Analyzing Modes of Foreign Entry

This paper studies the entry decision of a multinational enterprise into a foreign market. Two alternative entry modes for a foreign direct investment are considered: Greenfield investment versus acquisition. In contrast to existing approaches, the acquisition price and the profits under both entry modes are endogenously determined. Interestingly, we find that the optimal entry mode decision is a ected by the competition intensity in the market in a non-monotonic way. When markets are very much or very little competitive, greenfield investment is the optimal entry mode, while for intermediate values it is acquisition.Foreign direct investment ; multinational enterprise ; greenfield investment ; acquisition ; transition economies

Modes of Foreign Entry under Asymmetric Information about Potential Technology Spillovers

This paper studies the effect of technology spillovers on the entry decision of a multinational enterprise into a foreign market. Two alternative entry modes for a foreign direct investment are considered: Greenfield investment versus acquisition. We find that with quantity competition a spillover makes acquisitions less attractive, while with price competition acquisitions become more attractive. Asymmetric information about potential spillovers always reduces the number of acquisitions independently of whether the host country or the entrant has private information. Interestingly, we find that asymmetric information always hurts the entrant, while it sometimes is in favor of the host country.Foreign direct investment ; multinational enterprise ; enty mode ; technology spillovers ; asymmetric information ; transition economies

Technology Transfer and Spillovers in International Joint Ventures

This paper analyzes the effects of a potential spillover on technology transfer of a multinational enterprise and on the host country policy. In particular, we examine how both parties' incentives can be controlled through the ownership structure in an international joint venture. In contrast to existing arguments we show that spillovers must not always have negative effects on technology transfer and they may be efficiency improving. Moreover, there are circumstances where a joint venture is mutually beneficial. Surprisingly, however, we find that despite the prospect of spillovers a joint venture is sometimes not in the interest of a host country.Foreign Direct Investment; Joint Venutres; Ownership Structure; Multinational Enterprise; Spillovers; Transition Economics

The mobility capacity of the manufacturing multinational enterprise: a framework and two case studies

In this paper, I try to develop a framework, which presents the factors influencing the mobility capacity of the manufacturing activity of a multinational enterprise (the difficulty/ease with which it can transfer its manufacturing activity from the initial host territory to another territory). I differentiate five factors: (1) the nature (generic vs. specific) of the territorial resources used by the multinational’s subsidiary; (2) market access offered by production in the host territory; (3) the durability and specificity of the fixed assets owned by the multinational enterprise in the host territory; (4) other barriers making exit out of the host territory difficult (redundancy costs, interrelatedness of the subsidiary’s activity with other units of the multinational enterprise, etc.); and (5) the availability of substitute plants by the multinational enterprise that can take over the production of the host territory’s subsidiary. Once the framework is presented, I use it to analyse the mobility potential of the activities of two multinational enterprises: a Taiwanese company (Nien Hsing Textile Co.) that was assembling trousers in Nicaragua (fieldwork in 1998 and 2007) and a Japanese company (Sony) that was assembling television sets and manufacturing cathode ray tubes in Wales (fieldwork in 2000-2001). The study shows the importance, in the short run, of the heaviness of the capital goods used in production as factor limiting mobility. In the long run, however, the degree of specificity (uniqueness) of the territorial resources employed by the multinational enterprise (qualified labour, specialised suppliers, etc.) is crucial. The study shows also the risk of the “no-upgrading trap†of inward manufacturing investment for peripheral host territories. Indeed, multinational enterprises that realise small profit margin activities, and in which labour costs occupy an important share in total production costs, will want to maintain their international mobility capacity to be able to respond swiftly to changes in the configuration of location advantages. Therefore, they will restrict their sunk investments (in fixed assets, in training, in collaborations with local suppliers, etc.) in the host territory. This strategy counters the local embeddedness of the subsidiary and limits its structural economic impact on the host territory.

Reputational Comparative Advantage and Multinational Enterprise

For a firm without a readily identifiable brand name, quality reputation may solely reflect the country of origin. In this paper we endogenize country-of-origin reputations and show that these selffulfilling reputations determine not only the average quality of a country’s exports but also the type of products in which a country specializes. Hence, the pattern of international trade can be determined by reputational comparative advantage. Specialization according to reputational comparative advantage can also establish the location of the host and the parent firm in a multinational enterprise. Furthermore, multinationals that internalize production in a single firm can eradicate a low reputation equilibrium and, therefore, can increase host-country welfare by a greater amount than under a licensing arrangement. Finally, this reputation effect can identify whether internalization, or licensing, is more likely to occur.Country-of-Origin, Quality Reputations, Multinational Enterprise, Internalization, Statistical Discrimination.

The Multinational Enterprise

This thesis analyzes the strategic market entry decisions of multinational enterprises. The dissertation is organized in four chapters. Chapter 1 serves as an introduction and describes the recent trends and relevant literature as regards this form of international capital flows. Chapter 2 and chapter 3 analyze the optimal mode of foreign market entry. Therefore two alternative modes are distinguished: Greenfield investment, i.e. investment in a new facility, or acquisition of an existing company. In chapter 2 the effect of competition on the entry mode choice is concerned. Chapter 3 also examines the optimal entry mode and places particular interest on the effect of asymmetric information. Chapter 4 asks how potential spillovers affect the incentive to transfer technology in an international joint venture.Diese Arbeit untersucht strategische Markteintrittsentscheidungen multinationaler Unternehmen. Die Dissertationsschrift gliedert sich dabei in vier Kapitel. Das erste Kapitel dient der Einführung in die Thematik ausländischer Direktinvestitionen. An dieser Stelle werden die jüngsten Entwicklungen dargestellt und die relevante Literatur zu dieser Form internationaler Kapitalströme diskutiert. In Kapitel zwei und drei wird die optimale Markteintrittsstrategie für eine Direktinvestition untersucht. Dazu werden zwei alternative Markteintrittsformen unterschieden: Eine so genannte Greenfield Investition, also eine Neugründung, und eine Akquisition eines bereits bestehenden Unternehmens. In Kapitel zwei wird der Einfluss des Marktwettbewerbs auf die Eintrittstrategie untersucht. Kapitel drei greift die Frage nach der optimalen Marktzutrittstrategie erneut auf, wobei die Bedeutung asymmetrischer Information nun Gegenstand der Untersuchung ist. Kapitel vier untersucht die Frage, wie sich Spillovers auf den Technologietransfer innerhalb internationaler Joint Ventures auswirken

Margins of multinational labor substitution

Multinational labor demand responds to wage differentials at the extensive margin, when a multinational enterprise (MNE) expands into foreign locations, and at the intensive margin, when an MNE operates existing affiliates across locations. We derive conditions for parametric and nonparametric identification of an MNE model to infer elasticities of labor substitution at both margins, controlling for location selectivity. Prior studies rarely found foreign wages or operations to affect employment. Our strategy detects salient adjustments for German MNEs. With a one-percent increase in German wages, German MNEs add 2,000 manufacturing jobs in Eastern Europe at the extensive margin and 4,000 jobs overall; a converse one-percent drop in Eastern European wages is associated with an overall withdrawal of 730 MNE jobs from Germany. --Multinational enterprise,location choice,multiple sample selectivity,labor demand,translog cost function,nonparametric estimation

A missing operationalization: entrepreneurial competencies in multinational enterprise subsidiaries

We seek to provide a comprehensive operationalization of firm-specific variables that constitute multinational enterprise subsidiary entrepreneurial competencies. Towards this objective, we bring together notions from the fields of entrepreneurship and international business. Drawing on an empirical study of 260 subsidiaries located in the UK, we propose a comprehensive set of scales encompassing innovativeness, risk-taking, proactiveness, learning, intra-multinational networking, extra-multinational networking and autonomy; which capture distinct subsidiary entrepreneurial competencies at the subsidiary level. Research and managerial implications are discussed

The Multinational Enterprise

This thesis analyzes the strategic market entry decisions of multinational enterprises. The dissertation is organized in four chapters. Chapter 1 serves as an introduction and describes the recent trends and relevant literature as regards this form of international capital flows. Chapter 2 and chapter 3 analyze the optimal mode of foreign market entry. Therefore two alternative modes are distinguished: Greenfield investment, i.e. investment in a new facility, or acquisition of an existing company. In chapter 2 the effect of competition on the entry mode choice is concerned. Chapter 3 also examines the optimal entry mode and places particular interest on the effect of asymmetric information. Chapter 4 asks how potential spillovers affect the incentive to transfer technology in an international joint venture.Diese Arbeit untersucht strategische Markteintrittsentscheidungen multinationaler Unternehmen. Die Dissertationsschrift gliedert sich dabei in vier Kapitel. Das erste Kapitel dient der Einführung in die Thematik ausländischer Direktinvestitionen. An dieser Stelle werden die jüngsten Entwicklungen dargestellt und die relevante Literatur zu dieser Form internationaler Kapitalströme diskutiert. In Kapitel zwei und drei wird die optimale Markteintrittsstrategie für eine Direktinvestition untersucht. Dazu werden zwei alternative Markteintrittsformen unterschieden: Eine so genannte Greenfield Investition, also eine Neugründung, und eine Akquisition eines bereits bestehenden Unternehmens. In Kapitel zwei wird der Einfluss des Marktwettbewerbs auf die Eintrittstrategie untersucht. Kapitel drei greift die Frage nach der optimalen Marktzutrittstrategie erneut auf, wobei die Bedeutung asymmetrischer Information nun Gegenstand der Untersuchung ist. Kapitel vier untersucht die Frage, wie sich Spillovers auf den Technologietransfer innerhalb internationaler Joint Ventures auswirken.Multinational Enterprise; Foreign Direct Investment; Greenfield Investment; Acquisition; Technology Spillovers

Sequential International Joint-Ventures and the Option to Choose

The purpose of this study is to formalize the optimal choice of market entry strategy for an individual multinational enterprise (MNE) from a dynamic perspective. It is argued that incorporating a suitable treatment of irreversibility, uncertainty and flexibility related to a MNEs investment decision gives further insights to the expansion, dissolvement, and optimal timing of international joint ventures (IJVs). The evolutionary process of the value of the foreign direct investment can be interpreted as a compound complex chooser option. The results suggest that uncertainty, size of equity share and future investment/divestment opportunities play an important role when it comes to transit from export to the first phase of the foreign direct investment commitment. The paper underscores the importance of modeling the dynamics of market entry and helps to refine the application of real options in the alliance context by providing a closed-form solution in continuous time to valueForeign direct investment, multinational enterprise, sequential investments, entry mode, international joint venture, real options