Entry Mode Still Matters: A Replication and Extension of Shaver’s (1998) Endogeneity Thesis

Abstract

This paper seeks to replicate and extend Myles Shaver’s (1998) seminal findings that endogenous strategy selection explains the relationship between entry-mode and subsidiary performance. Expanding Shaver’s (1998) original single-country, single-year study to a multi-country, multi-year sample of Japanese subsidiaries’ foreign market entries, we employ a multinomial endogenous treatment effects model to test for differences in the effect of four entry modes – greenfield, joint venture, acquisition and alliance – on subsidiary performance growth. Our findings show that while endogeneity strategy selection does explain some portion of subsidiary performance, entry mode remains a significant predictor of survival and growth. These results hold even after splitting the sample based on host country cultural distance from Japan. We discuss reasons for the discrepancy in findings, as well as their implications for future research.