The influences of governance quality on equity-based entry mode choice: The strengthening role of family control

Yi-Chieh Chang, Ming-Sung Kao, Anthony Kuo*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

16 Scopus citations

Abstract

This study examines the possible heterogeneity of governance quality's influence on entry mode decisions made by firms with different degrees of family control. When entering a country with low governance quality, ceding control of the subsidiary in exchange for local partners' help enables foreign firms to tackle institutional flaws. However, such a motivation diminishes as governance quality increases. This study thus hypothesizes that firms tend to choose WOSs over JVs when entering a host country with high governance quality.

Firms controlled by family members, due to concerns regarding the preservation of socioemotional wealth, prefer to maintain high ownership levels of their affiliates. This study thus hypothesizes that firms with a higher degree of family control are even more likely to choose WOSs when entering a country with high governance quality. The results support the hypotheses. (C) 2014 Elsevier Ltd. All rights reserved.

Original languageEnglish
Pages (from-to)1008-1020
Number of pages13
JournalInternational business review
Volume23
Issue number5
DOIs
StatePublished - Oct 2014

Keywords

  • Entry mode
  • Family control
  • Governance quality
  • Joint venture
  • Wholly owned subsidiary
  • FOREIGN DIRECT-INVESTMENT
  • RESEARCH-AND-DEVELOPMENT
  • JAPANESE FIRMS
  • INSTITUTIONAL ENVIRONMENT
  • INTERNATIONAL EXPANSION
  • FINANCIAL PERFORMANCE
  • POLITICAL RISK
  • JOINT VENTURES
  • OWNERSHIP
  • STRATEGY

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