The FDI Behaviour of polish Companies: Equity Based Entry Modes and their Impact on Performance

Abstract

The purpose of this paper is to show how joint ventures and wholly owned subsidiaries contribute to building companies' competitiveness. It begins with a brief discussion of the theoretical approach to foreign direct investment (equity based modes). Next, the authors present the results of research carried out among Polish companies investing abroad during the period 2007-2008 by a team of researchers from Nicolaus Copernicus University. The research focuses on two main FDI entry modes and attempts to identify the relative impact of the entry mode on the competitiveness of investors. Although the level of international involvement of polish investors is still relatively low, their awareness of the benefits from internationalization is growing. Factors that may influence the choice of entry mode are studied, including the target host country, the economic activity of the company, the FDI diversification mode and the number of investment projects undertaken by a company, the latter a measure we take to reflect the international experience of the respondents. The research is also the first to highlight how the contribution to competitive potential may vary depending on the ownership structure adopted, offering a comparison of the relative benefits accruing as a result of internationalisation among companies operating on the basis of solo equity (wholly owned subsidiary or branch office), joint ventures or a mixed strategy.

Factors affecting SMEs' strategic decisions to approach international markets

“…For companies such as born globals, geographical location and psychic distance are not relevant factors. Furthermore, because many markets are entered simultaneously, these companies can reduce fixed costs, especially when linked to high technology industries and R&D activities (Gibb and Szałucka, 2012).…”

“…Internationalisation is mainly based on export activities, through cooperation with local companies and a strong use of personal contacts and business networks. Born globals are usually small and medium-sized enterprises with less financial means and resources than traditional multinationals (Gibb and Szałucka, 2012;Amal et al, 2013;Zhou and Wu, 2014).…”

“…Internationalisation by a certain company may even be initiated not by the export of goods or services but rather by the creation of a productive unit abroad or a company that is simply already global. Such companies are known as born globals (Gibb and Szałucka, 2012).…”