 |
 |
 |
 |
 |
Economics
- ISSN: 2155-7950
- Journal of Business and Economics
The Optimal Foreign Entry Mode Choice: The Role of Firm
Heterogeneous Capability
Chen Lili, Zhou Mao, Shen Ting
(Southwest University of Finance and Economics, Chengdu, China)
Abstract: By developing a general equilibrium model with firm heterogeneity in capability, this study
attempts to explore specifically how a firm’s technology and management mobile capabilities with other immobile
capabilities affect its optimal entry mode choice. We highlight that a firm with relatively stronger management
capability prefers M&A in management intensive industry, while a firm with the strongest technology capability
prefers newly-built operation in technology intensive industry. Our theoretical results are consistent with the
findings in the empirical work of Andersson and Svensson (1994).
Keywords: foreign direct investment; greenfield FDI; mergers and acquisitions; technology capability;
management capability
JEL codes: F1, L2
