Under which conditions do manufacturing companies choose FDI for service provision in foreign markets? An investigation using fsQCA

Abstract

Studying the provision of services from the point of view of manufacturing firms has been highlighted by many researchers in different fields. Besides, research on international business on the internationalization of either goods or services is vast, but rare on the combination thereof. While some studies have shown that firm-, country- and offering-specific factors can influence the foreign operation mode (FOM) of goods-related services, only a few have examined how these factors interrelate. The purpose of this study is to detect different configurations of conditions leading to a same decision. To answer this, the present study draws on the configurational approach and examines how combinations of different conditions lead to the choice of foreign direct investment (FDI) for service provision.A state-of-the-art fuzzy set qualitative comparative analysis (fsQCA) is applied to a sample of 111 Swiss and German industrial goods manufacturers. Choosing FDI for the provision of goods in foreign markets constitutes a necessary condition for service FDI. From the sufficiency analysis, several causal paths are detected. Companies with a servitization strategy choose FDI for their service resources only in digitally ready countries. The results furthermore show that differences between base, intermediate and advanced services exist. Also, the digital readiness of the country is found to be an important influence factor on the FDI decision.