Location Specificity and the Transferability of Downstream Assets to Foreign Subsidiaries

• Published in: Journal of international business studies Vol. 28; no. 3; pp. 579 - 603
• Main Authors: Anand, Jaideep, Delios, Andrew
• Format: Journal Article
• Language: English
• Published: London Academy of International Business and Richard Ivey School of Business, University of Western Ontario 01.01.1997; Palgrave Macmillan UK; Palgrave Macmillan
• Series: Journal of International Business Studies
• Subjects: 1994; Betrieblicher Standort; Business and Management; Business Strategy/Leadership; Business structures; Business studies; Disadvantages; Einzelhandel; Employment; Foreign investment; Foreign subsidiaries; Großhandel; Host country; Industrial production; International Business; Internationaler Markteintritt; Internationaler Wettbewerb; Japan; Joint ventures; Knowledge; Location of enterprises; Management; Market entry; Organization; Retail industries; Retail trade; Retailing industry; Service industries; Skills; Standortfaktor; Statistical analysis; Studies; Subsidiary companies; Wholesale trade; Wholesalers; Japan
• ISSN: 0047-2506; 1478-6990
• DOI: 10.1057/palgrave.jibs.8490112

We investigate the effect of firm-specific advantages being 'local' in scope, and the influence of subsequent location-specific disadvantages, on the choice of foreign entry mode and subsidiary performance. To look into this issue, we examine Japanese FDI data from the wholesale and retail industries - two sectors that have productive activity concentrated in downstream processes and location-bound resources. Our theoretical and empirical analyses demonstrate that, in situations where required capabilities must be developed through local experience and where location-specific resources were subject to market failure, acquisition and joint venture strategies were preferred. Greenfield entries were successful in industries that permitted the off-setting of location-specific disadvantages with firm-specific advantages. From our results, we draw implications for the entry mode literature and offer a perspective on the performance of the entry mode choice.