Overseas Entry Decision and Ownership Strategy of Japanese Companies: Institution and Corporate Governance

Sung Jin Kang

No 587, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: Using 20-year panel data, this paper tests Japanese companies' sequential decisions: (1) to invest abroad or not and (2) if so, what ownership strategy for that local company to be employed. In addition to transaction advantage emphasized by traditional studies on FDI, the focus is the role of corporate governance of the parent companies and institutional environment of the host countries. Through Heckman's two-step estimation, corporate governance is found to play an important role for entry decision but not for ownership strategy. Transaction cost approach has been well supported for entry decision. Most importantly, an institutional environment favorable to MNEs leads to higher level of ownership of local companies. Firm size plays a significant role for FDI decision as well as for ownership decision

Keywords: Sample selection bias; Entry decision; Ownership strategy; Corporate governance; Institution (search for similar items in EconPapers)
JEL-codes: C3 F2 O53 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-ifn
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