Abstract
This empirical study explores first the relationship between type of industry and subsidiary age, export ratio and MNCs’ firm factors. Second, we examined the impact of country of origin, foreign ownership and parent’s specific factors on asset growth ratio (AGR). Based on data derived from 2500 foreign companies in Japan, the findings show that the factors of foreign ownership, experience in host market, country of origin, export and parents company’s sales and the number of employees as a proxy of firm size have significantly effect on AGR. Also our finding shows that foreign companies in manufacturing industries are more likely to be as an international joint venture with a foreign manager and higher ratio of import and greater number of foreign employees. Finally, contrary to our expectations, we found that the total asset of parent company has negatively associated with type of industry. In the other word, firms in service industries are more likely to have greater total asset than those in manufacturing sectors.
Highlights
The multinational company has several choices of entry mode, ranking from the market to the hierarchy
We examined the impact of country of origin, foreign ownership and parent’s and subsidiary‘s factors on the asset growth ratio (AGR)
We examine the effect of experience in host country, foreign ownership and country of origin on the asset growth ratio (AGR)
Summary
The multinational company has several choices of entry mode, ranking from the market (arm's length transactions) to the hierarchy (wholly owned subsidiary). Examples of unique firm-specific assets and intangible wealth include established brand names, the firm's reputation, favored access to suppliers and skilled manpower, and superior products and processes. These resources, when employed in a host country during overseas entry, serve to reduce rivalry, as they are imperfectly imitable. The foreign entrant can be viewed as a special case of the multi-plant firm operating in different countries due to market imperfections (Horaguchi and Toyne, 1990) Such firms integrate industries by owning assets or controlling activities across countries as a result of structural market imperfections and transaction cost advantages.
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