Impact of the Institutional Environment on the Choice of Entry Mode: Evidence from Chinese Enterprises

Wu, Xianming and Liu, Xueyuan and Huang, Qihai (2012) Impact of the Institutional Environment on the Choice of Entry Mode: Evidence from Chinese Enterprises. China: an International Journal, 10 (1). pp. 28-50. ISSN 0219-8614

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Abstract

This article studies the influence of the institutional environment on Chinese enterprises' selection of entry mode for overseas investment from three dimensions: regulation, normalisation and imitation mechanisms. The results show that the regulation mechanism has a significant influence on the choice of mode of entry for overseas investment. Chinese enterprises tend to make investments in the form of acquisitions and wholly-owned subsidiaries in countries with sound policies, laws and formal institutional factors. The normalisation mechanism takes into consideration the influence of informal institutional factors including cultural distance mainly through adjustment of ownership mode. The greater the cultural distance between the host country and China, the higher the possibility that Chinese enterprises will opt for the joint venture mode of entry. The imitation mechanism takes into account the degree of integration between parent and subsidiary companies. Chinese enterprises which are highly integrated are likely to enter the local market via greenfield investment. Unlike the transnational enterprises of many developed countries, international experience has no significant impact on Chinese enterprises' choice of mode of entry for overseas investment.

Item Type:
Journal Article
Journal or Publication Title:
China: an International Journal
Uncontrolled Keywords:
/dk/atira/pure/core/keywords/englishlanguageandlinguistics
Subjects:
?? english language and linguisticsbusiness and international managementeconomics and econometricsgeneral social sciencessocial sciences(all)p philology. linguistics ??
ID Code:
56914
Deposited By:
Deposited On:
10 Aug 2012 16:57
Refereed?:
Yes
Published?:
Published
Last Modified:
16 Jul 2024 09:07