Acquisitions or Joint Ventures: Foreign Market Entry Strategy of U.S. Advertising Agencies

Jaemin Jung

Journal of Media Economics, 2004, vol. 17, issue 1, 35-50

Abstract: This article examines the preferred foreign entry mode and region of U.S.-based advertising agencies by analyzing all cross-border acquisitions and joint ventures completed from 1981 to 2001. In addition, based on the transaction cost theory, the impact of host country risk and cultural distance on the choice of entry mode was tested with a binomial logistic regression model. Although the frequency of acquisitions was approximately three times greater than that of joint ventures, U.S. agencies primarily set up joint ventures in the Asian countries. Two hypotheses depicting the environmental factors revealed significant results; that is, U.S. agencies preferred joint ventures to acquisitions when the host country is culturally more distant from the United States and politically, financially, or economically riskier. The results are of interest in understanding not only advertising agencies specifically but also useful in considering foreign entry strategy by all media companies.

Date: 2004
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DOI: 10.1207/s15327736me1701_3

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