Abstract
This paper discusses the use of binomial logit models by researchers trying to explain the choice made by foreign direct investors between entering a foreign market with wholly-owned subsidiaries or with joint ventures. The paper first discusses the theory of the optimal level of equity stake a parent should take in its foreign affiliates. I then critically examine the methodology chosen by researchers attempting to test this theory, and specifically the use of binomial logit models, the operationalization of the dependent variable as a categorical variable, and the data collection techniques. The paper then examines the practical problems and limitations faced in conducting such research, “using my 1991 Management Science study” of the ownership policies of Japanese foreign direct investors in the United States as an example. I conclude by suggesting areas for future research.
Earlier versions of this paper were presented at the Conference on Statistical Models for Strategic Management, Nice, 27–28 June 1996 and at the Third Workshop on International Business at the University of Vaasa, August 26–28, 1996. I thank participants to these two conferences for useful comments.
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Hennart, JF. (1997). Binomial Logistic Models, Transaction Costs, and Joint Ventures: A Methodological Note. In: Ghertman, M., Obadia, J., Arregle, JL. (eds) Statistical Models for Strategic Management. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-2614-5_11
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