Journal of International Business Studies

, Volume 39, Issue 2, pp 249–266 | Cite as

Strategic investments by US firms in transition economies

Article
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Abstract

Studies in international business have considered both theoretical and empirical analyses of investment strategies by multinational firms in transition economies. However, there is scant research on the impact of firm-specific factors on the likelihood, timing, and mode-of-entry decisions in these economies. We provide evidence on three aspects of the strategic decisions by US firms to invest in transition economies. First, we find that firms entering the region have greater advertising intensity and sales growth than industry peers that did not enter the region, suggesting that market-seeking considerations motivate expansion. Second, we find that earlier entry is undertaken by firms with fewer industry competitors and higher sales growth, suggesting that the desire to secure market share ahead of competitors motivates entry timing. Finally, we investigate the choice of entry mode into the region, and find that firms from concentrated industries are more likely to enter the region with high-equity commitment, consistent with market-seeking motives. We also find that firms incorporate the degree of progress with market-oriented reforms in making decisions concerning entry timing and mode.

Keywords

foreign direct investment transition economies 
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Notes

Acknowledgements

We are grateful for helpful comments and suggestions from Bruce Blonigen, Lorraine Eden (JIBS Departmental Editor), two anonymous referees, and participants at the Southern Finance Association Meeting (2003), Washington State University and Marquette University seminars (2004), the Western Economic Association Meetings (2005), the Midwest International Economics Conference (2005), and the Financial Management Association Meetings (2006). The authors acknowledge financial support from the International Business Institute, Washington State University (Paul), the Glavin Center for Global Management, Babson College (Paul), and the College of Social Sciences and Interdisciplinary Studies, California State University, Sacramento (Wooster).

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Copyright information

© Academy of International Business 2007

Authors and Affiliations

  1. 1.Department of FinanceInsurance & Real Estate, Washington State UniversityPullmanUSA
  2. 2.Department of EconomicsPortland State UniversityPortlandUSA

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