Abstract
We extend the stages model of internationalization to incorporate a sophisticated consideration of temporal and cross-national variation in the uncertainty of the policy environment. Using a sample of 6465 international expansions of 665 Japanese manufacturing firms in 49 countries, we develop arguments from internationalization and bargaining power perspectives to show how Japanese firms manage policy uncertainty in host country environments through the within-country sequencing of investments. Although a distribution to manufacturing entry sequence tends to prevail in countries with low levels of policy uncertainty, as uncertainty in the policy environment increases, initial entry by distribution is increasingly likely to be eschewed in favor of an initial entry by a joint venture manufacturing plant. We suggest that this change in investment sequence occurs as firms shift from an emphasis on developing knowledge about local markets and consumers in low-hazards markets to an international expansion strategy in uncertain policy environments that places knowledge development of the policy environment at the forefront of a firm's strategy.
Similar content being viewed by others
Notes
We thank Bernard Yeung for suggesting the inclusion of this variable.
References
Barkema, H.G., Bell, J.H.J. and Pennings, J.M. (1996) ‘Foreign entry, cultural barriers, and learning’, Strategic Management Journal 17: 151–166.
Beamish, P.W., Delios, A. and Lecraw, D.J. (1997) Japanese Multinationals in the Global Economy, Edward Elgar Publishing Ltd: Basingstoke, UK.
Behrman, J.N., Boddewyn, J.J. and Kapoor, A. (1975) International Business-Government Communications, Lexington Books: Lexington, MA.
Bergsten, C.F., Horst, T. and Moran, T.H. (1978) American Multinationals and American Interests, Brookings Institution: Washington.
Blossfeld, H.-P. and Rohwer, G. (1995) Techniques of Event History Modeling, Lawrence Erlbaum: Mahwah, NJ.
Boddewyn, J. (1988) ‘Political aspects of MNE THEORY’, Journal of International Business Studies 15: 341–363.
Boddewyn, J.J. and Brewer, T.L. (1994) ‘International business political behavior: new theoretical directions’, Academy of Management Review 19(1): 119–143.
Borensztein, E., De Gregorio, J. and Lee, J.-W. (1995) How does foreign direct investment affect economic growth?, NBER Working Paper, 5057.
Brouthers, K.D. and Brouthers, L.E. (2001) ‘Explaining the national cultural distance paradox’, Journal of International Business Studies 32(1): 177–189.
Capron, L. and Hulland, J. (1999) ‘Redeployment of brands, salesforce and general marketing expertise following horizontal acquisitions: a resource based view’, Journal of Marketing 63: 41–65.
Caves, R.E. (1996) Multinational Enterprise and Economic Analysis, 2nd edn, Cambridge University Press: New York.
Chang, S.-J. and Rosenzweig, P.M. (2001) ‘The choice of entry mode in sequential foreign investment’, Strategic Management Journal 22(8): 747–777.
Chung, W., Mitchell, W. and Yeung, B. (2002) ‘Foreign direct investment and host country productivity: the American automotive components industry in the 1980s’, Journal of International Business Studies 34: 199–218.
Davidson, W.H. (1980) ‘The location of foreign direct investment activity: country characteristics and experience effects’, Journal of International Business Studies 11(2): 9–22.
Delios, A. and Beamish, P.W. (2001) ‘Survival and profitability: the roles of experience and intangible assets in foreign subsidiary performance’, Academy of Management Journal 44(5): 1028–1038.
Delios, A. and Henisz, W.J. (2000) ‘Japanese firms’ investment strategies in emerging economies’, Academy of Management Journal 43(3): 305–323.
Dierickx, J. and Cool, K. (1989) Asset stock accumulation and sustainability of competitive advantage, Management Science 35(12): 1505–1510.
Fayerweather, J. (ed.) (1973) International Business-Government Affairs, Balinger: Cambridge, MA.
Feenstra, R.C. and Hanson, G.H. (1996) ‘Globalization, outsourcing and wage inequality’, American Economic Review 86: 240–245.
Forsgren, M. and Johanson, J. (1992) ‘Managing Internationalization in Business Networks’, in: M. Forsgren and J. Johanson (eds.) Managing Networks in International Business, Gordon & Breach: Philadelphia, PA. pp 1–18.
Gatignon, H. and Anderson, E. (1988) ‘The multinational corporation's degree of control over foreign subsidiaries: an empirical test of a transaction cost explanation’, Journal of Law, Economics and Organization 4: 305–336.
Henisz, W.J. (2000a) ‘The institutional environment for multinational investment’, Journal of Law, Economics and Organization 16: 334–364.
Henisz, W.J. (2000b) ‘The institutional environment for economic growth’, Economics and Politics 12: 1–31.
Henisz, W.J. and Delios, A. (2001) ‘Uncertainty, imitation, and plant location: Japanese multinational corporations, 1990–1996’, Administrative Science Quarterly 46(3): 443–475.
Henisz, W.J. and Williamson, O.E. (1999) ‘Comparative economic organization – within and between countries’, Business and Politics 1: 261–277.
Hennart, J.-F. (1988) ‘A transaction costs theory of equity joint ventures’, Strategic Management Journal 9(4): 361–374.
Hofstede, G.H. (1980) Culture's Consequences: Inter-national Differences in Work-Related Values, Sage: Beverly Hills, CA.
Inkpen, A.C. and Beamish, P.W. (1997) ‘Knowledge, bargaining power and international joint venture stability’, Academy of Management Review 22: 177–202.
Johanson, J. and Vahlne, J.-E. (1977) ‘The internationalization process of the firm: a model of knowledge development and increasing foreign market commitments’, Journal of International Business Studies 8(1): 23–32.
Kobrin, S.J. (1987) ‘Testing the bargaining hypothesis in the manufacturing sector in developing countries’, International Organization 41(1): 609–638.
Kobrin, S.J., Basek, J., Blank, S. and La Palombara, J. (1980) ‘The assessment and evaluation of noneconomic environments by American firms: a preliminary report’, Journal of International Business Studies 11: 32–47.
Kogut, B. and Singh, H. (1988) ‘The effect of national culture on the choice of entry mode’, Journal of International Business Studies 19: 411–433.
Lecraw, D.J. (1984) ‘Bargaining power, ownership and the profitability of transnational corporations’, Journal of International Business Studies 15(1): 27–43.
Makino, S. and Delios, A. (1996) ‘Local knowledge transfer and performance: implications for alliance formation in Asia’, Journal of International Business Studies 27(5): 905–928.
Oxley, J.E. (1999) ‘Institutional environment and the mechanisms of governance: the impact of intellectual property protection on the structure of inter-firm alliances’, Journal of Economic Behavior and Organization 38: 283–310.
Ronen, S. and Shenkar, O. (1985) ‘Clustering countries on attitudinal dimensions: a review and synthesis’, Academy of Management Review 10(3): 435–454.
Root, F.R. (1987) Entry Strategies for International Markets, Lexington Books: Lexington, MA.
Sakakibara, M. and Serwin, K. (2000) ‘US distribution entry strategy of Japanese manufacturing firms’, Journal of the Japanese and International Economies 14: 43–72.
Shenkar, O. and Li, J.-T. (1999) ‘Knowledge search in international cooperative ventures’, Organization Science 10(2): 134–143.
Toyo Keizai (1989) Kaigai Shinshutsu Kigyou Souran, Tokyo Keizai Inc.: Tokyo, Japan.
UNCTAD (1997) World Investment Report 1997: Transnational Corporations, Market Structure and Competition Policy, United Nations: New York, Geneva.
Vernon, R. (1977) Storm over the Multinationals: The Real Issues, Harvard University Press: Cambridge, MA.
Yamawaki, H. (1991) ‘Exports and foreign distributional activities: evidence on Japanese firms in the United States’, Review of Economics and Statistics 73: 294–300.
Acknowledgements
This research was supported by a RGC Grant (#HKUST6217/00H) and by a Social Sciences and Humanities Research Council of Canada Grant (#410-2001-0143). We thank Lorraine Eden, Ram Mudambi, Nicolaj Siggelkow, Bernard Yeung and Seminar participants at the Stern School of Business at New York University for their insightful comments and Freek Vermeulen for providing data for cultural distance measurements.
Author information
Authors and Affiliations
Corresponding author
Additional information
Accepted by Arie Lewin; Editor in chief, 28 February 2003.
Rights and permissions
About this article
Cite this article
Delios, A., Henisz, W. Policy uncertainty and the sequence of entry by Japanese firms, 1980–1998. J Int Bus Stud 34, 227–241 (2003). https://doi.org/10.1057/palgrave.jibs.8400031
Received:
Revised:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1057/palgrave.jibs.8400031