Entry Modes Choice to Emerging Markets: From an Institution-based Isomorphism Perspective

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Entry Modes Choice to Emerging Markets: From an

Institution-based Isomorphism Perspective

By Zhang Kai

s2154943

University of Groningen Faculty of Economics and Business

MSc Thesis IB&M

June 2013

Supervisor: S.R.Gubbi Co-assessor: A. A. J. van Hoorn

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Abstract

Entry strategy has received attention from several different streams of researches. Institutional theory is admitted to have more explanatory power than other schools of thinking in emerging markets. This study draws upon the institutional isomorphism theory to explain that the different entry mode strategies of developed countries to emerging markets. We detail the isomorphism theory into three pillars: coercive mechanism, mimic mechanism and normative mechanism. Our sample consists of 1440 foreign firms invested in China during 2007-2012. Our findings suggest that all these three mechanisms can influence the entry mode significantly. Besides, the mimic isomorphism has the most explanatory power than other two groups. Moreover, we find coercive pressure only can partially moderate the effects of other two mechanisms on entry mode choice.

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Introduction

As one of the most crucial elements in international expansion, entry mode choice in a foreign market can have significant and subsequent consequences on a firm’s performance and survival, especially in emerging markets. (Gatignon & Anderson, 1986; Zhao, Luo &Suh, 2004). Recently the emerging markets increasingly attract attention on both in the academic research as well in business practice due to its importance of the role in the world has been increasing dramatically (Hoskisson et al, 2000). The latest Global Investment Trends Monitor (GITM) reveals that over the past ten years, FDI inflows in BRICS has more than tripled, accounting for more than half of world’s total FDI flows in 2012(UNCTAD, 2012). As a consequence, concerning the firm-level, it is the case that the firms who dominate in emerging markets will be very likely to be the winners in the entire world as well.

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pressure will likely force foreign firms to resemble actions from others, implement similar strategies in order to mitigate liability of foreignness and gain legitimacy. Such phenomenon is also named isomorphic behaviour by DiMaggio and Powell (1983).

Isomorphic behaviour is regarded as a concept, even strategy, applied widely by firms to offset liability and reduce uncertainty. Institutional isomorphism has been a prominent finding of institutional theory also, widely admitted and applied in various fields of business or management researches. With respect to the issue of entry strategy, entry mode is treated as one main strategy to offset liability of foreignness and gain legitimacy. Therefore entry strategy is very likely to be affected by isomorphic pressure (Salomon & Wu, 2012), some scholars already addressed this issue. However, compared with other schools of institution theory, as one of the crucial concepts, isomorphism still lacks enough attention, although a certain number of articles of business strategy already studied on this issue (e.g. Li, Miller & Eden, 2012; Davis et al, 2000; Salomon & Wu, 2012).

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which mechanism has more explanatory power, and whether these isomorphic mechanisms have impacts on each other.

In this paper, we will fill this gap by grounding the arguments in an institutional isomorphism perspective to examine the following questions: (1) Do these three mechanisms of isomorphism have explanatory power on the choice of entry mode? (2) Does a particular mechanism (coercive, mimic or cognitive) have more explanatory power than others? Are there any interactions among the three mechanisms? If so, what is the relationship?

Providing isomorphism perspective to offset the foreignness and gain local legitimacy, this study contributes to first, enriching the institutional point of view to explain entry mode choice from an isomorphism angle. Proving the institutional view has explanatory power on entry mode and can complement transaction cost theory in emerging markets. Second, from the evidence from China, we find entry mode choice varies significantly in terms of different industries. This finding inspires a new angel for managers to take industry characteristics into consideration when they implement an entry strategy. Third, the findings of the paper suggest mimic isomorphic pressure has more influence on entry mode choice than other two mechanisms. Despite, we shed light on the inter-relations of three mechanisms in the context of emerging market, which can contribute to the theoretical researches of entry mode for further researches. Also, it is interesting for the purpose of managerial implications of how to develop efficient and effective entry strategy when stepping into other emerging markets, like India, Russia, etc.

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Literature review

It is widely admitted by many scholars the priority of foreign firms is to survive rather than efficiency(e.g. Chen et al, 2009), due to local institutional in emerging market is much more complicated and diverse than developed economies (e.g. Zhao, Luo, & Suh, 2004; Chen, Yang, Hsu, & Wang, 2009). One can imagine how many barriers and obstacles foreign firms may face when stepping into new markets. These disadvantages can be regarded as the liability of foreignness (Zaheer, 1995), which will negatively influence the firms’ performance and survival (Salomon & Wu, 2012). Thus, the crucial issue for a foreign company is to reduce uncertainty, to mitigate foreignness, to survive and to attain legitimacy. Scholars found one efficient approach which foreign firms can offset their liability of foreignness, is via imitating the local firms’ strategies (e.g. Chen et al, 2009; Yiu & Makino, 2002). By adopting strategies of isomorphism, foreign firms can apply suitable strategies which are already acknowledged as locally legitimate (Salomon & Wu, 2012). In short, entry mode choice is treated as a way to reduce foreignness, gain legitimacy or fitness, and reduce the risks of uncertainty is proven to be significantly influenced by isomorphic pressures (e.g. Salomon & Wu, 2012). A summary of previous isomorphism related studies is illustrated in appendix.

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location is emphasized (Henisz & Delios, 2001; Xia, Jun; Tan, Justin & Tan, David, 2008). Despite a large amount of studies focus on the developed countries (e.g. Lu, 2002; Salomon & Wu, 2012; Yiu & Makino, 2002), there are limited researches concerning on emerging market, for instance, Li, Miller & Eden (2012) examine the isomorphic behaviour of choosing entry mode when the foreign firms from emerging markets step into developed countries. Chen et al. (2009) compare TCE and institutional view in China, and apply the concept of isomorphism to represent the informal institutions.

In this paper, we focus on equity modes of entry and we divide entry mode into two aspects: wholly owned modes (Greenfield and M&A) and Joint ventures in terms of the level of control, then analyse the institutional isomorphic pressure influence the choice of entry when a firm internationalises. Empirical studies noted that in a certain country, especially in an emerging economy, like China, there is a distinction between the wholly foreign owned subsidiaries and joint ventures. There are local firms involved in joint venture that makes joint venture gains more legitimacy and a better cognition(reduce foreignness) by local institution than wholly owned foreign subsidiary which is usually regarded as an entire foreigner (Yiu & Makino, 2002).

Isomorphism

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mechanisms are identified,1) coercive isomorphism that driven by political pressure and the problem of legitimacy at a large extent; 2) mimetic isomorphism refers to the responses to uncertainty, the focus here is the peer organization group and 3) normative isomorphism, is normally a consequence professionalization.

Formal institutions+ Coercive isomorphism

Formal institution refers to mainly government enforcement mechanisms, such as regulations, rules and laws, which provide stability to the society (North, 1990; Scott, 1995). Legal and regulatory system plays a primary role that shapes regulatory environment for business, referring to rules of laws, rights setting and ownership (Meyer, Estrin & Bhaumik, 2009). Comprehensive regulatory system contributes to high efficiency and effectiveness of foreign corporate, while weak system presents institutional constraints. For example, if the right is not guaranteed, return of investment cannot be guaranteed while business rules are still variable. It will lead to high risks within this formal system that restraints firms’ economic development. Different regulatory context and corporate governance have different enforcement of ownership division (Robertson, Diyab & Al-Kahtani, 2012).

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(Meyer et al., 2009). The reason is that, the foreigner can mitigate the liability of foreignness by cooperate with local partners. As regulatory constraints are imposed on foreign rather than indigenous firms, firms can learn from their partners to overcome regulation barriers. Such experience cannot be achieved if foreign firms own the venture alone (Yiu & Makino, 2002).

On the other hand, the promotion and encouragement of trade liberalization is strengthened by the government with the development of emerging economies, providing favourable treatments for foreign ventures (Chen & Hu, 2002). In this case, China, for example, learned how to establish an appealing and stable environment for foreign investors (Zhan, 1993). Large amount of supportive regulations, laws that encourage foreign investments in China were imposed, give foreign investors priorities and reduce the risks of uncertainty has made remarkable achievements in attracting foreign investment. In specific, a certain amount of industries were encouraged, these industries are always seems complicated or hard to make profits, few local firms are willing to step into and always lack of advanced knowledge and technology(Meyer et al., 2009).The government needs foreign investors to promote the development of such industries. Thus, coercive pressure from the governmental regulations or rules which directly affect the entry mode choice in some restricted industries or supportive industries. Hence, we have the hypotheses below:

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Mimic isomorphism

Mimetic isomorphism refers to the tendency of an organization to model themselves after similar organizations in their field that they acknowledged to be more legitimate or successful, in order to reduce the risk of uncertainty (DiMaggio & Powell, 1983). To make it explicit, firms may face the new, unknown and complex institutional environment with high risk of uncertainty when they step into new market, especially emerging countries. They may seek to learn from their successful predecessors (Chen et al., 2009) and have the tendency to resemble similar strategies which have proven to be efficient and effective from others. As a result, isomorphic behaviour takes place, due to ventures realize that imitate similar successful organizations’ strategies in their fields can be more efficient and less uncertainty (DiMaggio & Powell, 1983; Yiu & Makino, 2002).

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The other trend is that foreign ventures are likely to resemble strategies from home-country firms. Because, firms from same home-country face the same psychic and geographic distance, that means similar level of liability of foreignness, and self-doubt (Li, Miller & Eden, 2012).In total, despite adopting the entry mode from predecessors (both from the same country or industry) may not guarantee the efficiency, firms can at least gain cognitive legitimacy reduce the risks of uncertainty (Li, Miller & Eden, 2012). As a result, isomorphic phenomenon of entry strategy occurs. Hence, we propose the following hypotheses:

H2a: The higher ratio of the entry mode chosen by the firms from same countries, greater is the mimic pressure on successor foreign firm to choose the same mode.

H2b: The higher ratio of the entry mode chosen by the firms from same industries, greater is the mimic pressure on successor foreign firm to choose the same mode.

Informal institution + Normative Isomorphism

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institution will largely influence the entry mode to host emerging markets.

The original definition of normative isomorphism is normally a consequence of professionalization. However, such narrow definition limits its range of applying. As a consequence, many scholars integrate this concept into certain circumstances. Normative pressure refers to the isomorphic pressure from the external normative environment on the firms to behave the ways that are believed to be the cognitive, right approach (Chen et al., 2009). To put it simple, ‘do as Romans do in Rome’, which is embedded in the form of national culture, value, norms, and belief systems in the host country (Yiu & Makino, 2002). Local interest groups are always involved in the process of establishing a subsidiary by foreigners, and may impose more discriminatory and unfair standards to them (Kostova & Zaheer, 1999). Thus, in order to survive in emerging market, firms must first conform to local normative expectations. The more different the normative or cognitive institutions between host and home country, the more difficult the foreign firm can gain cognition by locals, gain legitimacy and execute strategies.

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the responsibility of risk sharing (Salomon & Wu, 2012). Because of greater culture differences, the foreign firms lack the basic legitimacy, hardly accepted by locals. In order to adapt to the local environment with ease, finding a local partner enables the firm not only to gain more sophisticated knowledge and resources, but also gain the cognition and become locally legitimate in a short time. Thus, joint venture has been an isomorphic approach and widely applied to offset the foreignness and gain cognition (Scott, 1995; Chen et al., 2009). Therefore, we hypothesize:

H3: The higher level of culture distance between the origin of the parent firm and host country, greater is the normative pressure on successor foreign firm to choose the joint venture.

Interactions between three isomorphic pressures

As DiMaggio & Powell (1983) points out, the framework of three isomorphic mechanisms is dynamic. The linkages among them not always distinct, they can influence each other according to different conditions, they also can be mutually conflict or supplement. It is always the case that firms will be confronted with not only one source of isomorphic pressure, the level of importance is also different. In the complex institutional environment of emerging economies, by figuring out the linkage between and which mechanism has more explanatory power, firms can weigh the importance of each type then make a balance or compromise, enhance the efficiency and effectiveness of entry strategy.

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determine whether foreign firms can survive while soft rules only can restrict their development. Concerning entry strategy, there is no way to access to new market or industry if a foreign firm does not obey the laws or rules of the host country. For restricted industries in emerging markets, there is extremely high risk of uncertainty for foreign firms, they cannot gain legitimacy and offset foreignness, they are determined to failure. Existing researches have confirmed the idea that the premise of foreign firms entering emerging market is to survive rather than efficiency (e.g. Chen et al, 2009; Yiu & Makino, 2002). Thus, we believe the coercive pressure should be of utmost importance.

With respect to mimic and normative pressure, as described above, normative pressure originates from social norms, cultural difference, covering a wide range. It can influence one firm, but cannot force them, thus it is not of the same level of importance as coercive pressure comparably. In other words, normative pressure can hinder firms to gain legitimacy, slow down its speed to reduce uncertainty, but cannot threaten to survival. On the other hand, mimic pressure which comes from relevant competitors, suppliers, and partners who can differentiate how much the focal firm can gain through the value-add chain. Hence, we assume mimic pressure can affect firm’s strategy more than normative pressure. In sum, we propose:

H4: The coercive isomorphism has most explanatory power, followed by mimic isomorphism; normative isomorphism is of least importance.

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gain enough legitimacy even bonus from the government. For example, when firms invest in recommended industries or regions, these firms can be regarded as good sample foreign firms which fulfil the expectations of locals. As a consequence, instead of ordinary firms conform to mimic and normative pressure in order to reduce the risk of uncertainty and gain sufficient legitimacy. Such supportive firms never need to think about this issue, rather they can enjoy a large amount of priorities, e.g. tax reduction policies, fast approval process, etc. Hence, we can propose that,

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Research design and data collection

The focus of the research lies within the entry modes into China, because China is widely regarded as a sample location in which to test foreign firms’ entry mode in emerging market. The reason is first, there are most established foreign firms compared with other developing economies during the past decades. Second, there are also enough reliable records of entry strategies by foreign firms and can be accessed.

Research setting

In this paper, we focus on equity modes of entry and divided entry mode into two aspects: wholly owned modes (Greenfield and M&A) and Joint ventures in terms of the level of control, then analyse the institutional isomorphic pressure influence the choice of entry when a firm internationalises. Empirical studies noted that in a certain country, especially in an emerging economy, like China, there is a distinction between the wholly foreign owned subsidiaries and joint ventures. There are local firms involved in joint venture which can make joint venture more legitimate and a better cognition(reduce foreignness) by local institutions than wholly owned foreign subsidiary which is usually regarded as an entire foreigner (Yiu & Makino, 2002).

Data collection

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foreign origins were those from which most FDI into China arises: e.g. Hong Kong, Japan, United States, Germany, France and United Kingdom, etc. (State Statistical Bureau, 2011). The US invested most firms in China during the period. A total number of 659 observations are revealed, 245 of which are joint ventures and the rest 414 are wholly owned subsidiaries. Japan ranked second, 287 firms are established, and it has more joint ventures (165 firms) than wholly owned subsidiaries (122 firms). Then it comes to UK, France and Germany which has 105, 97 and 179, respectively. Our final sample consists of a total 1440 observations. Table 1 illustrates a summary below.

Table 1 Distribution of sample entries

Country Joint Ventures WOS Total

US 245 414 659 Japan 165 122 287 UK 51 54 105 France 35 62 97 Germany 38 41 79 Others 80 133 213 Total 614 826 1440

Note:WOS=Wholly Owned Subsidiaries

Empirical technique

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This process will be explained in the next section. Model A was the base model in this study, only control variable was involved. Based on Model A, we inserted different variables into the model to test hypotheses. We examined those separate models for each of independent variables. First, Model B tested the relationship between entry mode and coercive pressure, the latter is represented by industry support level. In the same logic, the two mimetic variables, ratio of prior home country and same industry entries, are examined in the Model C. At last, the normative variable was tested in Model D. All the independent variables were tested at one time in Model G.

Dependent variables

As dependent variables we differentiate two types of entry mode, wholly owned subsidiaries and joint venture. It is a dummy variable indicating (1) wholly owned subsidiaries or (0) joint ventures.

Independent variables

Coercive mechanism

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companies, Public administration and defence are sample most restrictive industries scores 1, 2 or 3. Industries like machinery, manufacturing, textile are those of ordinary ones scores from 4 to 7.

Mimic mechanism

In this paper, we use the approach to test mimic isomorphism which has been widely applied and proven to be reliable in prior studies (Henisz & Delios, 2001; Li et al., 2012).

Same country isomorphism: The first set of mimic mechanism is measured by the ratio of wholly owned entries over the total number of foreign firms from the same country in the prior year p-1, which is defined as WOS Ratio_con Then we use the variable to test its influence on the entry mode choice in year p.

Same industry isomorphism: With the same logic as mentioned above, the second set of mimic behaviour can be assessed by the ratio of joint venture over the total number of foreign firms from same industry in the prior year t-1, which is defined as WOS Ratio_ind.

Normative mechanism

Cultural distance

The index of culture distance between the parent firms and China is calculated by the methodology developed by Kogut and Singh (1988), which is based on the universally most widely used indices of Hofstede (2010) four culture dimensions of the selected countries. Algebraically, the index is represented as:

𝐶𝐷𝑗 = ∑ {(𝐼𝑖𝑗 − 𝐼𝑖𝑐)2/𝑉𝑖} 4

𝑖=1

/4

Where 𝐼𝑖𝑗 refers to the index for the 𝑖𝑡ℎ cultural dimension, 𝐼𝑖𝑐 stands for the score

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Control variable

Firm’s prior international experience: It is widely admitted by scholars that previous experience can affect entry strategies. Firms with relevant international experience can manage uncertainty more effective, while non-experienced firms may face more difficulty in offsetting high risks of uncertainty (Henisz & Delios, 2001; Li et al., 2012).Dummy variables are applied (1) experienced firms (0) non-experienced firms.

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Results

Table 2 illustrates a summary of descriptive statistics firstly. There are several significant correlations which exceed 0.50, just as mentioned in the last chapter, there may exist the problem of multicollinearity. In order to address this issue, I first checks the variance inflation factors (VIF) for all models, all of the coefficients are around 1, which is significant lower the thresholds of 10.Second, we also removed correlated variables one at a time and found no significant changes. As a result, it is proved that the potential multicollinearity problem does not exist in this paper.

Table 2 Descriptive Statistic (N=1440)

Variable Mean S.d 1 2 3 4 5 Industry 6.61 2.14 1 0.41* -0.22* -0.14* -0.02 WOS_ind 0.63 0.10 0.41* 1 -0.18* -0.11* -0.07 WOS_Con 0.60 0.16 -0.22* -0.18* 1 0.12* -0,05 Cultural Distance 2.93 0.67 -0.14* -0.11* 0.12* 1 0.013 Experience 0.95 0.21 0.02 -0.07 0.05 0.013 1

Note: *Significant at 10% level;**Significant at 5% level; WOS_ind=ratio ratio of wholly owned entries over the total number of foreign firms from the same industry; WOS_con=ratio ratio of wholly owned entries over the total number of foreign firms from the same country

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Model A Model B Model C Model D Model E Model F Model G

Industry 0.124*** 0.146*** 0.178*** 0.166*** WOS_ind 2.087*** 1.029* WOS_Con 1.926*** 2.328*** Cultural Distance 0.323** 0.302** 0.372** Industry*WOS_ind Industry*WOS_con Industry*Cultural Experience 0.345 0.348 0.353 0.364 0.052 0.302 0.117 0.402*** 0.334 0.362 Model Δ 1.880** 0 25.566*** 23.686*** 43.128*** 41.248*** 17.037*** 15.157*** 48.493*** 46.613*** 111.335*** 109.455*** 87.659*** 78.172*** Log likelihood 1907.847 1875.739 1861.705 1883.733 1857.496 1796.999 1818.730 Note:*Significant at 10% level; **significant at 5% level; ***significant at 1% level.

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still exist difference within mimic reference groups, firms from same home country seems have more explanatory than reference group of firms in same industry.

From the evidence of Model D and Model G, it also can be concluded that cultural distance which is a proxy for normative pressure has a significant effect on entry mode choice(βcd= 0.323, p<0.005 in Model D andβcd= 0.372, p<0.005). However, it is negative, which is opposite to the original assumption that is the larger the cultural distance, the more likely the firm will choose joint venture rather than wholly owned subsidiaries. As a result, H3 is rejected the explanation of this unexpected result will be discussed in the next section.

With regards to H5, firstly, as we can see from Model G, the coefficient between industry, cultural and entry mode industry are 0.166(significant at 1% level), 0.372(significant at 5% level) respectively, which indicates that coercive variable has more significant effects on entry mode than normative pressure. Second, this study uses the method that comparing the difference between the values of chi-square for each independent variable. Δ in Model B is 23.686 significant at 1% level, while in Model C and Model D, Δ are 41.248 and 15.157, both are significant at 1% level. Apparently, the value of change in Model C is greatest, thus we can conclude that mimic pressure has more influence on entry mode choice than coercive pressure and normative pressure, although they both also are significant influential. Moreover, there is evidence to prove coercive pressure impact more than normative pressure (Δ in Model B is 23.686; Δ in Model D is 15.157). As a consequence, in terms of the level of influence on entry mode from most to least, the sequence should be Mimic reference group, coercive reference group and normative reference group, H4 is rejected.

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significant at any level (βIndustry*Cultural = 0.052). Thus, it cannot be concluded that coercive mechanism can moderate the effect of cultural distance on entry mode choice. Meanwhile, from table 3, it is distinct to recognize that industry moderate the relationship between entry mode choice and one mimic reference group from same country significantly(βIndustry*WOS_con=0.402, p<0.001) while it does not make a big difference on the other mimic reference group from the same industry. Thus, hypothesis 5 is partial supported.

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Discussion and Conclusion

Discussion and conclusion

The present research seeks to find examine whether institutional isomorphism theory has the explanatory power to differentiate firm’s choice of entry strategy to emerging market, where the institutional environment is under-developed and different from developed countries. The results illustrate strong evidence of isomorphism can have a significant effect. First of all, the results of this paper prove all of the three isomorphic mechanisms have significant effects on the mode of entry by a foreign firm. To make it detailed, coercive pressure derives from political pressure and the problem of legitimacy. Governments can restrict or support foreigners’ behaviours directly by imposing guidelines for foreign investments, and such guidelines can be regarded as “soft laws”. They have same functions as laws of regulations, especially in emerging markets. If one obeys, foreign firm can gain legitimacy quickly and offset the liability of foreignness. Otherwise, the government can restrict foreigner via kinds of discriminatory policies and behaviours, for example, they can slow the process of registration, exclude the focal firm from supportive policies. This finding is consistent with previous studies (e.g. Henisz & Delios, 2001; Li et al., 2012).

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control changes. As a result, the previous experience of firms in same industry is meaningful to new entrants, and entry strategy is likely to be resembled.

With regards to normative group, cultural distance is a good proxy. It does have significant effect on entry mode choice, which is confirmed by prior scholars (e.g. Chen et al, 2009). Previous studies demonstrate that the higher the cultural distance, the more likely firm will choose joint venture (e.g. Brouthers & Brouthers, 2001). Especially in emerging market, due to the incomplete institutions, foreigner needs to learn the rules of the game from local partner to offset liability of foreignness. However, the study shows an opposite significant result of the linkage between culture distance and entry strategy. One explanation is that because of higher cultural distance, the way of running a business is remarkably different, joint venture may face lots collaboration problems, costs will weigh benefits. Another interpretation is that, during the last decades, China’s institutions became more and more mature. China has achieved remarkable results in attracting FDI and has a deep understanding of how to build a beneficial environment for foreigners. Thus, foreign firms do not need to worry about uncertainty any more, gain enough confidence to choose a wholly owned subsidiary mode to maximise the benefits. With regards to previous international experience, it is interesting to find prior experience does not matter in this paper. One interpretation is that, majority of firms have international experience before they came to China, therefore, the experience cannot significant differentiate them.

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logic is that coercive pressure is more forceful, normative pressure is more or less voluntary. The interpretation here is that the industry as a proxy for coercive mechanism has some limitations, cannot completely represent coercive pressure to compare with other mechanisms with this regard. What’s more, this paper finds out some interactions between coercive group and other two groups. There is no enough evidence to state the moderate effect of coercive pressure on normative group. But it strongly supports the idea that coercive pressure can significantly moderate the effect of mimic group on entry mode choice.

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Limitations and further researches

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Appendix

Previous isomorphism related studies on entry mode strategy

Authors Why

isomorphism is involved and gap

Key argument Choice set

and source of isomorphism Data and Methodology Countries and industry Useful findings about isomorphism Davis et al, 2000 No empirical studies confirm the linkage between

isomorphism and

entry mode

Difference between

internal and external isomorphism’s impact on entry mode choice

Exporting, licensing, joint venture, WOS No explicit isomorphism, general view Primary survey of managers USworld

Pulp and paper industry WOS=high internal isomorphism others=external isomorphism Henisz & Delios, 2001 No empirical studies show distinction

between internal and external

uncertainty’s impacts

interorganizational environment

and policy uncertainty directly influenced a firm's international plant location decisions Location choice issue Mimic isomorphism Published Archival data JAPworld Multiple industries

Same industry and

same country

have effects

Lu, 2002 To challenge TCE, isomorphism acts as

an representative

theory of IBV

IBV has more

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36 Multiple industries established by earlier entrants Yiu & Makino, 2002 To challenge TCE, isomorphism acts as an representative theory of IBV institutional theory provides incremental explanatory power of foreign entry-mode choice in addition to TCE WOS or JV Multiple isomorphism mechanism

Primary survey JAPWorld Regulative,

cognitive, and normative pressure matter Chen et al., 2009 To challenge TCE, isomorphism acts as an representative theory of IBV

IBV explains better than TCE in emerging markets High level or Low level of control Multiple isomorphism mechanism Case study(only one company) One Taiwan’s food firm in China Regulative, cognitive, and normative pressure matter Salomon & Wu, 2012 Limited existing researches about institutional distance and local adaption

Institutional distance positive related to local isomorphism No explicit isomorphism, general view Published Archival data WorldUS Banking industry Institutional distance positive related to local isomorphism Li, Miller & Eden, 2012 Limited articles notice isomorphism can explain entry choice by EMFs Isomorphism can overcome uncertainty as a form of responsiveness JV, Greenfield, M&A Mimic isomorphism Published Archival data EMFsUS Home-country

firms is the most

favoured group

Entry Modes Choice to Emerging Markets: From an Institution-based Isomorphism Perspective