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Title:The Strategic Rationale for Japanese Foreign Direct Investment in the United States
Author(s):Park, Young-Ryeol
Doctoral Committee Chair(s):Hennart, Jean-Francois
Department / Program:Business Administration
Discipline:Business Adminstration
Degree Granting Institution:University of Illinois at Urbana-Champaign
Subject(s):Business Administration, Management
Abstract:A firm's decision to integrate into foreign manufacturing should depend on its own capabilities and on the behavior of its rivals. Yet empirical studies on Foreign Direct Investment (FDI) have concentrated exclusively on the former or on the latter, but almost never on both. In addition, the main focus of previous studies of FDI has been the choice between wholly-owned subsidiaries and joint ventures, or greenfield investments and acquisitions. The order of entry (first-entrant vs. late-entrant, and the speed of a rival's competitive response to a first-mover) has been frequently mentioned in previous international business research, but not thoroughly researched empirically.
This thesis constitutes the first large scale product- and firm-level study to investigate the strategic rationale for Japanese manufacturing investment in the U.S. The objectives of this study are twofold: (1) to investigate four types of strategic interactions among Japanese and/or U.S. firms (e.g. avoidance or collusion, exchange-of-threat, follow-the-leader, and competitive dynamics), and their effect on whether a Japanese firm produces a product in the U.S., with location and governance factors held constant, and (2) to examine firm-specific and strategic determinants of the order of entry of Japanese investors in the U.S. market.
Four empirical models employing a binomial logistic model and an accelerated event-time method are tested on a database of Japanese manufacturing firms listed in the Japan Company Handbook as of 1986. The results of the determinants of Japanese manufacturing FDI in the U.S. support the prediction of the modern theory of FDI, which combines location and governance factors. In addition, I find strategic factors to be also important.
Market rivalry, rather than firm-specific factors, is the most significant determinant of the order of entry of Japanese firms in the U.S. The speed of competitive response of a Japanese firm to entry by its rivals is explained, on the other hand, by both firm-specific and strategic factors. The main conclusion of this study is that firms are heterogeneous and strategically linked to each other, and that both firm-specific and strategic aspects are crucial in studying a firm's foreign direct investment behavior.
Issue Date:1993
Description:228 p.
Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 1993.
Other Identifier(s):(UMI)AAI9329130
Date Available in IDEALS:2014-12-17
Date Deposited:1993

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