Entry mode and equity level: A multilevel examination of foreign direct investment ownership structure

Sudha Mani, Kersi D. Antia, Aric P Rindfleisch

Research output: Contribution to journalArticle

Abstract

Over the last two decades, strategy researchers have sought to understand the ownership structure of firms' foreign direct investments (FDI) as reflected in entry mode and equity level. However, prior FDI research has ignored the interrelated nature of these key FDI decisions. In addition, prior research does not fully account for the fact that individual ownership structure decisions occur within the context of a firm's broader FDI portfolio, and thus reflect a wide and frequently unobserved range of parent firm and host nation effects. Our research seeks to address both of these limitations. Using a rich dataset of 4,459 subsidiaries established by 858 Japanese firms across 38 countries over a 9-year period, we specify a conditional bivariate, crossclassified multilevel model of FDI ownership structure. Our model enables the joint estimation of entry mode and equity level, accounts for the portfolio nature of FDI, and compares the relative predictive power of transaction cost- and experience-based explanatory variables across both facets of ownership structure.

Original languageEnglish (US)
Pages (from-to)857-866
Number of pages10
JournalStrategic Management Journal
Volume28
Issue number8
DOIs
StatePublished - Aug 1 2007
Externally publishedYes

Keywords

  • Foreign direct investment
  • Multilevel modeling
  • Transaction cost analysis

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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