Interdependent behavior in foreign direct investment: The multi-level effects of prior entry and prior exit on foreign market entry

Christine M. Chan, Shige Makino, Takehiko Isobe

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

This paper examines the interdependent foreign market entry decisions of multinational corporations (MNCs). Based on the argument that legitimacy and competition are two important forces in foreign market entry decisions, we hypothesize that an MNC’s market entry decisions are influenced by its own prior entry and prior exit decisions and those of other MNCs. We examine this general proposition at four levels of analysis: the host country, global industry (an industry that spans host countries), local industry (an industry that is separately defined within each host country), and parent firm level. Our analysis of a panel data of over 4000 market entry decisions that were made by Japanese MNCs shows that an MNC’s market entry decision has a stronger inverted U-shaped relationship with the prior entry and exit decisions of other MNCs at the local industry level than the prior entry and exit decisions of other MNCs at the host country and global industry levels. We also find that both the prior entry and prior exit decisions of an MNC have a marginal influence on its own subsequent market entry decisions at the parent firm level.

Original languageEnglish
Pages (from-to)687-698
Number of pages12
JournalJournal of International Business Studies
Volume37
Issue number5
DOIs
Publication statusPublished - 2006 Sep
Externally publishedYes

Keywords

  • Interdependent behavior in foreign market entry
  • Legitimacy and competition in external and internal environments
  • Multi-level analysis
  • Prior entry and prior exit decisions as a signal to potential entrants

ASJC Scopus subject areas

  • Business and International Management
  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Strategy and Management
  • Management of Technology and Innovation

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