Mimetic isomorphism and location advantages as determinants of entry mode choice

Abstract

The current work seeks to throw new light on the choice of different ownership-based entry modes when firms make a foreign direct investment. With the aim of achieving this objective, this research has been sustained through a new combination of theoretical approaches. In particular, it analyzes the institutional and location factors, which determine the choice of a particular level of management and ownership control for foreign establishments. An analysis of simultaneous equations carried out with a sample of 109 German companies, allows us to confirm that management and ownership control, chosen by these companies for their incursion into Spain, responds to location advantages and both internal and external isomorphic pressures. Theoretical contributions are derived from the present research, and they are referred to the relative weight of the Location and Institutional Theories in the explanation of the foreign market entry mode; methodological, establishing bases upon which to orient future research; and practical, useful for governmental and entrepreneurial agents.