Determinants of Entry in an Emerging Economy: A Multilevel Approach

Abstract

The dynamics of the world economy and global competition patterns are encouraging multinational enterprises (MNEs) to expand into emerging economies. This study validates the proposition that entry mode selection in an emerging economy is influenced by situational contingencies at four levels: nation, industry, firm, and project. Analysis of data collected from China suggests that the joint venture is preferred when perceived governmental intervention or environmental uncertainty is high or host country experience is low. The wholly‐owned entry mode is preferred when intellectual property rights are not well protected, the number of firms in the industry is growing fast, the need for global integration is high, or the project is located in an open economic region. The importance of these multilevel determinants requires simultaneous and inseparable considerations of the risk, return, control, and resource effects of the entry mode decision. This necessitates a theoretical integration of multiple perspectives such as transaction cost, the eclectic paradigm, bargaining power, and organizational capability.

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