Technological capabilities, political connections and entry mode choices of EMNEs overseas R&D investments

Abstract

Through the combination of resource-based view (RBV) and institutional perspective, this study investigated how different types of ownership advantages interact to influence the entry mode decisions of emerging market multinational enterprises (EMNEs) investing in R&D overseas. Data from a survey of 82 Chinese manufacturing firms were analysed to determine that the technological capabilities (i.e., traditional ownership advantages) and political connections (i.e., non-traditional ownership advantages) jointly influence decisions by firms to choose Greenfield investments (i.e., resource-exploitation entry mode) over some sort of acquisition or joint venture (JV) (i.e., resource augmentation entry mode). Specifically, the study showed that strong political connections at home encourage Greenfield investments. Strong technological capabilities have relatively little direct impact, but interact with political connections to encourage Greenfield investments.