Abstract
In this article, we focus on tackling a relative research gap: how country distance (institutional, cultural, economic, and geographical distance) determines the entry mode choice between wholly-owned enterprises (WOEs) and joint venture enterprises (JVEs) in the context of “going global”. Based on a sample of 439 multinational enterprises (MNEs) from 22 different nations that directly invested in the agricultural sector of Vietnam in the period 1996–2019, an empirical investigation has been conducted by employing logistic regression. The results show that as cultural and geographical distances increase, MNEs prefer JVE forms. However, WOE becomes more popular in cases of large economic and institutional distance. Furthermore, entry mode choices of MNEs are also noticeably impacted by freedom of trade.
Highlights
The trend of globalisation has pushed investment activities abroad and the formation of multinational enterprises (MNEs)
The identification of selected enterprises for analysis is based on the following: (i) enterprises investing in the industry from 1996 (After the Law on Foreign Investment took effect) to 2019; (ii) enterprises for which its ownership structure changed by no more than 10% during the studied period; (iii) companies investing in the agricultural sector through wholly-owned enterprises (WOEs) and joint venture enterprises (JVEs); and (iv) investing countries with data on the Hofstede and Worldwide Governance Indicators (WGIs) cultural index
The results of descriptive statistical analysis (Table 2) indicated that foreign direct investment in Vietnam’s agricultural sector over the past three decades has mainly come from 22 countries around the world divided into five central regions: East Asia (53.3%), Europe (17.08%), North America (4.33%), Oceania (5.69%), and Southeast Asia (22.1%)
Summary
The trend of globalisation has pushed investment activities abroad and the formation of multinational enterprises (MNEs). In the framework of internationalisation decisions, the selection of entry mode is an important matter because it determines the degree of control over the activities of enterprises in foreign markets [1]. A suitable market entry mode will help MNEs create competitive advantages and even determine investment efficiency and development in the host country [2]. Several studies on international business have highlighted how international expansion involves overcoming barriers [3,4]. Previous studies have focused mainly on the choice of the form of investment by MNEs in general, and there have not been many forms of research associated with specific industries or fields of investment attraction, especially in the context of trade liberalisation and the introduction of Free Trade Agreements (FTAs)
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