An Empirical Study on FDI Entry Mode Choice in Myanmar: Evidence from Korean Multinational Companies

Abstract

Myanmar, one of the poorest countries in Asia, had not actively promoted foreign investment until the recent decade due to political issues. While it is meaningful and necessary to study FDI in terms of the promotion of FDI and economic growth in Myanmar, research on FDI in Myanmar is limited to date. This study aims to analyze how foreign multinational companies make FDI entry mode choices between the wholly-owned subsidiary and joint venture in Myanmar. Drawing upon the OLI framework and industrial organization theory, we investigate the firm’s decision of entry mode choice based on its internal and external factors, i.e., firm size, resource, international experience, host country experience, set-up costs, and industry competition. Using survey data collected from 91 Korean multinational companies that made foreign investments in Myanmar during the period from 1988 to 2014, this study shows that Korean multinational companies tend to adopt a wholly-owned subsidiary mode to enter Myanmar’s local market when the firm is larger in size and has more intangible resources and international experiences. However, Korean multinationals are more likely to adopt a joint venture mode when the set-up costs and industry competition are higher in Myanmar. No empirical support is found for the relationship between the firm's experiences in the host country and FDI entry mode choice. The findings provide valuable implications for MNEs that consider entering into Myanmar.