The Use of Non-Equity Modalities and Host-Country Impact: Some Evidence from the International Hotel Industry and Areas of Further Research

Abstract

This paper provides preliminary evidence on the use of non-equity modalities by transnational corporations (TNCs) in the hotel industry and discusses the conditions that may favor the choice of one of these modalities as a substitute for foreign direct investment (FDI). Based on secondary data and interviews with experts of the hospitality industry, the study looks at the expansion of the major international hotel chains and focuses on the issues of control, transferability of resources and institutional framework to explain the choice of a non-equity governance form. Concentrating on three of the main growth markets in the hospitality sector, China, India and the United Arab Emirates (UAE), the study highlights some implications of non-equity modalities in terms of host country impact, emphasizing the issues of skill development, knowledge transfer and procurement linkages, and identifies areas for further research.