Foreign Investment Strategies and Sub-national Institutions in Emerging Markets: Evidence from Vietnam

ABSTRACT Foreign investors entering emerging markets have to take strategic decisions on where and how to set up operations. These decisions have to accommodate institutional conditions that vary not only between countries, but also within the host economy. We offer a theoretical framework to analys...

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Bibliographic Details
Published in:Journal of management studies 2005-01, Vol.42 (1), p.63-93
Main Authors: Meyer, Klaus E., Nguyen, Hung Vo
Format: Article
Language:English
Subjects:
Business studies
Developing countries
Emerging markets
Foreign direct investment
Foreign investment
Hypotheses
Institutions
LDCs
Location of industry
Management science
Market entry
Organization theory
Strategic planning
Studies
Vietnam
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Summary:ABSTRACT Foreign investors entering emerging markets have to take strategic decisions on where and how to set up operations. These decisions have to accommodate institutional conditions that vary not only between countries, but also within the host economy. We offer a theoretical framework to analyse how institutions in an emerging economy influence entry strategy decisions. On this basis, we analyse the determinants of two key aspects of entry strategy: location and entry mode in Vietnam. We find that sub‐national institutional variables have a significant influence on both dimensions. The availability of scarce resources affects the location of FDI and the likelihood of Greenfield entry. Institutional pressures arising from incumbent state‐owned firms and the domestic market orientation of the investor lead to a preference for joint venture entry.
ISSN:0022-2380
1467-6486
DOI:10.1111/j.1467-6486.2005.00489.x