Download The Impact of Entry Timing and Mode on the Performance of Korean

The Impact of Entry Timing and Mode on the Performance of Korean
FDI in China
1. 논문 (연구) 요약
The purpose of this research is to study the impact of timing and mode of entry on
subsidiary performance considering parent firm-related factors, such as R&D intensity,
international experience and marketing ability.
Total of 102 Korean firms invested in Chinese markets are selected as a sample
group in analyzing the relationship with their subsidiary performance using a multiple
regression model.
The analyses explain that early entrants have significantly and positively higher
profitability and sales growth than late entrants. However wholly owned subsidiaries
don’t always get higher subsidiary performance.
The results also imply that parents’ specific advantages such as international
experience and marketing ability profoundly influence their international marketing
strategies and thus international performance, while R&D intensity has no obvious
impacts on them.
2. 논문(연구)주제를 선정한 이유
Korean FDI has been increased quickly into China since the diplomatic relations were
established between two countries in 1992. For Korean MNEs planning to contemplate
expansion in Chinese market, three basic questions have often been considered:
which markets to enter, when to enter those markets, and in what mode to enter the
markets.
There has been an abundant body of empirical literature on entry‐ timing effect. On
the one
hand, pioneers often earn a long‐ term market share advantage over late
entrants. On the other hand, a growing body of evidence suggests that in some cases
late movers outsell pioneers (Golder & Tellis, 1993; Lieberman & Montgomery, 1988;
Lilien & Yoon, 1990). So it is necessary for Korean MNEs to determine the right entry
timing into Chinese markets.
Theoretical and empirical research also provides substantial support for a
contingency approach toward entry mode selection. Many studies focus on alternatives
such as exporting, licensing, joint ventures and wholly owned subsidiaries underpinned
by either transaction cost theory or the OLI (Ownership―Location―Internationalization)
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framework. Despite advances in entry mode studies, not enough considerations have
been given to the performance implications of foreign market entry mode choices
(Brouthers, Brouthers & Werner, 1999; Woodcock, Beamish & Makino, 1994).And
Shaver (1998) suggests that mode performance is compared without regard to the
characteristics of the particular investment decision.
The issue gets more complicated if we further pay attention to the ability of internal
capabilities and resources to facilitate in the implementation of firm strategies. Few
researchers have explicitly measured and compared the integrative impact between
timing or mode of international entry and parent firm’s advantages. Therefore, our
study incorporates parent
firm‐ specific determinants of a subsidiary’s performance
while focusing on these two important factors. This is particularly necessary and
important because performance is the outcome of many factors (Kerin, Varadarajan &
Peterson, 1992).Drawing upon the literature in marketing, international business and
economics, the effect of parent firm’s R&D intensity, international experience, and
marketing ability was focused.
3. 연구(논문)의 목적
The object of this study is to examine the impacts of entry timing and entry mode on
Chinese subsidiary performance, given that Korean parent firms have some specific
advantages from R&D, international experience and marketing ability.
4. 논문(연구)의 선행연구 정리
1） Entry mode and transaction cost theory
International entry mode choice is considered a critical strategic decision. In an
attempt to understand this choice, scholars have primarily focused on transaction cost
theory (Anderson & Gatignon, 1986; Brouthers & Brouthers, 2003; Gatignon &
Anderson, 1988; Makino & Neupert, 2000).
In their theory of internalization they proposed that firms adopted a number of
different modes to enter foreign markets basing on heir cost, risk, return
characteristics and the degree of control. And this theory is offered as an explanation
of a firm’s behavior of maximizing profit by choosing the optimal entry mode for a
desired foreign market (Grosse 1985).
2） Entry timing
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The choice of entry timing is one of the major reasons for marketing success or
failure (Booz,
1971).
Allen
&
Hamilton,
1982;
Crawford
1977; Hopkins
&
Bailey,
The rational for he first‐ mover advantages one from four major perspectives, namely,
economic, preemptive, technological and behavioral factors (DeCastre &
Chrisman,1995; Yeung, Mitchell & Shaver, 1994). However, there are circumstances
under which late entrants may overcome the disadvantages. The conditions include
free‐ rider effects, low
costs of imitation, and shifts in technology and consumer
preferences leading to new product and market opportunities or simply the
complacency of early movers (Carpenter & Nakamoto, 1989; Lieberman & Montgomery,
1988).
3) Resource based view
The resource based view (RBV) is a relatively recent strategic management theory
that aims to determine the skills and resources that allow a firm to develop a
sustainable competitive advantage (Barney, 1991; Wernerfelt, 1984).
The fundamental premise of the RBV is that possessing a particular combination of
the skills and resources provides a firm with the ability to perform certain functions
more effectively and more efficiently than its competitors (Barney, 1991).
It suggests that firms obtain sustained competitive advantages by implementing
strategies that exploit their internal strengths, through responding to environmental
opportunities, while neutralizing external threats and avoiding internal weaknesses. In
the interests of parsimony, these characteristics are considered under the headings of
value, barriers to duplication and appropriability. Even where resources are clearly
identified and understood, their imitation may be prevented through the legal system of
property rights (Coyne, 1986; Hall, 1992, 1993).
5. 논문(연구)의 선행연구에서 당신이 중요하다고 생각하는 2 개 논문(연구)를
간략하게 정리하세요.
1) Entry mode and transaction cost theory
International entry mode choice is considered a critical strategic decision. In an
attempt to understand this choice, scholars have primarily focused on transaction cost
theory (Anderson & Gatignon, 1986; Brouthers & Brouthers, 2003; Gatignon &
Anderson, 1988; Makino & Neupert, 2000).
3
In their theory of internalization they proposed that firms adopted a number of
different modes to enter foreign markets basing on heir cost, risk, return
characteristics and the degree of control. And this theory is offered as an explanation
of a firm’s behavior of maximizing profit by choosing the optimal entry mode for a
desired foreign market (Grosse 1985).
2) Entry timing
The choice of entry timing is one of the major reasons for marketing success or
failure (Booz, Allen & Hamilton, 1982; Crawford 1977; Hopkins & Bailey, 1971).
The rational for he first‐ mover advantages one from four major perspectives, namely,
economic, preemptive, technological and behavioral factors (DeCastre & Chrisman,
1995; Yeung, Mitchell & Shaver,1994). However, there are circumstances under which
late entrants may overcome the disadvantages. The conditions include free ‐ rider
effects, low costs of imitation, and shifts in technology and consumer preferences
leading to new product and market opportunities or simply the complacency of early
movers (Carpenter & Nakamoto, 1989; Lieberman & Montgomery, 1988).
6. 논문(연구)의 연구모형을 제시하고 연구변수와 가설설정을 설명해주세요
1） R&D intensity
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H1a : Given
the
higher, wholly
ventures.
condition
owned
that
relative
subsidiaries
level
have
of
higher
parent’s
R&D
profitability
H1b : Given the condition that relative level of parent’s R&D
higher, wholly owned subsidiaries have higher sales growth
ventures.
intensity is
than
joint
intensity is
than joint
H1c : Given the condition that relative level of parent’s R&D intensity is
higher, Korean subsidiaries entering early in a given product sector in
China have higher profitability than those entering late.
H1d : Given the condition that relative level of parent’s R&D intensity is
higher, Korean subsidiaries entering early in a given product sector in
China have higher sale growth than those entering late.
2） International experience
H2a : Given the condition that parent has more international experience,
wholly owned subsidiaries have higher profitability than joint ventures.
H2b : Given the condition that parent has more international experience,
wholly owned subsidiaries have higher sales growth than joint ventures.
H2c : Given the condition that parent has more international experience,
Korean subsidiaries entering early in a given product sector in China
have higher profitability than those entering late.
H2d : Given the condition that parent has more international experience,
Korean subsidiaries entering early in a given product sector in China
have higher sale growth than those entering late.
3） Marketing ability
H3a : Given the condition that parent’s relative marketing ability is higher,
wholly owned subsidiaries have higher profitability than joint ventures.
H3b : Given the condition that parent’s relative marketing ability is higher,
wholly owned subsidiaries have higher sales growth than joint ventures.
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H3c : Given the condition that parent’s relative marketing ability is higher,
Korean subsidiaries entering early in a given product sector in China have
higher profitability than those entering late.
H3d : Given the condition that parent’s relative marketing ability is higher,
Korean subsidiaries entering early in a given product sector in China
have higher sales growth than those entering late
7. 논문의 연구변수가
서술해주세요
어떠한
선행연구로부터
근거하고
있나요
설명하거나
1) R&D intensity
Kotabe & Okoroafo, 1990; Kotabe et al., 2002; Mansfield & Wagner, 1981 found
positive relationship between R&D intensity and firm performance. Companies can
improve their performances by focusing on product design/development and by
improving their manufacturing processes.
MNEs with stronger R&D capabilities should face lower technological barriers and
have more negotiating power entering overseas markets and be less inclined to enlist
joint ventures (Kogut & Chang, 1991).
Full ownership can better protect their proprietary technology from being stolen by
local rivals (Anderson & Gatignon, 1989).
What’s more, researches suggest that particular R&D skills encourage earlier entry
(Robinson, Fornell & Sullivan 1992; Lieberman & Montgomer, 1988).
2) International experience
MNEs
reducing
with international experience can get
the cost basing on the learning curve
better
effect
performance by
(Levitt & March,
1988). And a firm’s international experience is positively related to the
amount of control sought because more experienced managers have a
more accurate perception of foreign risks and returns.
Empirical evidence of relationship between multinational experience and
wholly owned entry mode selection was also observed by Caves &
Mehra (1986). Besides, firms with experience in a related business may
become early entrants since they already posses many of the necessary
skills and capabilities needed to compete in the related field (Copper &
Smith, 1992).
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3) Marketing ability
Firms that emphasize differentiation by heavy advertising and marketing
activities are more likely to succeed in a multitude of diverse markets
than those that do not (Helsen, Jedidi & DeSarbo,1993).
Also, firms with strong brand names can charge premium prices in
foreign markets to enhance their profitability as well. Researchers have
argued that investors who spend more on advertising are more likely to
favor wholly owned subsidiaries over joint ventures (Gatigonon & Anderson,
1989; Kogut & Chang, 1991).
Moreover, a firm that spends money on advertising and promoting its
products can increase sales by both expanding the sales of the
product category and getting customers to switch to their brands.
Therefore, it is easier for
they are found to be early
advertising is viewed as a
Robinson & Fornell, 1985),
reduce consumer uncertainty
have more chance to enter
these firms to overcome entry barriers and
entrant (Schoenecker & Cooper, 1998). And when
source of consumer information (Lynk, 1981;
information provided by strong advertising can
and meet less entry barriers so that firms
early.
8. 가설검증에 관한 결과를 제시하고 설명해주세요. 그리고 결과가 어떤 의미를
나타내고 있나요
1) R&D intensity
The hypotheses of H1a, H1c and H1d are accepted while H1b is rejected because
the relationship between wholly owned subsidiary and subsidiary sales growth is
insignificant here (p=0.206, adjusted R2 =0.267). Thus, fewer impacts of R&D intensity
are found on entry strategies.
2) International experience
The hypotheses of H2a, H2b, H2c and H2d are all supported. Considering the results
of models 1, we are reminded that international experience really has some distinct
influences on entry mode and entry timing, thus influences subsidiary profitability and
sales growth.
3) Marketing ability
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The hypotheses of H3a, H3c and H3b are accepted, while H3b is rejected.
Therefore,
subsidiary
above, we
timing and
it shows that the higher the parent’s advertising intensity is the lower
sales growth will be got through wholly owned mode. Considering the
can get the idea that marketing ability has some positive impacts on entry
negative impacts on entry mode, thus affects subsidiary performance
9. 통계분석결과가 주는 시사점(IMPLICATION)은 어떤 것인가요
First, early entrants with a relative advantage from parent’s R&D intensity,
international experience or marketing intensity significantly and positively have higher
subsidiary performance than late entrants. This finding is consistent with many
previous researches on entry timing and performance (Lilien & Yoon, 1990; Robinson &
Fornell, 1985). However, previous studies on entry timing mostly focused on
profitability performance. Our study also adds another index sales growth. So that it is
reassuring that early entrants entering an overseas market have a higher profitability
and sales growth.
Second, this study contributes to a better understanding of the impact of entry mode
on subsidiary profitability in Chinese market. We find that wholly owned subsidiaries
that have a relative advantage from parent’s R&D intensity, int’l experience positively
and significantly have higher profitability than joint ventures. It is natural that higher
subsidiary performance comes from the higher control, higher efficiency and lower
cost of management. These results not only support previous studies that have
attempted to assess the relationship between entry mode and performance.
Third, it also clearly indicates that firm’s specific advantages profoundly influence
their international marketing strategies and thus international performances. According
to the results of this study, both international experience and marketing ability of
parents are found to have some impacts on entry strategies and subsidiary
performance, while R&D intensity doesn’t have such clear impacts.
10. 결론은 무엇인가요
One of the most important findings of the study is the integrative impact of entry
mode, entry timing and the parent firm’s asset‐specific on the subsidiary performance.
With respect to the Korean FDI invested in Chinese markets, both entry mode and entry
timing incorporating with parent firm’s advantages are tested to have some impacts on
subsidiary performances such as profitability and sales growth.
First, early entrants with a relative advantage from parent’s R&D intensity,
international experience or marketing intensity significantly and positively have higher
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subsidiary performance than late entrants. This finding is consistent with many
previous researches on entry timing and performance (Lilien & Yoon, 1990; Robinson &
Fornell, 1985). However, previous studies on entry timing mostly focused on
profitability performance. Our study also adds another index sales growth. So that it is
reassuring that early entrants entering an overseas market have a higher profitability
and sales growth.
Second, this study contributes to a better understanding of the impact of entry mode
on subsidiary profitability in Chinese market. We find that wholly owned subsidiaries
that have a relative advantage from parent’s R&D intensity, int’l experience positively
and significantly have higher profitability than joint ventures. It is natural that higher
subsidiary performance comes from the higher control, higher efficiency and lower
cost of management. These results not only support previous studies that have
attempted to assess the relationship between entry mode and performance.
Third, it also clearly indicates that firm’s specific advantages profoundly influence
their international marketing strategies and thus international performances. According
to the results of this study, both international experience and marketing ability of
parents are found to have some impacts on entry strategies and subsidiary
performance, while R&D intensity doesn’t have such clear impacts.
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