Foreing investors' choice of mode of entry: An integrative framework

Abstract

When investing abroad, firm s miist choose between either exploiting their firm-specific competencies or combining them with those o f other firms through joint ventures or total or pardal acquisiüons. This paper studies these decisions using insights from Transaction Cost and Knowledge Based Theories o f multinational corporations. Using a sample offoreign direct investments made by Spanish firms, our results show that the two theories are complementaty. The choice o f entry mode is injluenced not only by transaction cost factors, but also by the prior experience and internationalization path o f the foreign investor, as suggested by Knowledge Based Theories.