Choice between non-equity entry modes: an organizational capability perspective

Many studies have examined the choice between different types of equity and non-equity modes; however, none has focused on the choice between different types of non-equity modes that service-firms employ routinely. This study develops a theoretical framework based on the "organizational capability" perspective to explain the choice between two non-equity modes - franchising and management-service contracts. While previous studies are based on the premise that foreign-market entrants choose a mode - equity or non-equity - that offers them most control given their particular circumstances, the premise of this study is that foreign entrants choose a non-equity mode that, in addition, offers effective transfer of the firm's capabilities to the host-country venture.