Conceptualizing different foreign entry modes as distinct organizational forms, we examine how wholly owned foreign subsidiaries (WOFSs) gain legitimacy in a host country. Drawing on the institutional and ecological perspectives, we build a legitimation framework based on the ideas of identity, community, and audience. Specifically, we identify dual sources of legitimating influences for these subsidiaries in China in 1979-95: foreign direct investment (FDI) communities, and host country public opinion. Our findings reveal that the legitimation and competition dynamics of FDI communities and Chinese acceptance of the organizational form both influenced adoption of wholly owned foreign subsidiaries in China.

and Key Results 0Recognizing that country-specifi c resources are generally diffi cult to imitate or diffuse across national boundaries, we propose that home country conditions are key determinants of fi rms' strategic choices. By embracing insights from both institutional economics and resource-based view, we identify two country-level environmental constituents -domestic market size and legal institutions -to examine how these resources infl uence multinational fi rms' international diversifi cation strategies. We further propose that home country legal institutions moderate the link between geographic diversifi cation and fi rm performance. 0 These hypotheses are tested with historical data on 435 multinational fi rms based in 13 developed economies. Results suggest that a multinational fi rm's degree of international diversification has a U-shaped relationship with the size of the fi rm's domestic market; fi rms from civil law countries are more likely to pursue international diversifi cation than their counterparts from common law countries; and the effect of international diversifi cation on fi rm performance was more pronounced among MNCs from civil law countries.

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