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The size of the firm reflects its capability for

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Unformatted text preview: Young 19791. The size of the firm reflects its capability for absorption of these costs Buckley and Casson im 1976; Kumar 19841. Empirical evidence indicates that the impact of fr size on foreign direct investment positive [Buckley and Casson 1976; is Cho 1985; Caves andMehra1986; Yu and Ito 1988;Terpstraand Y 1988; u Kimura 19891. In other words, thesize of the f r is expected to be positively im in general, and to correlated with its propensity to enter foreign markets choose sole and joint venture modes in particular.While the preference for sole ventures is not surprising, the choice of joint ventures maybe explained by the fact that a larger organization may be less concerned than a smaller of organization with the potential possibility exploitation by the host country partner p o z 19881. level of multinational experience, has Another formof asset power, a firm’s also been shown to influence entry choices. Firms without foreign market 5 CHOICE OF FOREIGN MARKET ENTRY MODE FIGURE 1 A Schematic Representation of Entry Choice Factors I Firm Size Multinational Experience Ability to Develop Differentiated Products - ------------------ ADVANTAGES LOCATION Market Potential Investment Risk - -------------No Involvement Exporting Joint Venture Sole Venture Licensing INTERNALlZATiON ADVANTAGES - -----------------Contractual Risk experience are likely to have greater problems managing foreign operatio...
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