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Unformatted text preview: 1. However, low control modes will have
a higher cost
compared to integrating the assets and skills within the f r if managers are
unable to predict future contingencies (problembounded rationality/extemal
uncertainty) and if the market is unable to provide competing alternatives
(problem of small numbers/opportunism). High external uncertainty, given
bounded rationality, makes the writing and enforcement of contracts that
specify every eventuality and consequent response more expensive [Anderson
and Weitz 19861. Similarly, the small numbers problem makes the enforcement of contracts meaningless and possibly inefficient since the firm may
not find other partners. Under these conditions, exporting and sole venture
modes provide better control dueto retaining of the assets and skills within
the f irm.
EFFECTS OF INTERRELATIONSHIP
AMONG DETERMINANT FACTORS Size/Multinational Experience and Market Potential
The above discussion of the main effects suggests that investment modes
would be preferred (a) by firms that are larger and that have more multinational
experience, and (b) in countries that are perceived to have high market
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This document was uploaded on 03/22/2014.
- Summer '14