Entry modes of multinational corporations into China’s market: a socioeconomic analysis

Abstract

The economic boom and liberalization make China a new focus of international investments by multinational corporations (MNCs). How to enter this huge market and what entry mode should be taken, remain inconclusive. This paper is a study of the entry modes of MNCs into China from socioeconomic perspectives. It provides a theoretical discussion and also an empirical investigation of MNCs’ entry modes in the Chinese particular institutional and business environments. It examines the impact of sociocultural differences, the technology intensity of investment projects and regional factors on MNCs’ entry mode choice.

Impact of firm-level factors and market entry mode on performance: A study of service MNCs in an emerging economy

“…Authors like Pitelis and Roger (2000) suggest that MNCs ability to do business in foreign countries without local practices seems paradoxical. However, authors like Ekeledo and Sivakumar (2004), Kim et al (2002), Koch (2001) and Sun (1999) have written on how these multinational firms enter foreign markets in various areas like manufacturing and services. However, between service and manufacturing, literature on entry strategies still remains at its initial stages and more especially in the developing world.…”

“…A study undertaken by Sun (1999) into market entry modes into China indicates that there are three basic modes to firms that want to internationalize into China. These are namely wholly foreignowned enterprise, equity joint venture and contractual joint venture.…”

“…They represent the modes in which these MNCs enter their host country with their investment. In terms of property rights, entry mode is the ownership structure of a foreign subsidiary (Sun, 1999). Sun (1999) discusses two main modes of entry.…”

“…In terms of property rights, entry mode is the ownership structure of a foreign subsidiary (Sun, 1999). Sun (1999) discusses two main modes of entry. The first being Joint Ventures, which can be sub-divided into various categories depending on the percentage ownership, held by the multinational company.…”

Corruption and multinational companies’ entry modes. Do linguistic and historical ties matter?

“…Grande and Teixeira (2011) Based on the firms' abilities, it may be possible to connect the firm's competences, skills and assets from the resource-based theory (Hill & Jones, 2009) to Dunning's Eclectic Paradigm or the OLI framework (Luo, 1999). Accordingly, to take advantage of firmspecific assets (Madok, 1998;Sreenivas & Pangarkar, 2000), such as technology-intensive resources (Sun, 1999;Javorcik & Wei, 2009) and inventive/R&D-intensive activities (Bhaumik & Gelb, 2005;Chung, 2009), the most common entry mode is the establishment of whollyowned subsidiaries (WOS). This is justified on the basis that firm-specific resources and activities need a high level of control (Edwards & Buckley, 1998;Chen & Hu, 2002), which would not be possible in a joint venture (JV), where knowledge has to be transferred to the partner (Chiao, Lo & Yo, 2010;Yiu & Makino, 2002;Martin & Salomon, 2003).…”