Week 3 [Meyer, Estrin, Bhaumik & Peng, 2009]

Question 1

What do [Meyer, Estrin, Bhaumik & Peng, 2009] argue in regards to ‘institutional development’ and ‘need for local resources’ with relation to entry strategies (2)?
[Meyer, Estrin, Bhaumik & Peng, 2009]

Answer 1

1. Institutional development (especially) in different emerging economies directly affects entry strategies
2. Investor needs for local resources impact entry strategies in different ways in different institutional contexts
   - > Paper examines choice between Gf, Acquisition and JV

Question 2

What do [Meyer, Estrin, Bhaumik & Peng, 2009] argue to factor in when choosing between entry modes?
[Meyer, Estrin, Bhaumik & Peng, 2009]

Answer 2

Institutions need to be factored into decisions, along-side MNE-level factors and subsidiary-level factors

Question 3

What can be said about strong/weak institutional frameworks?

[Meyer, Estrin, Bhaumik & Peng, 2009]

Answer 3

Stronger institutional framework lowers cots of doing business (less need to worry about “what goes on around you”)
Weak institutions may magnify information asymmetries so firms face higher partner-related risks -> JV to reduce uncertainty
-
H1: Strong market-supporting institutions, Gf/M&A > JV

Question 4

What concession between entry modes should you keep in mind depending on the need for local resources?
[Meyer, Estrin, Bhaumik & Peng, 2009]

Answer 4

M&A/JV: way to pool resources between foreign entrant and local firm
Gf: no access to resources embedded in local firms
-
H2a/3a: Strong need to rely on local (intangible) resources to enhance competitiveness, M&A/JV > Gf
3b: Strong institutions + tangible resources has no influence on entry mode choice

Question 5

What distinction should you make between (in)tangible resources when it comes to needing access to local resources?
[Meyer, Estrin, Bhaumik & Peng, 2009]

Answer 5

For tangible sources, you could just hire a consultant
Intangible sources are hard to communicate and often tacit to the market, you’ll need local partners
-
H2b: effect of relying on resources is stronger when relying on intangible assets