Abstract:
Very little attention has been paid to the impact of sub-national heterogeneity on multinationals’ entry mode choices and/or their subsidiaries’ performance. Accordingly, this study seeks to identify the effects of sub-national heterogeneity on entry mode selection, and to detect the factors that contribute to mode performance across different sub-national regions. The literature identifies several sub-national political, economic and cultural factors that might have an impact on entry mode choices. With regard to the mode-performance relationship, three hypotheses are posited: (1) joint venture (JV) mode outperforms whollyowned subsidiary (WOS) mode in less-developed sub-national regions; (2) WOS mode performs better than JV mode in developed regions; and (3) the difference in performance value is smaller in less-developed regions than in developed regions. To test these hypotheses, 113 secondary observations of foreign subsidiaries located in two provinces of China were collected. Shandong Province and Gansu Province, from the eastern and western region of China respectively, were used as the sampling fields, as they exhibit the critical differences between the eastern and western regions with regard to political, economic, social, and environmental attributes. Hierarchical Regression Analysis and T-test statistical methods were used to analyse the data. The results indicate that the JV mode outperforms the WOS mode in the less-developed subnational region, whereas the WOS mode outperforms the JV mode in the developed region. The difference in performance value between WOSs and JVs is, however, smaller in the developed region than in the less-developed region. This study confirms that entry mode performance varies across sub-national regions, and the influence of mode choices on performance also varies across regions. It concludes with a discussion of possible explanations of these findings and presents recommendations for future research, management practice, and policy reform.
