In they havebeen observed to overstate the potential

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Unformatted text preview: ns. in They havebeen observed to overstate the potential risks, while understating the potential returnsof operating in a foreign market. This makes choice of non-investment modes more probable for these f m s [Caves and Mehra 1986; Gatignon and Anderson1988; Terpstra and Yu 19881. Conversely, firms w t higher multinational experience may e expected to prefer investment ih b modes of entry. Location Advantages Firms interested in servicing foreign markets are expected to use a selective strategy and favor entry into more attractive markets. This is because their chances of obtaining higher returns are better in such markets. The attractiveness of a market has been characterized in termsof its market potential and investment riskn5 Marketpotential (size and g o t ) has been foundto be an important rwh determinant of overseas investment[Forsyth 1972;Weinstein 1977; Khoury 1979; Choi, Tschoegl and Yu 1986; Terpstra and Yu 19881. In high market potential countries, investment odes are expected to provide greater longm term profitability to a f m ,compared to non-investment modes, through the oppartunity to achieve economiesof scale and consequently lower marginal 6 j JOURNAL OF INTERNATIONAL BUSINESS STUDIES, FIRST QUARTER 1992 cost of production [Sabi 19881. Ev...
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This document was uploaded on 03/22/2014.

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