Location Specificity and the Transferability of Downstream Assets to Foreign Subsidiaries

We investigate the effect of firm-specific advantages being 'local' in scope, and the influence of subsequent location-specific disadvantages, on the choice of foreign entry mode and subsidiary performance. To look into this issue, we examine Japanese FDI data from the wholesale and retail...

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Bibliographic Details
Published in:Journal of international business studies 1997-09, Vol.28 (3), p.579-603
Main Authors: Anand, Jaideep, Delios, Andrew
Format: Article
Language:English
Subjects:
Business and Management
Business Strategy/Leadership
Business structures
Business studies
Disadvantages
Employment
Foreign investment
Foreign subsidiaries
Host country
Industrial production
International Business
Japan
Joint ventures
Knowledge
Location of enterprises
Management
Market entry
Organization
Retail industries
Retail trade
Retailing industry
Service industries
Skills
Statistical analysis
Studies
Subsidiary companies
Wholesale trade
Wholesalers
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Summary:We investigate the effect of firm-specific advantages being 'local' in scope, and the influence of subsequent location-specific disadvantages, on the choice of foreign entry mode and subsidiary performance. To look into this issue, we examine Japanese FDI data from the wholesale and retail industries - two sectors that have productive activity concentrated in downstream processes and location-bound resources. Our theoretical and empirical analyses demonstrate that, in situations where required capabilities must be developed through local experience and where location-specific resources were subject to market failure, acquisition and joint venture strategies were preferred. Greenfield entries were successful in industries that permitted the off-setting of location-specific disadvantages with firm-specific advantages. From our results, we draw implications for the entry mode literature and offer a perspective on the performance of the entry mode choice.
ISSN:0047-2506
1478-6990
DOI:10.1057/palgrave.jibs.8490112