 TECHNOLOGICAL ASYMMETRY AMONG FOREIGN INVESTORS AND MODE OF ENTRYBeata Javorcik and Kamal Saggi () Economic Inquiry, 2010, vol. 48, issue 2, 415-433 Abstract: How does the preferred entry mode of foreign investors depend on their technological capability relative to that of their rivals? This article develops a simple model of entry mode choice and evaluates its main testable implication using data on foreign investors in Eastern European countries and the successor states of the Soviet Union. The model considers competition between two asymmetric foreign investors and captures the following trade‐off: while a joint venture (JV) helps a foreign investor secure a better position in the product market vis‐à‐vis its rival, it also requires that profits be shared with the local partner. The model predicts that the efficient foreign investor is less likely to choose a JV and more likely to enter directly relative to the inefficient investor. Our empirical analysis supports this prediction: foreign investors with more sophisticated technologies and marketing skills (relative to other firms in their industry) tend to prefer direct entry to JVs. This empirical finding is robust to controlling for host country–specific effects and other commonly cited determinants of entry mode. (JEL F13, F23, O32) Date: 2010 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:ecinqu:v:48:y:2010:i:2:p:415-433 Ordering information: This journal article can be ordered from Access Statistics for this article Economic Inquiry is currently edited by Tim Salmon More articles in Economic Inquiry from Western Economic Association International Contact information at EDIRC. |
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