TY - JOUR
T1 - The influence of international experience on entry mode choice
T2 - Difference between family and non-family firms
AU - Kuo, Anthony
AU - Kao, Ming-Sung
AU - Chang, Yi-Chieh
AU - Chiu, Chih-Fang
PY - 2012/6
Y1 - 2012/6
N2 - International experience plays a crucial role in the choice of foreign entry mode, but its influence may vary across firms. This study investigates the difference of such an influence between family and non-family firms.The TCE perspective sees the foreign entry mode choice of a joint venture (JV) or a wholly owned subsidiary (WOS) as a trade-off between administrative costs of managing an organization and costs of safeguarding against partner's potential opportunism. From the TCE perspective, we hypothesize that inexperienced firms would rather relinquish control of foreign subsidiaries in exchange for local partners' help and thus will tend to choose a JV vs. a WOS. Family firms, however, have unique concerns regarding the preservation of socioemotional wealth and tend toward nepotism. Thus they often suffer from relatively scant management capabilities, relying more on partners' help to manage foreign subsidiaries jointly. We then hypothesize that inexperienced family firms, compared with inexperienced non-family firms, are more likely to choose JVs rather than WOSs.As firms accumulate international experience, they rely less and less on partners' help. We further hypothesize that ceding control to partners eventually will no longer be worthwhile, making the WOSs choice more favorable. Family firms, due to their socioemotional wealth concerns, have a higher desire to control their affiliates and tend to maintain higher ownership levels than do non-family firms. We thus hypothesize that experienced family firms are more likely to choose WOSs, compared with experienced non-family firms.We used a sample of publicly listed computer and electronic companies in Taiwan entering the China market to test our hypotheses. The empirical results support our hypotheses. The heterogeneity in the influence of international experience has profound implications for both family business research and international business studies. (C) 2012 Elsevier Ltd. All rights reserved.
AB - International experience plays a crucial role in the choice of foreign entry mode, but its influence may vary across firms. This study investigates the difference of such an influence between family and non-family firms.The TCE perspective sees the foreign entry mode choice of a joint venture (JV) or a wholly owned subsidiary (WOS) as a trade-off between administrative costs of managing an organization and costs of safeguarding against partner's potential opportunism. From the TCE perspective, we hypothesize that inexperienced firms would rather relinquish control of foreign subsidiaries in exchange for local partners' help and thus will tend to choose a JV vs. a WOS. Family firms, however, have unique concerns regarding the preservation of socioemotional wealth and tend toward nepotism. Thus they often suffer from relatively scant management capabilities, relying more on partners' help to manage foreign subsidiaries jointly. We then hypothesize that inexperienced family firms, compared with inexperienced non-family firms, are more likely to choose JVs rather than WOSs.As firms accumulate international experience, they rely less and less on partners' help. We further hypothesize that ceding control to partners eventually will no longer be worthwhile, making the WOSs choice more favorable. Family firms, due to their socioemotional wealth concerns, have a higher desire to control their affiliates and tend to maintain higher ownership levels than do non-family firms. We thus hypothesize that experienced family firms are more likely to choose WOSs, compared with experienced non-family firms.We used a sample of publicly listed computer and electronic companies in Taiwan entering the China market to test our hypotheses. The empirical results support our hypotheses. The heterogeneity in the influence of international experience has profound implications for both family business research and international business studies. (C) 2012 Elsevier Ltd. All rights reserved.
KW - Family firms
KW - Entry mode
KW - International experience
KW - Emerging market
KW - SUSTAINABLE COMPETITIVE ADVANTAGE
KW - CULTURAL DISTANCE PARADOX
KW - FOREIGN DIRECT-INVESTMENT
KW - TRANSACTION-COST-ANALYSIS
KW - EQUITY JOINT VENTURES
KW - JAPANESE FIRMS
KW - CORPORATE GOVERNANCE
KW - EMERGING MARKET
KW - INSTITUTIONAL ENVIRONMENT
KW - MULTINATIONAL-ENTERPRISE
U2 - 10.1016/j.emj.2012.03.008
DO - 10.1016/j.emj.2012.03.008
M3 - Article
SN - 0263-2373
VL - 30
SP - 248
EP - 263
JO - European management journal
JF - European management journal
IS - 3
ER -