How MNCs Choose Entry Modes and Form Alliances: The China Experience

Abstract

This study examine two dimensions of firms' foreign market entry strategy: mode of entry and formation of alliances. Based on the existing literature, we propose a model that describes how host country-, home country- and industry-specific factors affect foreign firms' decisions on how they enter the market and whether they will enter with a partner firm or not. The model also describes how operation-related factors, i.e., the location and the level of local government, affect these decisions. Seven major hypotheses were tested using a longitudinal sample of 2,998 foreign business activities in China between 1979 and 1993. Our sample consists of foreign investing firms from the U.S., Europe, Japan, and other Asian countries. By choosing China as a host country, the study offers insights into how firms of different regional groups adapted their strategies to a changing host environment.