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National Culture, Transaction Costs, and the Choice Between Joint Venture and Wholly Owned Subsidiary

Published on Dec 1, 2000in Journal of International Business Studies 7.72
· DOI :10.1057/palgrave.jibs.8490930
Shige Makino24
Estimated H-index: 24
(CUHK: The Chinese University of Hong Kong),
Kent E. Neupert10
Estimated H-index: 10
(BSU: Boise State University)
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Abstract
Transaction cost theory posits that culture plays a limited role in the choice between JV and WOS. In contrast, research suggests that firms' preferred level of ownership in their foreign subsidiaries is influenced primarily by cultural traits. This study provides additional evidence in this ongoing debate by replicating Hennart's transaction cost model of entry mode choice in two different national contexts: Japanese firms investing in the U.S. and the U.S. firms investing in Japan. The results suggest that the transaction cost explanation for the ownership choice holds in the both national contexts. Yet, the propensity to choose JV or WOS significantly varied between Japanese and the U.S. firms.© 2000 JIBS. Journal of International Business Studies (2000) 31, 705–713
  • References (18)
  • Citations (215)
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References18
Newest
Published on Oct 1, 1998in Asia Pacific Journal of Management 2.74
Shige Makino24
Estimated H-index: 24
(CUHK: The Chinese University of Hong Kong),
Paul W. Beamish59
Estimated H-index: 59
(UWO: University of Western Ontario)
This study examines the moderating effects of a host government's local ownership restrictions on the linkage between the choice of foreign entry mode and its performance, using a sample of 917 Japanese foreign subsidiaries in Asia. The study focuses on two foreign entry modes, joint ventures (JVs) and wholly-owned subsidiaries (WOS), and two performance measures, financial performance and termination rate. The results suggest that the extent of local ownership restrictions is negatively and sig...
Published on Sep 1, 1998in Journal of International Business Studies 7.72
Jean-François Hennart41
Estimated H-index: 41
(UIUC: University of Illinois at Urbana–Champaign),
Jorma Larimo15
Estimated H-index: 15
(University of Vaasa)
This paper tests the proposition that national origin affects the strategies of multinational enterprises by looking at the determinants of the choice they make between entering the United States through partially versus wholly owned subsidiaries. We pool entries into the United States made by firms based in two countries, Japan and Finland, which differ both in their cultural characteristics and in their cultural distance to the United States. After carefully controlling for the known firm and ...
Published on Sep 1, 1998in Journal of International Business Studies 7.72
Peter J. Buckley57
Estimated H-index: 57
(University of Leeds),
Mark Casson41
Estimated H-index: 41
(University of Reading)
A new fully integrated analysis of the foreign market entry decision is presented, encompassing the choice between exporting, licensing, joint venturing and wholly owned foreign investment. The choice between acquisition and greenfield investment is examined, and so too are options based on subcontracting and franchising. The model extends the insights of internalization theory, and draws on concepts from the economics of industrial organization. A special feature of the model is the distinction...
Published on Jan 1, 1997
Paul W. Beamish59
Estimated H-index: 59
,
Andrew Delios37
Estimated H-index: 37
,
Donald J. Lecraw1
Estimated H-index: 1
The data sources comparison of entry dates a comparison of sales activity a comparison of equity levels total employment levels in US and Japanese subsidiaries expatriate management in Japanese subsidiaries ownership patterns joint venture ownership structure performance.
Published on Jun 1, 1996in Journal of International Business Studies 7.72
M. Krishna Erramilli20
Estimated H-index: 20
(NTU: Nanyang Technological University)
This paper examines the notion that the multinational's nationality influences its foreign subsidiary ownership decisions. It identifies theoretically meaningful constructs to represent nationality and examines, under carefully controlled conditions, their influence on subsidiary ownership preferences in American and European multinationals. The paper concludes that there are indeed significant differences in ownership preferences among various nationalities that can be explained using cultural ...
Published on Jan 1, 1995in Industrial Marketing Management 4.78
W. Benoy Joseph10
Estimated H-index: 10
(College of Business Administration),
John T. Gardner10
Estimated H-index: 10
(State University of New York at Purchase)
+ 1 AuthorsFrances E. Vernon1
Estimated H-index: 1
(CSU: Cleveland State University)
Abstract This nationwide survey reports distributors' perspectives of their relationship with a core supplier. The survey reports on elements of partnership, expectations, outcomes, and satisfaction relating to the relationship's position on a continuum between arm's length and close partnership styles.
Published on Oct 1, 1994in Strategic Management Journal 5.57
Scott Shane65
Estimated H-index: 65
(Georgia Institute of Technology)
This paper argues that national differences in levels of trust impact perceptions of transactions costs and thereby influence the desirability of internalization and the choice of foreign market entry mode. The paper tests this framework on industry level data from the United States Commerce Department's Benchmark Survey of operations of U. S. -based manufacturing multinational corporations in 1977 and 1982, and shows that cultural differences in trust do influence perceptions of transaction cos...
Published on Jun 1, 1994in Journal of International Business Studies 7.72
C. Patrick Woodcock1
Estimated H-index: 1
(UWO: University of Western Ontario),
Paul W. Beamish59
Estimated H-index: 59
(UWO: University of Western Ontario),
Shige Makino24
Estimated H-index: 24
(UWO: University of Western Ontario)
This study examines the relationship between ownership entry modes and performance. The ownership entry modes examined are the wholly owned modes of acquisition and new venture entry, and the non-wholly owned mode of joint venture entry. A theoretical relationship is developed for international entry modes that is based on the contingency characteristics of resource requirements and organizational control factors. This model suggests that different entry modes have different performance outcomes...
Published on May 1, 1993in Organization Science 3.26
Arvind Parkhe16
Estimated H-index: 16
The dramatic growth of global strategic alliances between firms is fundamentally reshaping the nature of international business, Indeed, interfirm cooperation has become a crucial component of the pursuit of global competitive advantage. Yet such alliances are enormously complex to manage successfully, in part because of the opportunity and incentive to cheat, and profit at the partner's expense, that is an inescapable part of these relationships. Consequently, strategic alliances are frequently...
Published on Mar 1, 1992in Journal of International Business Studies 7.72
W. Chan Kim24
Estimated H-index: 24
(Ad: INSEAD),
Peter Hwang1
Estimated H-index: 1
(Baruch College)
This paper makes a case directed towards establishing the importance of global strategic considerations in choosing multinationals' entry mode. Specifically, it is our contention that beyond the environmental and transaction-specific factors well established in the literature to affect the entry mode decision, we should also consider the strategic relationship a multinational envisages between its operations across borders in reaching this decision. After incorporating various global strategic v...
Cited By215
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Published on Mar 1, 2018in Journal of World Business 5.79
Michael Carney25
Estimated H-index: 25
(Concordia University),
Saul Estrin43
Estimated H-index: 43
(LSE: London School of Economics and Political Science)
+ 1 AuthorsDaniel Shapiro28
Estimated H-index: 28
(SFU: Simon Fraser University)
Abstract We analyse the relationship between institutional systems (configurations of countries with similar institutional characteristics) and firm performance. We use a large sample of firms from understudied countries to explore whether the performance impact of these configurations is the same (“ equifinality ”), whether this holds across different measures of firm performance (“ Tversky effect ”), and whether some institutional configurations better support foreign-owned firms. We find that...
Published on May 1, 2019in Strategic Change
Nakul Parameswar1
Estimated H-index: 1
,
Sanjay Dhir7
Estimated H-index: 7
(IITD: Indian Institute of Technology Delhi)
Published on Mar 31, 2019in Thunderbird International Business Review
Weijing He , Agyenim Boateng16
Estimated H-index: 16
(University of Leicester)
+ 0 AuthorsPatrick Ring6
Estimated H-index: 6
(GCU: Glasgow Caledonian University)
Published on Mar 1, 2019in Asia Pacific Journal of Management 2.74
Megan Min Zhang1
Estimated H-index: 1
(UCD: University College Dublin),
Paul W. Beamish59
Estimated H-index: 59
(UWO: University of Western Ontario)
This study investigates how Japanese MNEs are adapting their ownership choices to accommodate China’s economic liberalization. Drawing upon the institution-based view of the firm, we propose an institutional response model that is simultaneously based on the progress of economic liberalization and the accumulation of subsidiary experience. This model suggests that Japanese MNEs increasingly adopt higher ownership levels in their subsidiaries because of the combined effects of deepening deregulat...
Published on Feb 18, 2019
Pooja Thakur-Wernz (WSU: Wichita State University)
Purpose The purpose of this study is to examine backsourcing, which refers to the full or partial re-internalization of a firm’s previously outsourced activity. Researchers have primarily focused on the drivers of backsourcing, but this paper builds on that prior research to develop a typology of backsourcing. Design/methodology/approach Drawing on transaction cost economics and the resource-based view (RBV), the paper posits that firms backsource because of two factors – changes in their short-...
Published on Jan 29, 2019in British Journal of Management 2.75
Jenny Hillemann5
Estimated H-index: 5
(Vrije Universiteit Brussel),
Alain Verbeke47
Estimated H-index: 47
(Vrije Universiteit Brussel)
+ 0 AuthorsWon Yong Oh (UNLV: University of Nevada, Las Vegas)
The European Monetary Union (EMU) provides a new macro-level, institutional setting for multinational enterprises (MNEs). The authors investigate the impact of regional integration on MNE strategy by analysing Belgian firms’ entry-mode choices in foreign markets, both EMUand non-EMU ones, with a focus on what impact remains of countrylevel risk. They demonstrate that regional integration has altered the impact of countrylevel institutional risk on MNE entry-mode choices inside the EMU. The conve...
Published on Sep 10, 2018in Entrepreneurship Theory and Practice 6.19
Maria Cristina Sestu (UNIPV: University of Pavia), Antonio Majocchi12
Estimated H-index: 12
(UNIPV: University of Pavia)
We examine the effects of family control on entry mode choice by integrating Transaction Costs Economics with the family business literature. Using a dataset of 951 foreign investments, we investigate the role of family involvement on entry modes. After controlling for endogeneity, we find that if both the investing and the local firm are family firms, forming a joint venture is preferred, while if only the investing firm is a family firm, a wholly owned subsidiary is more likely. Results show t...
Published on Aug 1, 2018
Shailen Kumar Dalbehera (IIMB: Indian Institute of Management Bangalore), S. Raghunath (IIMB: Indian Institute of Management Bangalore)+ 2 AuthorsV. Nagadevara
An international joint venture, upon termination, is an attractive option for the parent organizations to convert to a wholly-owned subsidiary. Since each parent organization has the option to internalize the joint venture, there is the potential for competition between the firms when this mode change occurs. We study the impact of the institutional environment on the issue of which parent organization is able to internalize the joint venture. Analyzing international joint ventures that were int...