The differing foreign entry mode choices for sales and production subsidiaries of multinational corporations in the manufacturing industry

Abstract

Foreign market entry mode research has been a popular area of study. However, a clear agreement between the usage of conventional constructs and their impact on a firm's entry mode choice has not yet been found. This paper focuses on how, depending on the type of subsidiary that is established, multinational corporations (MNCs) in the manufacturing industry use different foreign market entry strategies. Previous research either treated types of subsidiaries synonymously or investigated them separately. However, due to the changing competitive landscape and disaggregation of value chain activities into separate subsidiaries, I find it necessary to compare how these entry mode choices differ depending on the activity each subsidiary is responsible for. My analysis finds that MNCs in the manufacturing industry are more likely to use joint ventures rather than wholly owned modes of entry for their production subsidiaries in comparison to their sales subsidiaries. I further explore how the international experience of the MNC strengthens this effect. This research utilizes a sample of 201 listed Korean manufacturing firms and 833 foreign market entry mode choices into 49 countries.