Asset-Exploitation versus Asset-Seeking: Implications for Location Choice of Foreign Direct Investment from Newly Industrialized

Economies Author(s): Shige Makino, Chung-Ming Lau, Rhy-Song Yeh Source: Journal of International Business Studies, Vol. 33, No. 3 (3rd Qtr., 2002), pp. 403-421 Published by: Palgrave Macmillan Journals Stable URL: . Accessed: 01/03/2011 06:09
Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at . JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at . . Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact

Palgrave Macmillan Journals is collaborating with JSTOR to digitize, preserve and extend access to Journal of International Business Studies.

Versus Asset-Exploitation Asset-Seeking: Choice Location of Implications for





Shige Makino*

Industrialized Economies

Chung-Ming Lau**

Rhy-Song Yeh***

This study examined several hypotheses regardingthe location choice of foreign direct investmentfrom newly industrialized economies (NIEs).Using a sample of 328 Taiwanesefirms in the analysis, this studyfound that the firms' motivations had a significant impact on the choice of their
INTRODUCTION The existing studies of foreign direct investment (FDI) have focused mainly on the FDI from developed countries

investmentlocation (developedcountries vs. less developed countries),yet this impact was moderatedby the capabilitiesthatthefirmspossessed. The resultssuggestthatbothasset-exploitation and asset-seekingaspects of investments are predictive of the ME firms'location choice of investment.
(DCs). These studies have primarily examined either why FDI occurs from a DC to another DC, or from a DC to less developed countries (LDCs) or newly in-

*Shige Makino is Professor in the Departmentof Managementat the Chinese University of Hong Kong. His current research interests include strategies for international expansion of Asian enterprises, inter-organizationalimitation, and managementof internationalstrategic alliances. **Chung-MingLau is currently Chairmanand Professorin the Departmentof Managementat the Chinese University of Hong Kong. His research interests include strategic change, organizationalculture, and management of Chinese organizations. ***Ryh-song Yeh is Professor of Guanghua School of Managementat Peking University. His current research interests are in leadership and cultural values in Chinese context, and international management of Chinese firms. We wish to thank Professor John Dunning for his comments and continuous encouragement. We also thank three anonymous referees for their very insightful and helpful comments on earlier drafts. The work described in this paper was partially supported by a grant from the Research Grants Council of the Hong Kong Special Administrative Region (Project No. CUHK4052/99H).


From the organization learning perspective. and did not examine any specific cases in which LDC or NIE firms expanded their international activities from their home countries to DCs. Lecraw. but also when they intend to seek technologybased resources and skills in a DC that are superior or not available in their home countries in a particular product market domain. Lall.. 404 Specifically. 1977. In developing hypotheses. However. Firms engage in foreign direct investment because they are motivated and have the capability to do so. March (1991) suggested that exploration involves gaining new information about alternatives and thus improving future returns. invest in LDCs." Recently. 1999). To test this general proposition.e. In the asset-exploitation perspective. van Hoesel.. invest in DCs. We argue that NIE firms engage in FDI in a DC not only when they possess certain forms of firm-specific advantages exploitable to a DC. or "upstream countries. or "downstream" countries. 1983) investigated why FDI occurs from LDCs or NIEs. technology. and management expertise) available in a host country. Wells. A motivation for FDI refers to the reason that gives an investing firm the impetus for investing abroad. this study focuses on two critical factors that would influence the choice of location of FDI: an investing firm's motivations and capabilities to engage in FDI. yet are equally essential for organizational JOURNAL OF INTERNATIONAL BUSINESS STUDIES . we focus on two distinct but complementary perspectives of FDI: asset-exploitation and asset-seeking. NIE firms are motivated to invest in LDCs when the labor costs in their home country made their products non-competitive in LDC markets.g.1 LITERATURE REVIEW One of the key issues in the field of international business research is how firms exploit their existing assets and explore new assets in host countries through FDI. marketing..g. 1983. A capability refers to an investing firm's resources and skills necessary to invest abroad. 1993. 1981. Kumar and McLeod. However. researchers (e. researchers have started investigating why and when LDC and NIE firms engage in upstream investments (e. they mainly investigated why firms from LDCs or NIEs invested in other LDCs or NIEs. 1998. In the asset-seeking perspective. The primary purpose of this study is to provide additional evidence to the literature in this emerging stream of research. systematic conceptual and empirical investigations are still needed to build consensus on this issue. FDI is viewed as a means to acquire strategic assets (i. we propose the following general hypotheses. FDI is viewed as the transfer of a firm's proprietary assets across borders. Those that have the capability to absorb this technology form the intent to do so. and hence. Chen and Chen.VERSUS ASSET-SEEKING ASSET-EXPLOITATION dustrialized economies (NIEs). Those that have superior capabilities in labor intensive production relative to firms in the LDCs form the intent to do so. To relate this definition of motivation and capability to the research subject. Both exploitation and exploration involve different aspects of organizational learning. and exploitation involves using the information currently available and thus improving present returns. NIE firms are motivated to invest in DCs when they lacked some component of technology that is necessary to compete in DC market that is available in the DC. and hence. Conversely. About two decades ago. this study examines FDI decisions made by 328 firms from Taiwan-one of the Asian-based NIEs.

Hymer. 1993. They argued that due to the neglect of aspects of asset exploration. internalization theory (Buckley and Casson. FDI as Asset-Exploitation The perspective which views FDI as the transfer or exploitation of firmspecific advantage assumes that firms should possess certain forms of rentyielding resources when investing in a host country. as contrasted with the asset-exploiting FDI that underlies the traditional international business literature. no matter whether FDI is viewed as the exploitation of firmspecific advantage or the response to market failure for rent-yielding resources.SHIGEMAKINO. Frost. but also to learn. Recently. Wells (1977. Hedlund and Ridderstrale (1997) suggested that dominant theoretical perspectives in international research business the exploitation rather than the adopted exploration (creation) perspective. knowledge 'seekers. With regard to the first question. No. This literature. would internalize transactions across borders.. Kumar. 1976). 1998. Building on the organization learning perspective. Wells (1981) raised two important questions: what are the skills of the LDC firms that enable them to earn profits abroad and why do these companies choose to exploit their skills through direct investment. where the assets is embodied in the product. Wesson.CHUNG-MING YEH LAU. In sum. 1971. Rugman. The theory suggests that firms have an incentive to internalize a transfer of intermediate goods. Dunning. cannot clearly explain whether.' not the 'owners' of the knowledge. 1999. Chen and Chen. the knowledge or control of a more efficient production function. From a different perspective. tive) advantage in a host country (Caves. RHY-SONG survival and prosperity. Makino and Delios. the traditional literature generally assumes that for FDI to take place. As a corollary. 3. know-how. Hymer (1976) suggested that such advantages included the abilities to acquire factors of production at a lower cost than other firms. Recent studies (Lecraw. Caves (1971) suggested technological and marketing expertise as primary sources of a firm's monopolistic advantage. This alternative form of FDI is referred to as a strategic asset-seeking FDI. 1998. 1981. however. 1976. or gain access to. van Hoesel. and financial capital under common control and ownership so as to reduce transactions costs associated with this transfer. e. This perspective postulates that FDI would occur when firms possess proprietary resources and skills which give rise to a monopolistic (or competiVOL. Kogut and Zander (1993) challenged the theory's public good assumption and suggested that the firm's decision as to whether or not to engage in FDI would depend on the relative efficiency of the knowledge transfer 'within' and 'between' firms. irrespective of the existence of market failure. firms should possess certain types of proprietary resources to exploit in the host country. THIRD 2002 QUARTER. In examining the nature of FDI by LDC firms. 1996. the necessary strategic assets available in the host country. 2001) suggested that firms would engage in FDI not only to transfer their resources to a host country.g. 1995. Most early studies of FDI from LDCs share a similar perspective. and better distribution facilities or a differentiated product. 1983) suggested the 405 . 1981) focuses on another characteristic of firm resources-a rentyielding resource as a public good which is transferred within a firm with lower cost than via some other method. licensing or exporting. and under what conditions. 1994. the conventional theories of MNE have not successfully explained how MNEs can create innovations through international expansion and activities. 33.

S. Almeida (1996) studied inward FDI in the U. In support of this perspective. Ting and Schive. 1995.S. yet small. and (3) there is not a formal legal or control system to protect investing firms' technological knowledge.S. Firms that intend to build advantages through FDI therefore have a natural incentive to seek opportunities to invest in a particular location (host country) in which their needed strategic assets are available. technology.ASSET-EXPLOITATION VERSUSASSET-SEEKING skills of the LDC firms are to develop small scale. Similar distinct characteristics of LDC firms have also been observed in ASEAN countries (Lecraw. suggesting that a primary purpose of inward FDI by foreign firms in the U.S. and flexible processes and products which are suitable to the LDC markets. 1981). such investments are considered "exceptional" cases in these studies (Lall. 1998. technology. small scale manufacturing) is difficult. 1998. Shan and Song (1997) found similar evidence in the U.S. Dunning. 1997. With regard to the second question. semiconductor industry was to source local technology. 2001. 2000). biotechnology industry. (2) the internalization of local firms' skills (e. These studies suggest that a firm's firm-specific advantages would arise not only from the possession 406 of proprietary assets but also from the capacity to acquire. although Lall (1983) found that there were noticeable differences in types and degree of their firm-specific assets and skills.S. Wells suggested that LDC firms would prefer to engage in FDI when: (1) the local market is uncertain due to the lack of information about the value of the assets produced by local firms and the less developed distribution network. 1983).S. number of LDC and NIE firms have engaged in strategic asset-seeking FDI (Kumar. More recently. Taiwan.S. 1998). 1992).. and to find ways to substitute locally available inputs. Kumar and McLead. semiconductor industry and found that foreign firms tended to cite local patents more frequently than similar domestic firms.g. the complementary assets owned by other firms in a host country (Dunning. and Singapore (Lecraw. Chen and Chen. 1981. is motivated by strategic asset-seeking purposes. Chang. labor intensive. Teece. Korea. FDI as Strategic Asset-Seeking Recent studies have recognized that firms invest in foreign countries not only to exploit but also to develop their firmspecific advantages or acquire necessary strategic assets in a host country (Almeida. was motivated primarily for capability development. and found that the Japanese firms' FDI in the U. Kogut and Chang (1991) examined whether Japanese FDI would reflect the exploitation of Japanese firms' firmspecific advantages or the targeting of U.S. 1995. Although these studies recognized the possibility of LDC firms' upstream investments. 1996. Chang (1995) investigated the sequential entry of the Japanese electronic manufacturing firms in the U. or the efficient coordination of. and found that Japanese firms tended to form a JV with U. usually much less developed than their home countries. 1995. 1998. a growing amount of literature has suggested that much of inward FDI in the U. These explanations are applicable primarily to LDCs firms investing in other LDCs. 1977. Shan and Song. Frost. JOURNAL OF INTERNATIONAL BUSINESS STUDIES . Underlying this perspective is that critical resources and capabilities that firms seek are more often found to be spatially determined than simply existing within any single firms (Enlight. Recent studies of both LDC and NIE multinationals suggest that a growing. 1993. firms to source U. 1993) and in NIEs such as Hong Kong.

combined with their competitive advantages in access to low-wage labor and physical inputs. No. RHY-SONGYEH van Hoesel. we argue that strategic asset-seeking FDI would occur more likely in upstream countries than in down stream countries. Lecraw (1993) investigated international expansion strategies of both export-enhancing and operation-extending firms in Indonesia.and market-seeking FDI can be better understood from the asset-exploitation perspective. 1998). whereas strategic asset-seeking FDI is better understood from the asset-seeking perspective. a priori. Market-seeking FDI would occur more likely in large countries than in small countries for standard goods. and resource/ labor-seeking FDI more likely in downstream countries than in upstream countries. Based on the analysis of the data collected from the interviews. novel product technology. To simplify our discussions. VOL. we argue that.SHIGEMAKINO. and more likely in upstream countries than in downstream countries for differentiated goods. 1993). He found that export-enhancing Indonesian firms tended to be less scale. we focused on three key motivations for FDI: strategic asset-seeking. Lecraw suggested that export-enhancing firms tended to invest in higher income countries than operationextending firms primarily to acquire management. and extensive networks of distributors. and market-seeking (Dunning. technology. NIEs. These regional groups are identified based on level of economic development and market size. 33. In developing hypotheses. Chen and Chen (1998) found a similar pattern in outward FDI of Taiwanese firms. In this study. 3. and marketing expertise. 1999). typically via aggressive acquisitions of DC firms in the host countries (Kumar 1998. resource-seeking. we focus specifically on FDI from NIEs to LDCs and DCs." The asset-exploitation perspective of FDI commonly posits that firms that possess firm-specific advantages utilize these advantages to operate abroad to seek markets or low-cost natural resources or labor force. NIE firms tend to invest in DCs for either strategic asset-seeking or market-seeking purposes. we hereafter use the term 'resource-seeking' as a synonym of "labor-seeking. using the capital that they earned in their home country. whereas those NIE firms investing in LDCs used FDI primarily to strengthen their price competitiveness. we consider both resource/labor. and large LDCs.CHUNG-MING LAU. Research also suggests that many of the NIE firms investing in DCs have gained access to established brand names. small and large LDCs for resource/labor-seeking 407 . He found that the amount of the outflow of FDI from Asian NIEs to DCs has been rapidly increasing over the past decade and suggested that the NIE firms investing in DCs tended to use outward FDI to strengthen their non-price competitiveness. Taken together. 1999) and/or through 'relational networks' of local suppliers and customers that share cultural or ethnic backgrounds similar to the investing firms' (Chen and Chen. As will be discussed in the subsequent sections. THIRDQUARTER. DCs. 2002 CONCEPTUAL FRAMEWORK AND HYPOTHESES Conceptual Framework Figure 1 depicts four groups of economic regions. small LDCs. Kumar (1998) investigated a recent trend in strategic asset-seeking FDI conducted by firms from Asian NIEs. van Hoesel. cost and technology efficient than operation-extending firms yet had more advantages in access to low cost natural resources and labor than uninational firms. Therefore.

Figure 2 provides a conceptual framework for hypotheses development. whether NIE firms actually invest in these locations may depend on the firms' capabilities that support the investments. We argue that the likelihood that the NIE firms invest in a particular country (location) for a specific investment motivation may vary depending upon the types and amounts 408 of the firm's capabilities that support the investment. In this study. the firm's capabilities strengthen or weaken the influence of motivation on location decision.VERSUSASSET-SEEKING ASSET-EXPLOITATION FIGURE 1 REGIONALGROUPS AND FDI MOTIVATIONS Advanced (Upstream) DCs Asian NIEs Level of economic development Less Srmall ( LDCs > ( LargeLDCs (e.g. Second. technology-based assets.g. the firm's motivation directly influences its location decision. we discuss how NIE firms' motivations and capabilBUSINESS STUDIES JOURNALOF INTERNATIONAL . low cost labor and natural resources) or created endowments (e. China. These capabilities are firm-specific and constitute the sources of the NIE firms' unique advantages over indigenous firms and/or the basis for further development of their advantages through FDI. Finally. In the following sections. strategic assets) available in a host country (location). as depicted in Figure 1. First. and large LDCs for both resource and market-seeking purposes.. However.g. we focused on three types of capabilities: labor intensive production capability. and prior technology-seeking experience.. advanced (Downstream) India) Small MarketSize Large Market-seeking (standardgoods) purposes.. a firm's motivation to engage in FDI in a particular country (location) would be driven by natural country-specific factors-either endowments (e.

Building on the argument discussed earlier. Dunning 1998). 33. it is expected that. 1990. THIRDQUARTER. Hypotheses Strategic asset-seeking. when NIE firms intend to source advanced technology.seeking * Resource (labor)-seeking " Strategic asset-seeking ities would influence their actual FDI decisions regarding the choice of FDI location. For successful strategic assetseeking FDI. As discussed in earlier sections. this type of capability is referred to as an 'absorptive capacity'. An absorptive capacity is largely a function of the level of prior related knowledge. and management expertise. the 409 . marketing. we expect that NIE firms seeking technology-based resources and skills via FDI would more likely invest in DCs than in LDCs. In the literature of organization theory.SHIGE MAKINO. and integrate strategic assets from external sources. they are more likely to invest in DCs than in LDCs. the NIE firms need to possess related expertise prior to engaging in FDI in DCs. acquire. This is because most advanced strategic assets and sophisticated customer segments tend to be spatially concentrated in DCs (Kumar 1998. Hypothesis la: NIE firms are more likely to invest in DCs than in LDCs when their primary motivation of investment is to seek technology-based assets in a host country. While the traditional asset-exploitation perspective of FDI suggests that these related expertise would create the investing firms' firm-specific advantage that drives outward FDI. RHY-SONG YEH FIGURE 2 CONCEPTUAL MODEL Capabilities ? labor intensive production * technology-based assets ? prior technology-seeking experience Country specific factors * Natural endowments * Created endowments Motivations * Market. CHUNG-MING LAU. which takes the forms of both basic and recent scientific and technological developments in a given field (Cohen and Levinthal. and other NIE firms are less active in this type of investment. Some may wonder why some NIE firms are more active in strategic assetVOL. We set forth the following hypothesis. No. This difference would lead to a varying degree of the likelihood that the firms would engage in strategic asset-seeking FDI in DCs. 128). 2002 seeking FDI and thus investing in DCs. Such related knowledge is used as a platform for a firm's further development of capability. p. One possible explanation for this question is that firms might differ in their capabilities to evaluate. 3.

Unlike strateJOURNAL OF INTERNATIONAL BUSINESS STUDIES . and lower when they have no such advantages.A. We therefore expect that the NIE firms with prior experience of strategic asset-seeking through OEM or alliance formation in their home country may have a stronger propensity to engage in asset-seeking FDI. natural resources. FDI is often used to source these resources in a comparatively advantaged country. van Hoesel (1999) observed that most NIE firms investing in DCs had made extensive OEM contracts or alliances with DC-based firms in their home country prior to their investments in DCs. invest in DCs. Probably the most immediate resources to be acquired through this type of FDI involve labor. Hypothesis lb: NIE firms are more likely to invest in DCs than in LDCs for strategic asset-seeking motivations when they possess more superior technological assets than indigenous competitors in a host country. For an asset-seeking FDI to occur in a DC. 1993). and are the basis for comparative advantages of nations (locations). the NIE firms should possess related technological capabilities that are advanced enough to absorb the superior technological capabilities owned by the source firms in the DC. Chen and Chen (1998) found that Taiwanese firms investing in the U. and capital in a host country. path-dependent 410 processes of organizational learning (Cohen and Levinthal. however. does not necessarily imply that these firms would automatically engage in asset-seeking FDI in DCs.ASSET-EXPLOITATION VERSUSASSET-SEEKING asset-seeking perspective of FDI suggests that such expertise would work as an absorptive capacity that facilitates further development of capabilities. 1990).S. Given that an absorptive capacity is one form of a firm's learning capability. and hence. Development of absorptive capacity requires cumulative. these factors of production are assumed to be unevenly distributed and immobile among nations (locations). In support of the latter perspective. Hypothesis Ic: NIE firms are more likely to invest in DCs than in LDCs for strategic asset-seeking motivations when they have prior experience of seeking strategic assets from foreign firms. In support of this view. These studies generally suggest that firms that possess superior firm-specific advantages are more likely to engage in strategic asset-seeking FDI (and hence invest in DCs) than those firms that do not possess such advantages. compared to those firms with no such experience. Similarly. In the traditional trade theory. The primary purpose of firms which engage in resource/labor-seeking FDI is to acquire particular and specific resources in a host country at a lower real cost than could be obtained in their home country (Dunning. van Hoesel (1999) found that NIE firms that invested in DCs tended to possess superior technology and marketing advantages over other domestic firms. it is expected that the level of absorptive capacity that the firm possesses would be closely associated with the amount of prior experience that the firm has in acquiring strategic assets from non-domestic firms. We therefore expect that the likelihood that NIE firms would invest in DCs for asset-seeking purposes will be higher when they possess advantages in technology-based capabilities over indigenous competitors in a particular product market domain in a host country. The fact that NIE firms possess superior firmspecific advantages over their domestic competitors. tended to have a greater R&Dintensity and a higher rate of sales growth than those investing in LDCs. Resource (labor)-seeking.

SHIGE CHUNG-MING RHY-SONG YEH MAKINO. Some studies have specifically investigated whether market-seeking FDI would occur more likely in DCs or in LDCs. firms would engage in resource/labor-seeking FDI when they can successfully combine their superior product or process technology with low cost labor to make delivered cost in the host country market. Lecraw (1991) studied factors that influenced inward FDI in LDCs and found that the rate of growth of domestic demand and changes in the tariff rate had a significant and positive impact on market-seeking FDI in LDCs. or other market. Hypothesis 2b: NIE firms are more likely to invest in LDCs than in DCs for labor-seeking purposes when they possess more superior labor intensive production capabilities than indigenous competitors in a host country. establishing affiliates to develop marketing networks in the host countries and provide after sales activities. and less likely to invest in DCs. to lower transportation costs. Again. Building on the above arguments. In the case of FDI. With regard to inward FDI from NIEs to DCs. In principle. Dunning (1993) suggested that firms seek market expansion opportunities through FDI for a variety of reasons: to expand the existing domestic buyer-supplier relationships in host countries. LAU. and. THIRDQUARTER. 2002 Market-seeking. with the exception of large LDCs such as China and India. 3. gic asset-seeking FDI. we expect that NIE firms are more likely to invest in LDCs when this is their primary motivation of investment. 1976). to either preempt or avoid being preempted by the rivals' entry into a particular host country. lower than the costs of exports to the host country. 33. we expect that. the primary focus of this type of FDI is to lower total delivered cost including transportation and tariffs by gaining access to low cost factor inputs for production such as low cost labor. NIE firms seeking market opportunities would invest more 411 . These evidence generally suggest that NIE firms exploring new market opportunities abroad are more likely to invest in countries where market potential is large than in countries with small market potential. Van Hoesel (1999) conducted in-depth case studies of Korean consumer electronics and Taiwanese PC industries and found that the firms in these industries tended to produce labor intensive goods in locations with abundant. Hypothesis 2a: NIE firms are more likely to invest in LDCs than in DCs when their primary motivation of investment is to gain access to low cost labor in a host country. we expect that NIE firms with more superior capabilities in labor intensive production than the indigenous competitors are more likely to invest for labor-seeking purposes in LDCs. assuming that foreign firms can gain access to low cost labor more easily in LDCs than in DCs. Assuming that the firm's access to a low cost labor force is easier in LDCs than in DCs. non. than those firms with no such capabilities.or semiskilled labor. whereas they preferred assembling final goods in high income markets for such reasons as protectionism or because of fast changing consumer demands. they would better exploit the low cost labor and hence gain higher returns than the competitors in the same host country (Hymer. Kumar (1998) suggested that an increasing number of NIE manufacturers (Korean firms) have made numerous trade supporting investments in DCs. VOL. to benefit from investment incentives. No. to produce products close to local markets. if foreign firms possess advantages in superior labor intensive production capabilities over the indigenous competitors in a host country.

or had closed down already. which underlies the previous literature (e. Firstly. We also focused only on FDI in manufacturing sectors in order to avoid possible industry effects on the choice of FDI location. 1977. where market size is relatively small. We excluded the cases of the firms investing in NIEs from the sample. 1983). Of the returned questionnaires.312 were usable. Hypothesis 3c: NIE firms are more likely to invest in LDCs than in DCs for market-seeking purposes when they possess more superior labor intensive production capabilities than indigenous competitors in a host country.g. retreated from investing overseas. Hong Kong. NIE firms tend to invest in high income countries to produce differentiated goods to high income customers. Taken together. Hypothesis 3b: NIE firms are more likely to invest in DCs than in LDCs for market-seeking purposes when they possess more superior technologybased capabilities than indigenous competitors in a host country. The sample included the Taiwanese firms that had invested or had the intention to invest overseas. To gain higher returns than indigenous firms in the host country. and South Korea. and in DCs when they have superior technological capabilities over the firms in the host countries. than in LDCs. 1.. The cases excluded from the original sample included the cases of the firms that invested in newly industrialized economies (NIEs) such as Singapore. The questionnaire was sent to 2. The above discussion also suggests that.712 randomly selected Taiwanese manufacturing firms that were registered in the Foreign Investment Commission as of September 1996. Hypothesis 3a: NIE firms are more likely to invest in DCs than in LDCs (except large LDCs) when their primary purpose of investment is to explore market opportunities. ceteris paribus. BUSINESS STUDIES JOURNALOF INTERNATIONAL . only 328 cases were selected for the analysis in this study. The usable sample represented 92% of the effective size. and those firms which had invested in non-manufacturing sectors. since the total number of Taiwanese firms investing in China was conspicuously large (about 70% of the total cases). we expect that market-seeking FDI by NIE firms would occur more likely in LDCs when they have superior labor production capabilities. and LDC markets to produce labor intensive goods to low income customers. Wells. Secondly. we consider that the results of the analysis might have a bias towards the firms investing in China. and in China. and superior labor intensive production capabilities to produce more low cost standard goods to the customers. where market size is relatively large. China is different from other LDCs in terms of market size as well as cultural connections and may not fall into a regular LDC category.ASSET-EXPLOITATION VERSUSASSET-SEEKING likely in DCs. RESEARCH METHODOLOGY Sample A sample used in the present study was based on a survey conducted in 412 1996 by the Statistics Department of the Ministry of Economic Affairs in Taiwan. Of the total cases available. not those in other NIEs. NIE firms need to possess superior technological capabilities to produce more unique differentiated goods. We excluded the cases of the firms that had invested in China for two major reasons. because our primary purpose in the present study was to examine the determinants of NIE firms' FDI in DCs and LDCs. The non-responding firms were those which had not started actual investment.

leather products.K.YEH CHUNG-MING RHY-SONG SHIGE LAU. two Oceanic countries. The variable was defined by a dummy variable. clay & glass products Primarymetal Fabricatedmetal products Machinery & equipment Electronic equipment Transportationequipment Instruments LDC* 18 18 2 11 10 6 3 15 1 9 21 1 7 31 9 55 6 4 DC 2 1 1 1 3 4 1 11 3 3 4 58 1 3 Total 18 20 2 11 11 7 1 6 19 10 32 4 7 34 13 113 7 7 Miscellaneous manufacturing Total 4 231 1 97 5 328 *The cases of inward FDI in China are not included. We classify countries in North America (U. and countries in Middle/South America. Table 1 provides the distribution of FDI locations across industries. Australia and New Zealand. either DCs or LDCs. VOL. lumber & wood products petroleum & coal. A dependent variable (LOCATION) represents the investment location. Firms in electronic equipment industry had the largest number of investment both in LDCs (55 cases) and in DCs (58 cases). and Japan into the DC category. Firms in most industries tended to have more investments in LDCs than in DCs.S. Western Europe (U. In some industries such as textile. firms had no investments in DCs. The independent variables used in the analysis consist of three capability-related and three motivation-related variables. France. 2002 413 . Africa. The firms were asked to choose their most representative FDI based on the amount of investment and TABLE 1 BY DISTRUTION OF FDI LOCATION INDUSTRY Industry Textile Apparel Leatherproducts Lumber& wood products Furniture Paper mills & paper products Printing & publishing Chemical materials Chemical products Petroleum & coal products Rubberproducts Plastic products Stone. No. primary metals. and ASEAN countries into the LDC category. MAKINO.. and Canada). The first two capability-related variables represent advantages in labor intensive production capability (LABORCAP) and advantages in technology- Variables The hypothesized relationships were examined using logistic regression analysis. 3. indicate the location of the FDI from a list of 18 countries and regions. and "0" when it invested in a LDC. coded "1" when the firm invested in a DC. 33. THIRDQUARTER. and others).

and "0" otherwise. With this evidence. Nonetheless. Three variables were used in the analysis to control for possible subsidiary age. local market expansion (MARKETSEEK). These variables were measured on a dichotomous scale (high-low). some may argue that what is being tested in our study would actually be the extent to which the managers' perceptions are consistent and rational rather than the capabilities of the firms. FOUNDATION was meaJOURNAL OF INTERNATIONAL BUSINESS STUDIES . and "0" otherwise. Leiter. which was defined by a dummy variable. 414 we assume that firms with advantages in technology-based and labor intensive production capabilities (TECHNOLOGY and LABORCAP) tend to be large in size and attain higher overall performance in their overseas activities than those firms without such advantages. self-reported measures are commonly used.f. research has found that perceived measures were correlated positively with objective measures.ASSET-EXPLOITATION VERSUS ASSET-SEEKING based capability (TECHNOLOGY). and excellent). Here. Since managers of each firm may have different evaluation criteria and different reference groups for comparison of advantages. the results of t-tests (both parametric and non-parametric tests) suggest that both the firms with advantages in technology-based capability (TECHNOLOGY=1) and those firms with advantages in labor intensive production capabilities (LABORCAP= 1) had a significantly larger number of parent firm employees and a significantly higher level of perceived performance than those firms with no such advantages. respectively. and "0" otherwise). and Thompson (1994) suggest that a comparative method is more effective in eliciting responses than asking respondents directly to provide exact numbers for performance. Tomaskovic-Devey. we conducted two additional analyses. and technology seeking (TECHSEEK). satisfactory. coded "1" when the firm had a prior experience of technology seeking with DC firms through licensing or OEM agreements. we consider that there exists no critical self-reporting bias in our sample. 1996). coded "1" when the firms possessed relative advantages in the respective areas over their competitors in a specific product market domain in the host county. The firms were asked to indicate their relative advantages in a particular product market domain over the indigenous firms in the host country. Delaney and Huselid. These variables were constructed from their indication of reasons for investing overseas along different dimensions. firm size (EMPLOYEES). and defined by a dummy variable (coded "1" when the firms had the described motivations. Although there is the danger of self-reporting bias. especially in strategic human resource management and strategy research where objective measures are not directly comparable (c. entry mode (MODE). entry mode. Note that the first two capability variables (LABORCAP and TECHNOLOGY) are self-reported measures. Another capability variable is an investing firm's prior technology seeking experiences at arm's length (EXPERIENCE).2 The motivation-related variables represent access to local labor force (LABORSEEK). We used the two measures available in the database as proxy for the firm size and performance: the number of employees (a parent firm) and the perceived performance of overseas operations measured by a three-point scale (unsatisfactory. and percentage of overseas sales (FOREIGNSALES). Consistent with our expectation. and parent firm size effects on the choice of FDI location: year of foundation (FOUNDATION). To examine potential problems of self-reporting bias in our study.

and 3a. The results of the analyses are summarized as follows.SHIGE MAKINO. coded "1" when the firm possessed more financial assets than indigenous firms in a host country. coded "1" when the firm's foreign affiliate was a joint venture. where they do not have substantial control over local operations. RESULTS The results of the analyses are presented in Table 3. 2a. we included a financial asset dummy variable (FINANCE). MODE was defined by a dummy variable. although the signs of the coefficients of these variables were consistent with the predicted directions. Consistent with Hypotheses la. First. THIRD QUARTER. The results provided in Models 4 and 6 suggested that the two interaction variables. The correlation matrix is presented in Table 2. No. the year of observation in the present analysis. EXPERIENCE x TECHSEEK (Model 3). than when they did not possess such advantages and experience. We included this variable to control for possible industry bias because the majority of FDI cases in DCs (113 cases) were in the electronic equipment industry.4 Further. LABORCAP x LABORSEEK and LABORCAP x MARKETSEEK. DISCUSSION This study examined the impact of both the capabilities and motivations of Taiwanese firms on the choice of FDI location between DCs and LDCs. the NIE firms engaging in strategic asset-seeking FDI were more likely to invest in DCs over LDCs when they possessed advantages in technology-based capability over indigenous firms (Hypothesis lb) and prior seeking experience (Hypothesis Ic). and "0" when it was a wholly-owned subsidiary. we created four interaction variables. Firms with a large amount of financial resources may treat FDI as a portfolio investment. Thus.e. We also included an electronics industry dummy in the analysis (ELECTRONICS).. had a significant and positive impact on the dependent variable. RHY-SONG YEH sured by the number of years between the year of establishment and 1996. CHUNG-MING LAU. and "0" otherwise.3 EMPLOYEES was measured by the total number of employees of parent firms. The proposed hypotheses were generally supported in this study. our results (Model 1) suggested that technology seeking motivations (TECHSEEK) and market-seeking motivations (MARKETSEEK) were both significantly associated with investment in DCs. FOREIGNSALES was measured by percentage of a parent firm's overseas sales relative to its total sales. We included this variable to control for this possibility. Second. Hypotheses 2b and 3c were rejected. The implications of these results are twofold. 415 . which suggests no critical multicollinearity problems for logistic regression analysis. 2002 LDCs. TECHSEEK and MARKETSEEK). were not significant. 3. 33. and the coefficients of these interaction variables were all greater than those of the original motivation variables (i. coded "1" when the subsidiary's industry was electronic equipment and "0" otherwise. the NIE engaging in market-seeking FDI were more likely to invest in DCs over LDCs when they possessed advantages in technology-based capability over indigenous firms (Hypothesis 3b). and TECHNOLOGY x MARKETSEEK (Model 4). In order to examine the moderating effects of a firm's capabilities on the impact of the firm's motivations on the location choice. The results indicated that the three interaction variables. TECHNOLOGY x TECHSEEK (Model 2). and labor-seeking motivations (LABORSEEK) were significantly associated with investment in VOL.

09 0.06 0.02 0.06 0.31 -0.10 0.12 -0.61 0. Variables Choice of location: LDC = 0.46 5.T^ TABLE 2 CORREIATION MATRIX Std.05 -0.48 0.42 0.07 0.48 -0.00 1 2 3 4 5 0.50 0.06 N= 328 tn[ I~ .04 -0.04 -0. JV=1 4 EMPLOYEES Total # of employees 5 FOREIGNSALES Percentage of overseas sales 6 ELECTRONICS Industry dummy (Electronics =1) 7 FINANCE Financial resources 8 LOBOOCAP AdventAges in labor intensive 1 LOCATION Mean 0.50 -0.49 -0.04 0.00 0.73 0.00 -0. 0.01 0.02 0.34 0.16 0.48 0.13 0.02 -0.35 -0.12 0.35 0.03 -0.04 -0.06 0.36 0.32 0.49 0.07 -0.01 0.37 -0.32 -0.35 0.01 0.11 -0.04 -0.02 0.61 Dev.83 0.07 -0.49 -0.50 0.12 -0.14 0S production capability 9 TECHNOLOGY 10 EXPJK NCE 11 LABORSEEK 12 MAXKETSEEK 13 TECHSEEK Advantages in technologicalbased capability Prior seeking experience through licensing or OEM Labor-seeking FDI Market-seeking FDI Strategic asset-seeking FDI 0.05 0.99 -0.21 0.50 0.06 231.02 4.16 0.16 0.01 -0.48 0.60 0.08 -0.30 79.10 0. DC=1 2 FOUNDATION Year of foundation 3 MODE Entry mode: WOS = 0.19 2.12 395.07 0.08 0.15 0.

0 85.352) 0.188 (0.144 (0.063) 1.634 (1.347) -1.356) -0.51 328 (% (% 'Figures shown are beta coefficients of the logistic regressions.365) -1.885* (0.3 .47 328 -0.673** (0.510) 1.354) 1.424 (1.063) 1.065) 1.524) -0. *p<.53 94.160*** Capability EXPERIENCE (0.344) -1.355) Motivation MIARKETSEEK 0.YEHl SHIGEMAYINO.675 (0.919*** (0.027 (0.156 MODE Control (0.072 (0.923) 159.708*** (0.349) .53 NagelkerkeR' DC cases correctly classified 94.160*** (0.951) 156.5 .023 (0.959) 1.063) 1.000) -0.355) -0.353) -0.345) -1.345) -1.0 Overall classification rate (% 86.158 (0.0l.023) -0.53 328 1.689** (0.186*** (0.180** Motivation TECHSEEK (0.359) 0.955*** (0.976*** (0.704 (1.4 67. ***p<.355) 1.922) 156.572) X Interaction TECHNOLOGY TECHSEEK X Interaction EXPERENCE TECHSEEK X LABORCAP hinteraction LABORSEEK X Interaction TECHNOLOGY MARKETSEEK Interaction LABORCAP)( MARKETSEEK 1.54 93.000 EMPLOYEES Control (0.692*** (0.353) 0.351) 0.027 (0.471) 1.342) -1.055 (0.0* .150 (0.361) 0.147) Model 4 -0.515 Constant (1. AChi-square .152*** Capability LABORCAP (0.356) -1.000) -0.345) -0.920* (1.453) -0.153*** (0.669) 1.4 LDCcases correctly classified 67.054 (0.855) 1.9 66.3 .051 (0. No.334) Capability TECHNOLOGY -0.7 .262*** (0.000) -0. **p<. R.353) 0.CHUNG-MING LAU.592) Model 6 -0.2*** 13 0 .358) 0.54 93.256*** (0. THIRD QUARTER.682) 1.179** (0.344) -1.158 (0.027 (0.53 328 1.7* .166*** (0.474) 0.023*** ElECTRONICS Control (0.650) 1.975*** (0.024) -0.944** (1.154 (0.055 Control (0.477) 1.1 86.277 (0.053 (0.397) 1.4 .023*** (0. Figures in the parenthesis are standard errors.336) -0.127*** (0.838*** (0.HY-SONG TMJLE3 AuNAYSIS' OF RIESUILTS LOGISTC REGRIFSSTON (LDC= 0 and DC = 1) Dependent variable:LOCATION ModelI Control FOUNDATION -0.5 69.358) 1.341) -1.000 (0.000 (0.051 FINANCE Control (0.551) 1. 3.1 63.3 .150 (0.338) -0.026*** (0.055 (0.027 (0. 200247 417 .356) -0.000) -0.370) 0.072 (0.484 (0.353) -0.54 93.0* .05.497) 0.343) -1.024) -0.357) 0.666*** (0.063) 1.142 (0.056** (0.356) -0.062** (0.675) 1.f.2** 13 3.9 84. 33.10 (One tail test) VOL.044** (0.1.024) -0.000) FOREIGNSALES-0.470) 1.5 66.571) -0.056 (0.3** 13 0.000 (0.925) 158.127*** (0.054 (0.0 86.016*** (0.341) -1.056 (0.544 (1.643** (0.488 (1.2** Model Chi-square 12 d.019*** (0.0 85.000 (0.693*** Motivation LABORSEEK (0.1 .000) -0.025 (0.53 Lambda-p 328 N Model 2 -0.381) Model 3 -0.53 93.9** 13 2.572) Model 5 -0.180** (0.363) 0.008*** (0.50 328 1.034*** (0.063) 1.934) 159.359) 1.175 (0.023) -0.039 (0.2** 13 3.000 (0.027 (0.024) -0.966) 156.

more comprehensive studies are needed to investigate how asset-seeking and asset-exploitation aspects of FDI are dynamically linked in the choice of FDI location. most previous studies have examined only either side of the motivations in explaining the location of FDI. Hedlund and Ridderstrale. Technology-based advantages also strengthened the likelihood for the firms to invest in DCs when they had market-seeking motivation. This evidence suggests that the firms' motivation to invest in a particular location is pertinent to countryspecific factors in the host country. one of the key findings in our study is that the NIE firms were more likely to invest in DCs when they had strategic asset-seeking motivations and absorptive capacity (prior technology sourcing experience). irrespective of whether they possessed advantages in labor intensive production capability. 1996). our study also suggested that the likelihood for the firms to invest in a particular location was significantly influenced by the types and degree of the capabilities that the firms possessed. Especially. As we discussed earlier. our evidence showed that the NIE firms with labor-seeking motivations tended to invest in LDCs. access to created country-specific en418 dowments such as strategic assets owned by indigenous firms may require the investing firms to possess certain forms of firm-specific absorptive capacity because the acquisition and integration of such endowments (assets) are difficult and costly due to tacit and organizationally embedded nature of the endowments (assets) (Makino and Delios. One interpretation of this result is that access to natural country-specific endowments such as pooled low-cost labor markets in a LDC does not necessarily require the investing firms to possess firm-specific advantages in labor intensive production capabilities because such endowments are available for any firms located in the same country (or location). Another important question is whether both types of FDI would require different organizational structures and processes of investing firms. and how the choice of FDI location influences the process of development of competitive advantage of the MNC. however. If we can consider a market-seeking FDI as a typical case of asset-exploitation FDI. First. In contrast.. Although some researchers have recently touched upon these issues (e. Second. the NIE firms tended to invest in DCs when they had strategic asset-seeking and market-seeking motivations. Second. supporting the idea that FDI is used as a means to gain access to comparatively advantaged country-specific assets in the host country. and in LDCs when they had labor-seeking motivations. There are several implications for the future study. more conceptual investigations BUSINESS STUDIES JOURNALOF INTERNATIONAL . This begs important questions of how the firms had developed the absorptive capacity and why they were motivated to seek more. With regard to labor-seeking FDI. we suggest that technological advantages facilitate both asset-exploitation and assetseeking FDI in DCs. Future studies should incorporate both aspects of FDI motivations into the analysis simultaneously. our evidence suggests that the NIE firms' choice of FDI location between DC and LDC be determined by both asset-exploitation and strategic asset-seeking motivations. 1997). Our evidence suggested that technologybased advantages and prior strategic asset-seeking experience strengthened the likelihood of FDI in DCs when the NIE firms' primary motivation was strategic asset-seeking.ASSET-EXPLOITATION VERSUS ASSET-SEEKING First.g.

as exemplified by Dunning's early model of eclectic paradigm. The "why" question generally involves the issues of whether a firm possesses proprietary resources or capabilities that can be exploited or internalized across borders under the common ownership. Future studies should conduct more detailed examinations of possible interaction effects between firm-specific and countryspecific factors on the location choice of FDI. NOTES 1. International Expansion Strategy of Japanese Firms: Capability Building through Sequential Entry. REFERENCES Almeida. However. 1971. previous studies have extensively examined why MNEs exist and where FDI is likely to take place. Our evidence shows that a firm's choice of FDI location was influenced significantly by the investing firms' specific motivations and capabilities. which suggests that the effects of location and ownership advantages on the location choice might be better specified as interactions than as direct effects (Dunning. Buckley. Recent studies found that international joint ventures took a variety of ownership structure according to the VOL. Finally. the affiliatedness. Strategic Management Journal. Administrative Science Quarterly. To examine the possible industry bias in our analyses. 38: 383-407.. Semiconductor Industry. Wesley M. 35: 128-152. 17: 155-165. We are very grateful to one of the reviewers for helpful advice for clarifying the conceptual difference between motivation and capability. Beamish. Thus. & Daniel A. & Mark Casson. Academy of Management Journal.SHIGE MAKINO. 1990. The "where" question generally involves the issues of location advantages that can attract inward FDI. and Makino. 1976. One group included a sample of the firms in the electronic equipment industry and the other group included a sample of the remaining observations. as well as the levels of resource commitment. Knowledge Sourcing by Foreign Multinationals: Patent Citation Analysis in the U. Caves. The Future of the Multinational Enterprises. due to the limitation of the data. 1995. Chen. THIRDQUARTER. Levinthal. 2000). 419 .. however. Paul. Richard E. 1998). Peter J. 3. Absorptive Capacity: A New Perspective on Learning and Innovation. 1996. However. Industrial Corporations: The Industrial Economics of Foreign Investment. 33. We ran separate regression analyses for each group and found no substantial differences in the results. we have to acknowledge that our findings should be interpreted with caution. we simply defined a joint venture as a subsidiary with a shared ownership structure. more detailed analysis may be necessary to examine the possibility of a self-reporting bias. 1994). & Tain-Jy Chen. 2. 1998. 4. Sea-Jin. 38: 1-27. Economica. the analysis beyond this is not feasible. Network Linkage and Location Choice in Foreign Direct Investment. 2002 number. Homin. In this study. Journal of International Business Studies. We admit that a further. and the nationality of partners (Makino and Beamish. RHY-SONG YEH should be pushed forward to make the theory more complete and relevant. and risks shared among partners (e. 3.g. we divided the sample into two groups. London: Macmillan. Cohen. No. a majority of the previous studies have examined the "why" and "where" questions separately. CHUNG-MING LAU. 29(3): 445-467. Chang. control. Woodcock.S.

Multinationals from Developing Countries.ASSET-EXPLOITATION VERSUSASSET-SEEKING Delaney. In Brian Toyne and Douglas Nigh. Multinational Enterprises and the Global Economy. 1983. Globalization. New York: Oxford University Press: 315-342. Multinational Enterprises in Less Developed Countries. editors. Dunning. Kumar. Journal of International Business Studies. 1993.1991. . Technological Capabilities and Japanese Foreign Direct Investment in the 420 United States. 27(5): 905-927. Dunning. John T. Columbia. New York: St. Nagesh. Kogut. MA: MIT Press. Re-appraising the Eclectic Paradigm in an Age of Alliance Capitalism. Martin's Press: 163-180. MA: D. 1993. Michael J. Lexington. Lecraw. Tony S.. & Udo Zander. Makino. Hymer. Buckley & Jeremy Clegg. In John H. Strategy. 24(4): 625-645. 1998. Local Transfer and Knowledge Performance: Implications for Alliance Formation in Asia. McLeod. Transnational Corporations in Host Developing Countries: A Preliminary Report. The International Operations of National Firms: A Study of Direct Foreign Investment. 1997. 29: 442-457. Frost. London: 390-423. Multinationals: The Spread of Third World Enterprises. International Business Review. Ojan Solvell. 29(1): 45-66. 1993. Regional Clusters and Firm Strategy. 1985. Academy of Management Journal. Bruce. Health and Company. In Alfred D. New York: Addison-Wesley. Wiley: . The Geographic Sources of Foreign Subsidiaries' Innovations. . & Mark A. . The Impact of Human Resource Management Practices on Perceptions of Organizational Performance. Multinational Enterprises. Performance and Survival of Joint Ventures JOURNAL OF INTERNATIONAL BUSINESS STUDIES . Toward a Theory of the Selfrenewing MNC. Strategic Management Journal. 24(3): 589-600. and Regions. 1996. 1981. Singapore. & Sea-Jin Chang. & Jonas Ridderstrale. 9(2): 163190. 22(2): 101-123. Hedlund. editor. Direct Investment by Firms from Less Developed Countries. The Eclectic Paradigm as an Envelope for Economic and Business Theories of MNE Activity. The Dynamic Firm: The Role of Technology. Organization. 1977. 1991. Gunnar. Beamish. 26(3): 461-491. In Peter J. 73: 401-413. Oxford Economic Papers. 1998. New York: Routledge. & Maxwell G. and International Competitiveness. Sanjaya. Location and the Multinational Enterprise: A Neglected Factor? Journal of International Business Studies. Foreign Direct Investment and Technology Transfers: Impacts on and Prospects for Developing Countries. Journal of International Business Studies. Enlight. 1976. Stephen H. International Business: An Emerging Vision. 1998. Donald J. 1998. editors. 1995. Huselid. The Review of Economics and Statistics. . & Andrew Delios 1996. Shige. editors. . 2001. & Paul W. The New Lall. Journal of International Business Studies. Outward Direct Investment by Indonesian Firms: Motivation and Effects. Journal of International Business Studies. New York: Wiley. Krishna. Kumar. John H. 2000. Peter Hagstr6m.C. Cambridge. 39(4): 949-969. . Economic Structure. SC: University of South Carolina Press: 329-354. Knowledge of the Firm and the Evolutionary Theory of the Multinational Corporation. . Chandler.

Roger. Journal of International Business Studies. 34(2): 88-106. Foreign Investors from the Third World. MA: MIT Press: 133-156. 1999. van Hoesel. 28(2): 267-284. Journal of International Business Studies. editors. In Krishna Kumar & Maxwell G. VOL. 1994. 33. editors. In Tamir Agmon and Charles P. Administrative Science Quarterly. RHY-SONG YEH with Non-conventional Ownership Structures. Paul W. March. Organizational Survey Nonresponses.. Multinationalsfrom Developing Countries. . Health and Company: 101-114. Tomaskovic-Devey. Inside the Multinationals: The Economics of Internal Markets.C. Direct Investment and Technology Transfer. New Multinational Enterprises from Korea and Taiwan: Beyond Export-led Growth. David J. D. Cambridge. 1991. editors. Third World Multinationals: The Rise of Foreign Investment form Developing Countries. Cambridge. Beamish. 29(4): 797-818. MA: D. 2002 421 . Foreign Direct Investment and the Sourcing of Technological Advantage: Evidence from the Biotechnology Industry. & Shealy Thompson. Foreign Investment and the Technological Development in Silicon Valley. Rugman. Jeffrey Leiter. Wells. 1981. CHUNG-MING LAU. THIRDQUARTER. 1981. Shan. Unpublished Ph. New York: Routledge. Donald. Woodcock. New York: Columbia University Press. Louis T. Kindleberger. 1992. McLeod. An Alternative Motivation for Foreign Direct Investment. 1983.D dissertation. Weijian. 1993. In Krishna Kumar & Maxwell G. McLeod. Alan M. Wesson. 1977. 1994. 1981. 1997. 3. 39: 439-457. California Management Review. The Internationalization of Firms from Developing Countries. Mass. & Shige Makino. Multinationals from Small Countries. 2(1): 71-87. Journal of International Business Studies. Teece. Lexington. Lexington. & Chi Schive.C. No. Patrick. Wen-Lee. 25(2): 253273. Ting. Health and Company: 23-36. & Jaeyong Song. MA: MIT Press. Thomas J. Harvard University. Exploitation and Exploration in Organizational Learning.SHIGE MAKINO. Organization Science. James G. . C. Multinationals from Developing Countries. Ownershipbased Entry Mode Strategies and International Performance.