The Influences of Formal and Informal Institutions on Taiwanese Family-owned Firms' Entry Mode Choice

Abstract

This study is designed to shed further light on the foreign direct investment (FDI) decision by the family business, and address the question: Under what situation family-owned firms make the entry mode with high risk commitment. The data source for this study was obtained from Taiwan Economic Journal Database. The database is a comprehensive source for Taiwanese firms' foreign direct investments in 13 countries (Japan, U.S., Korea). This study included 2451 FDI projects. This study demonstrates that the formal and informal institutions influence a family firm's entry mode decision. In the informal institutions, the family-owned firms choose the joint venture (JV) arrangement. In the formal institutions, the family-owned firms choose the wholly owned entry mode. The results display what situation family-owned firms choose the entry mode.