Entry Modes and Firm Performance in a Transition Economy: Evidence from Inward FDI to Romania

The article analyzes the characteristics and performance of foreign direct investment (FDI) to Romania since the 1990s. We provide evidence for some of the commonly advanced propositions about FDI in transition economies, namely the selection of entry and firms’ performance over time and across economic sectors. Contrary to the FDI literature, multinational enterprises in Romania favored greenfield FDI over acquisitions, although this does not apply to oligopolistic and technology intensive industries. Specific relationships between the nationality of the investor, the location and the entry modes decisions are also analyzed. We observed that acquisitions exhibited higher profit margin and turnover compared to greenfield FDI.     

Entering China Today

Summary

The peripherally growing and remarkably dynamic Chinese economy is now encouraging the use of more diverse and creative entry modes for international investors. This article illustrates various entry modes of foreign direct investment available at present to foreign companies entering China. These entry modes include equity joint ventures, wholly foreign owned subsidiaries, contractual joint ventures, umbrella companies, acquisitions, representative offices, branches, build-operate-transfers, licensing and franchising. The merits and limitations of each entry mode are discussed. Some practical advice on entry strategies for international executives active in the Chinese market is also highlighted.     

Explaining employment changes in foreign manufacturing investment in the UK

This article tests the view that the impact which foreign direct investment (FDI) has upon employment within the host economy will vary according to the entry mode which the multinational enterprise (MNE) chooses, the type of subsidiary and the nationality of the parent organisation which is established in the regional economy. Data were collected from the subsidiaries of foreign-owned firms in the UK. A model was devised and tested with estimations using this data. The results provide support for the view that the impact of FDI may be differentiated by entry mode, nationality and subsidiary type. Specifically, firms which entered by way of greenfield investment created positive employment effects as compared to those which entered by means of a merger or acquisition where the effects were relatively negative. There is some evidence that impact is also ownership specific. Finally, those subsidiaries which performed more value-added functions had a positive effect on employment.     

Limiting Factors of Foreign Direct Investment Undertaken By Polish Enterprises

Limiting factors of foreign direct investment are of great significance for managers, governments, and scholars as they directly influence the profitability of a foreign subsidiary and a parent multinational company. The aim of the paper is to identify FDI limiting factors of host country location choices among Polish enterprises and differences in the perception of the factors depending on the establishment mode choice, i.e. whether it is through greenfield investments or acquisitions. The paper presents results of a field surveyed carried out in 2012–2013 among Polish companies. The research results revealed that regardless of the establishment mode choice, investors from Poland perceived market-related limiting factors as significant. The empirical findings also proved that there were no significant differences in the perception of the importance of FDI limiting factors, between investors who undertook acquisitions and those who decided to make greenfield investments. However, single cases of differences were identified at the level of the policy framework-related factors.     

Greenfield FDI,cross-border M&As,and government size

This study examines the effects of greenfield foreign direct investment (FDI) and cross-border mergers and acquisitions (M&As) on government size in host countries of FDI. Using panel data for up to 130 countries for the period from 2003 to 2011, the study specifically tests the compensation hypothesis, suggesting that by increasing economic insecurity, economic openness leads to larger government size. It is found that greenfield FDI increases labour market volatility and thereby economic insecurity while M&As are not significantly associated with labour market volatility. The main results of this study are that greenfield FDI has a robust positive effect on government size, while M&As have no statistically significant effect on government size in the total sample of developed and developing countries, as well as in the sub-samples of developed and developing countries.     

International Market Entry Strategies of Emerging Market MNEs: A Case Study of Qatar Telecom

ABSTRACT

Drawing on existing theoretical perspectives and previous research, this study essentially investigated the strategic motives, location choice, and international entry mode strategies of emerging market multinational enterprises based on a case study of a telecom company, Qatar Telecom (Qtel) from the Gulf Cooperation Council. Using empirical findings from the semi-structured interviews, this study has clearly indicated that the main strategic motivation behind Qtel's internationalization was essentially opportunity seeking in terms of enabling market development and generating higher return on investment. Although Qtel used different entry strategies depending on the characteristics of host country markets, the company is more in favor of mergers and acquisitions than greenfield investments.     

Efficiency and Ownership Structure: The Case of Poland

We examine the effects of foreign entry on productive efficiency during the Polish investment liberalisation. The performance of foreign acquisitions is compared to foreign firms entering the market through greenfield entry, as well as domestic acquisitions of privatised firms, domestic greenfields and remaining state‐owned (non‐privatised) firms during the period 1995–2000. We find that foreign privatised firms have realised larger productivity gains than all types of domestic firms and that this is not due to higher price‐cost margins, which is consistent with the idea that foreign firms bring in firm‐specific knowledge. Foreign greenfields have the highest average labour productivity, while foreign privatisations show the largest productivity increase.     

Diversification and market entry choices in the context of foreign direct investment

Multinational enterprises (MNEs) consider many factors when making decisions in the context of foreign direct investment (FDI). The MNE must decide whether to diversify or to concentrate on its main line of business (LOB). It must also decide whether to enter into a foreign market through a greenfield or acquisition strategy. This paper analyzes both decisions. The international business literature has generally treated these strategic choices as independent. This paper introduces a more realistic selection model, in which the diversification choice and the entry mode choice are made sequentially, and are therefore related. The model is tested using a data set of FDI into the United Kingdom by MNEs in engineering and related industries. The analysis indicates a strong relationship between the diversification choice and the entry mode decision. In virtually all cases, the statistical significance of the selection model is higher than that of the independent model, indicating an improvement over previous research. Overall, the results indicate that the decisions on product diversification and foreign mode of entry are related. Diversified firms are more likely to enter through acquisition. Firms focusing on their main LOB are more likely to enter through greenfield entry. The paper also identifies a number of managerially relevant factors affecting these relationships.     

Foreign Direct Investment in China

Summary

China has attracted the second largest amount of foreign direct investment in the world each year since 1993. Hundreds of thousands of foreign-invested enterprises are in operation in China. However, what drive the success or cause the failure of foreign investments is still not well understood. This paper critically examines one success factor, i.e., the importance of timing of marketing entry into China. It begins with a brief review of the literature on first-mover advantages and the recent empirical research. It then attempts to theorize on why timing of market entry matters in the context of foreign direct investment. Apart from drawing upon the four recent studies in this area, this paper focuses on the auto industry in China and the case of Volkswagen to illustrate the importance of early entry into an overseas market. It calls for foreign investors to seize the first-wave opportunities when the door is opened a certain sector. It pays in the long run both in terms of the market share position and profitability.     

Geo-politics and the impact of China's outward investment on developing countries: evidence from the Great Recession

Using a novel dataset on Chinese large-scale overseas investment and project contracts by sector and mode of entry, we analyze whether Chinese outward activity (COA) before the Great Recession worsened or alleviated the contractionary phases in developing countries. We find that, on average, COA did not increase recessionary vulnerability. Both sectoral targeting and the size of pre-crisis engagement matter. While COA in financial market sectors implies an aggravation, substantial pre-crisis investment in energy, metals and transportation industries tends to attenuate the slump. Additionally, the mode of entry, i.e. through either greenfield investment or mergers and acquisitions, also matters.     

Foreign Capital Inflows and Economic Growth in Nigeria: Any Nexus?

ABSTRACT

This paper examines the impact of foreign capital inflows on economic growth in Nigeria for 1980–2015 period. It employs Autoregressive Distributed Lagged (ARDL)-bounds test, and finds a cointegration relationship between foreign capital inflows and growth. Specifically, foreign portfolio investment has positive impact on growth, while the impact of foreign loans is negative. Nevertheless, foreign direct investment and foreign aid have insignificant impact on growth, suggesting that Nigeria cannot rely on foreign direct investment and foreign aid as vehicles to stimulate growth. Rather, an increase in foreign portfolio investment or reduction in foreign loans has beneficial effects on the economy.     

Greenfield Investments or Acquisitions: Impacts of Institutional Distance on Establishment Mode Choice of Multinational Enterprises in Emerging Economies

ABSTRACT

The authors analyze the impacts of formal and informal institutional distance on establishment mode choice of multinational enterprises (MNEs) using a sample of 343 foreign direct investments (FDIs) made in selected emerging economies of Central and Eastern Europe, Asia, and Latin America by the Finnish MNEs. This study contributes to conceptualization and operationalization of institutional distance as well as its application in international business studies. The empirical analysis revealed that high informal institutional distance results in preference of greenfield investments by the Finnish MNEs as the authors hypothesized. However, the authors also found that high formal institutional distance results in preference of acquisitions, which is opposite the study hypothesis as well as the findings of previous studies addressing similar issues.     

The ‘disguised’ foreign investor: Brands,trademarks and the British expatriate entrepreneur in Brazil

Abstract

This article examines the impact of the British expatriate entrepreneur, and his processes of knowledge transfer, on the industrialization and economic development of Brazil between 1875 and 1914. It focuses on the textiles industry, and combines original trademark data with conventional trade and investment statistics, and also case study analysis about firms and their entrepreneurs. It argues that British investment in Brazil was higher and had a deeper impact on economic development than considered by existing research, as expatriate entrepreneurs ‘disguised’ a substantial amount of foreign investments by acting as shareholders and top managers of newly established local businesses.     

苏州利用外商直接投资现状分析

随着全球经济一体化和投资自由化程度的进一步加深,外商投资成为促进苏州经济高速发展的重要因素,外商投资企业进入苏州有效地填补了苏州经济发展的资金缺口,扩大了出口创收,增加了就业,促进了产业结构的调整,对苏州经济产生了深刻的影响。目前苏州利用外资的特点是外商直接投资规模较大、外商直接投资来源相对集中、外资投向地区分布较为集中和投资产业集中于第二产业等。     

Impact of international entry choices on the nature and type of innovation: Evidence from emerging economy firms from the Indian bio-pharmaceutical industry

As emerging economy multinational enterprises (EMNEs) enter foreign countries in search of new markets, seeking to expand their knowledge bases, research on the type and nature of innovation activity is needed to address the impact of EMNEs’ choices related to international expansion. Building on prior literature on entry mode and location choices, as well as on organizational learning, we argue that how and where an EMNE expands internationally will impact the nature of its innovation. We carry out empirical analysis on a sample of 167 Indian bio-pharmaceutical firms for the period from 1997–2017. Our findings suggest that greenfield ventures foster innovation in core technologies, while cross-border mergers and acquisitions (M&As) foster innovation in non-core technologies. In addition, locating subsidiaries in high income countries encourages product innovations, while locating in low income countries encourages process innovations. Our findings contribute to the growing literature on differences in learning outcomes of EMNE internationalization.     

Investment Flows,Economic Growth,and Corruption in African Countries: An Analysis

ABSTRACT

The analysis of corruption in international business is a relatively new phenomenon, and for the past two decades, many studies have attempted to capture the economic impact of the corruption in a country. However, most of these studies have concentrated their analysis to the experiences of the developed countries. None or very few of the current works have addressed the corruption issue in the context of foreign direct investment and economic growth in the developing countries. This work examines theoretically, as well as empirically, the incidence of corruption in the context of foreign direct investment in the developing countries, especially several African countries that signed a treaty to reduce the incidence of corruption in their respective countries.     

Motives,choice of entry mode,and challenges of bank internationalization: Evidence from China

This study examines the motives, entry mode choice, and challenges of the international expansion in an emerging country context. Data were collected via interviews from 30 senior managers based on a sample of 10 Chinese commercial banks (CCBs) involved in international expansion over the period of 2001–2013. This study finds greenfield and mergers and acquisitions are the most popular foreign entry mode used by CCBs. The motives of emerging market banks’ internationalization appear to be intrinsically linked to market development to serve customers operating in overseas market, government policies, and strategic knowledge sourcing. In terms of challenges, the study finds lack of management resources/technical capacity, culture, adapting to the host country regulatory environment, and lack of experience to be the main challenges to bank internationalization.     

Financial globalisation and the labour share in developing countries: The type of capital matters

In this paper, we investigate how de facto financial globalisation has influenced the labour share in developing countries. Our main argument is the need to distinguish between different types of capital in this context as they differ in their effect on the host countries' production process and vary concerning their bargaining power vis-à-vis labour. Our econometric analysis of the impact of foreign direct versus portfolio investment in a sample of about 40 developing and transition countries after 1992 supports this claim. Using different panel data techniques to address potential endogeneity problems, we find that foreign direct investment has a positive effect on the labour share in developing countries, while the impact of portfolio investment is significantly smaller and potentially negative. Our results also highlight that de facto foreign investment cannot explain the decline of the labour share in developing countries over the investigated period.     

东北地区FDI就业效应实证分析

研究东北老工业基地的就业基本情况,从理论上分析FDI对于就业所带来的影响,得出建立模型求出外资对于就业发展的弹性,可利用拓宽外资渠道,调整外资策略,多种外资形式等扩大农业利用外资。