Chapter 11 Firm Resources, Institutional Distance, and the Choice of Entry Mode

We build on the resource-based view and extend entry mode research by focusing on firms’ intention to transfer different resources from the parent firm to its overseas subsidiary. In line with our hypotheses, we find that parent firms that plan to transfer high levels of intangible resources to their foreign subsidiaries tend to choose wholly owned subsidiaries, while firms that intend to transfer high levels of tangible resources tend to choose international joint ventures. Moreover, we find that these relationships are moderated by institutional distance. We test our hypotheses using unique primary data from a sample of 128 foreign subsidiaries in the People’s Republic of China. Our results have important theoretical implications for international business strategy research as they develop further existing entry-mode theories.