V. (2005). Foreign investment strategies and sub-national institutions in emerging markets: Evidence from Vietnam. Journal of Management Studies, 42(1), 63–93.CrossRefGoogle Scholar
Michailova, S., & Worm, V. (2003). Personal networking in Russia and China: Blat and Guanxi. European Management Journal, 21(4), 509–519.CrossRefGoogle Scholar
Mohamad, N., & Hoshino, Y. (2013). Host country restrictions, choice of entry mode and Japanese subsidiaries performance in developing countries. American Journal of Economics, 3(1), 12–17.Google Scholar
Monaghan, S., Gunnigle, P., & Lavelle, J. (2014). “Courting the multinational”: Subnational institutional capacity and foreign market insidership. Journal of International Business Studies, 45(2), 131–150.CrossRefGoogle Scholar
Nachum, L. (2000). Economic geography and the location of TNCs: Financial and professional service FDI to the USA. Journal of International Business Studies, 31(3), 367–385.CrossRefGoogle Scholar
National Bureau of Statistics of China (2016). National Data. Retrieved August 1, 2017, from http://data.stats.gov.cn/english/easyquery.htm?cn=C01.Google Scholar
Nguyen, T. V., Le, N. T., & Bryant, S. E. (2013). Sub-national institutions, firm strategies, and firm performance: A multilevel study of private manufacturing firms in Vietnam. Journal of World Business, 48(1), 68–76.CrossRefGoogle Scholar
Pan, Y., & Chi, P. S. (1999). Financial performance and survival of multinational corporations in China. Strategic Management Journal, 20(4), 359–374.3.0.CO;2-9>CrossRefGoogle Scholar
Park, S. H., Li, S., & David, K. T. (2006). Market liberalization and firm performance during China’s economic transition. Journal of International Business Studies, 37(1), 127–147.CrossRefGoogle Scholar
Peng, M. W. (2003). Institutional transitions and strategic choices. Academy of Management Review, 28(2), 275–296.CrossRefGoogle Scholar
Porter, M. E. (1998). Clusters and the new economics of competition. Harvard Business Review, 76(6), 77–90.Google Scholar
Saxenian, A. (1996). Regional networks: Industrial adaptation in Silicon Valley and route 128. Cityscape: A Journal of Policy Development and Research, 2(2), 41–60.Google Scholar
Schaaper, J., Mizoguchi, S., Nakamura, H., & Yamashita, S. (2011). Control of French and Japanese subsidiaries in China: Implementing control mechanisms before and after the global economic crisis. Asia Pacific Business Review, 17(4), 411–430.CrossRefGoogle Scholar
Shapiro, D., Tang, Y., & Ma, C. X. (2007). Mode of entry and the regional distribution of foreign direct investment in China. Journal of Chinese Economic and Business Studies, 5(3), 261–277.CrossRefGoogle Scholar
Shaver, J. M. (1998). Accounting for endogeneity when assessing strategy performance: Does entry mode choice affect FDI survival? Management Science, 44(4), 571–585.CrossRefGoogle Scholar
Shaver, J. M. (2013). Do we really need more entry mode studies? Journal of International Business Studies, 44(1), 23–27.CrossRefGoogle Scholar
Shi, Y. Z., Ho, P. Y., & Siu, W. S. (2001). Market entry mode selection: The experience of small firms in Hong Kong investing in China. Asia Pacific Business Review, 8(1), 19–41.CrossRefGoogle Scholar
Slangen, A. H., & Van Tulder, R. J. (2009). Cultural distance, political risk, or governance quality? Towards a more accurate conceptualization and measurement of external uncertainty in foreign entry mode research. International Business Review, 18(3), 276–291.CrossRefGoogle Scholar
Sun, H., & Chai, J. (1998). Direct foreign investment and inter-regional economic disparity in China. International Journal of Social Economics, 25(2/3/4), 424–447.CrossRefGoogle Scholar
Sun, S. L., Peng, M. W., Lee, R. P., & Tan, W. (2015). Institutional open access at home and outward internationalization. Journal of World Business, 50(1), 234–246.CrossRefGoogle Scholar
Teng, B. S. (2004). The WTO and entry modes in China. Thunderbird International Business Review, 46(4), 381–400.CrossRefGoogle Scholar
Tihanyi, L., Griffith, D. A., & Russell, C. J. (2005). The effect of cultural distance on entry mode choice, international diversification, and MNE performance: A meta-analysis. Journal of International Business Studies, 36(3), 270–283.CrossRefGoogle Scholar
Tung, R. L. (2008). The cross-cultural research imperative: The need to balance cross-national and intra-national diversity. Journal of International Business Studies, 39(1), 41–46.CrossRefGoogle Scholar
Venaik, S., & Midgley, D. F. (2015). Mindscapes across landscapes: Archetypes of transnational and subnational culture. Journal of International Business Studies, 46(9), 1051–1079.CrossRefGoogle Scholar
Woodcock, C. P., Beamish, P. W., & Makino, S. (1994). Ownership-based entry mode strategies and international performance. Journal of International Business Studies, 25(2), 253–273.CrossRefGoogle Scholar
Wu, J., Muller-Kahle, M. I., Arora, A. S., & Leseane, R. (2013). The impact of fit between anticipated and actual entry mode selection on firm performance: Evidence from China. Journal of International Business Research and Practice (forthcoming), Available at SSRN: https://ssrn.com/abstract=2345666.Google Scholar
Yi, J., Chen, Y., Wang, C., & Kafouros, M. (2015). Spillover effects of foreign direct investment: how do region-specific institutions matter? Management International Review, 55(4), 539–561.CrossRefGoogle Scholar
Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management Journal, 38(2), 341–363.Google Scholar
Zámborský, P. (2012). Emergence of transnational clusters: Evidence from the Slovak automotive industry. Journal for East European Management Studies, 17(4), 464–479.CrossRefGoogle Scholar
Zhou, D., Kautonen, M., Wang, H., & Wang, L. (2017). How to interact with knowledge-intensive business services: A multiple case study of small and medium manufacturing enterprises in China. Journal of Management & Organization, 23(2), 297–318.CrossRefGoogle Scholar
Supplementary material: File

Li et al supplementary material

Li et al supplementary material 1

Download Li et al supplementary material(File)
File 79.4 KB