Local complementary inputs as drivers of entry mode choices: The case of US investments in Brazil

Jean-Francois Hennart, Hsia Hua Sheng and Gustavo Pimenta

International Business Review, 2015, vol. 24, issue 3, 466-475

Abstract: The theory of entry mode choice has modeled that choice as solely determined by the foreign investor. Hennart's bundling model, on the other hand, argues that foreign entry into a host market involves the bundling of intangibles contributed by the foreign investor with local complementary inputs contributed by local actors, and that the chosen mode of entry will be the one that maximizes the joint gains of both parties. That chosen mode will depend on the relative efficiency of the various markets on which intangibles and complementary assets can be bundled. We test the model on a sample of US entries into Brazil. We find that the number of available suppliers of local complementary assets and the degree of concentration of the Brazilian industry are significant determinants of the choice US investors make between joint ventures and wholly-owned subsidiaries, and between greenfields and acquisitions, thus providing support for the model.

Keywords: Acquisition; Bundling model; Entry mode; Expansion mode; Greenfield; Internationalization; Joint venture; MNEs; Wholly-owned subsidiary (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (8)

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DOI: 10.1016/j.ibusrev.2014.10.005

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