Determinants of Foreign Entry Modes in China Theories and Evidences

1、thesis proposal for msc in logistics atmolde university collegedeterminants of foreign entry modes in china:theories and evidencessupervisor: arnt buvikauthor: pingping qiudecember 2004contents1. introduction32. literature review42.1 transaction cost analysis (tca) and entry modes.42.2 bargaining po

2、wer theory (bpt) and entry modes.42.3 organizational capability theory (oct) and entry modes.52.4 synthesis of the theories.53. decision framework.63.1 main attributes of entry modes.63.1.1 entry modes and control63.1.2 entry modes and resource commitment.63.1.3 entry modes and dissemination risk.73

3、.1.4 attributes of jvs and wfoes73.2 entry mode decision framework.83.2.1 external environment factors83.2.2 internal environment factors.103.2.3 strategic variables.114. research methodology12references151. introduction· since the “open-door” policy was launched in 1979, china has attracted su

4、bstantial foreign direct investment (fdi). since 1992, china has been the second largest fdi recipient in the world just behind the united states. · with its formal entry into the world trade organization (wto) on december 11, 2001, china continued to keep the momentum to attract massive foreig

5、n investment and became the largest recipient of foreign investment in 2003. by the end of august 2004, china has applied foreign investment of us$ 545.029 billion (peoples daily, 2004). · the choice of an appropriate entry mode is a critical determinant of the likely success of the foreign ope

6、rations and has crucial impact upon competitive advantage of multinational firms (root, 1994). · the purpose of this paper is to theoretically explore the determinants which the foreign firms take into consideration when they decide the proper entry mode into china. · and then empirical ca

7、se studies of several norwegian firms in china will be conducted to test the general decision framework.· the remainder of the proposal is organized into three parts. section 2 briefly reviews the relevant literatures. after that several propositions and the decision framework are proposed. the

8、 last section deals with the research setting and method.2. literature review 2.1 transaction cost analysis (tca) and entry modes2.2 bargaining power theory (bpt) and entry modes2.3 organizational capability theory (oct) and entry modes2.4 synthesis of the theories3. decision framework3.1 main attri

9、butes of entry modes· this paper will mainly focus on the two most often used entry modes in china, i.e. joint ventures (jv) and wholly foreign owned enterprises (wfoe). · they have different implications for the degree of control that an mnc can exercise over the foreign operation, the re

10、sources it must commit to the foreign operation, and the risk it must bear to expand into the foreign country (hill et al., 1990). 3.1.1 entry modes and control3.1.2 entry modes and resource commitment3.1.3 entry modes and dissemination risk3.1.4 attributes of jvs and wfoesentry modeattributescontro

11、lresource commitmentdissemination riskjoint ventures (jv)medium medium mediumwholly foreign owned enterprises (wfoe)high high low 3.2 entry mode decision frameworkdesired attributesentry modesdeterminants external environment joint venturesinternal environment· degree of control· resource

12、commitment· dissemination riskwholly foreign owned enterprisesstrategic variables3.2.1 external environment factorsproposition 1. as the external uncertainty typically labeled as “country risk” in china keeps declining, mncs are more willing to take high resource commitments and thus adopt wfoe

13、 entry mode. proposition 2. as chinese market potential is huge and market demand keeps on rising, mncs are more willing to take high resource commitments and thus set up wfoes to enter china. 3.2.2 internal environment factorsproposition 3. mncs with little or no host country experience will try to

14、 limit resource commitment, and selecting the jv mode is preferable. otherwise, firms with significant host country experience may prefer wfoe so as to maximize payoffs. proposition 4. mncs whose competitive advantage is based on firm-specific know-how will prefer high-control mode in order to minim

15、ize the dissemination risk. 3.2.3 strategic variablesproposition 5. other things being equal, mncs that pursue a global strategy will prefer high-control entry modes, and thus wfoe is a better choice. otherwise, firms that pursue a multi-domestic strategy will favor low-control, i.e. jv entry mode.4

16、. research methodologymost of the research in the field of business process has been done by empirical observation and case studis. a number of surveys of businesses in local regions have also been undertaken. much of the development of methods, guidelines and “best-practice” in this rapidly changin

17、g field is originating from inspirational “gurus” and management consultants, working with pioneering organizations. · this study will use the embedded multiple-case study approach (yin 1994) to discover relevant principles for multinationals to successfully select the entry mode in china. 

18、3; four case studies will be analyzed to determine the key principles, in addition to those supported by the literature. the four companies involved, with their subsidiaries in east china, are:o iv group - iv techmould suzhou co. ltd.o glamox group - glamox (suzhou) lighting co. ltd. o borregaard ch

19、emicals - borregaard industries ltd. (china)o kenmore international - kenmore refrigeration components (wuxi) co. ltd.· the organizations selected for analysis are from a range of business sectors, and vary in the selection of entry modes· the common factor is that they have all establishe

20、d manufacturing subsidiaries in china and each of these subsidiaries is regarded as a successful business unit by its parent company. · the case studis will be developed using both documentary evidence and qualitative interviews. · documentary evidence to be used include joint venture cont

21、racts, annual reports, website information, promotional material, parent company documentation, published case descriptions, magazine and newspaper reports, and government printed sources. · a qualitative research design will be employed, with the mncs decision process of selecting entry mode i

22、n china as the unit of analysis. · key informants are selected for interview on the basis of their close involvement in the development of the business unit. · each case will be analyzed from the same viewpoint and summarized in the same format. references:agarwal, sanjeev & ramaswami,

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