HCBE Faculty Articles

Determinants of International Equity Entry Mode: An Empirical Analysis

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International Journal of Strategic Management



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This empirical paper tests hypotheses exploring the use of equity investment in international market entry by US-based firms. We first establish the respondents' use of equity or non-equity, and their international presence, and then proceed to test for determinants of investment. Using transaction cost theory and resource base theory we examine the influences of asset specificity, tacitness of strategic resources, country similarity, business similarity, environmental uncertainty and behavioral uncertainty on firm decisions to make equity investments. Six hypotheses are presented and tested on a sample of self-identified firms engaged in international business. The results for the exploratory study are significant for one hypothesis, and discussion follows regarding the lack of confirmation of the theory with this data set.

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