Determinants of EMNEs’ Entry Mode Decision with Environmental Volatility Issues: A Review and Research Agenda

Abstract

Emerging market multinational enterprises (EMNEs) play a vital role in global economic development and usually adopt aggressive internationalization strategies. However, the volatile global environment has caused EMNEs to face various risks in their overseas expansion. To maximize the competitive advantages and achieve successful expansion, EMNEs should choose the most suitable foreign entry mode. Therefore, EMNEs need to understand what environmental factors affect their decision-making and how they influence the choice of entry modes, especially in a volatile environment. This review examines 44 selected journal articles from 1996 to June 2021 on the environmental volatility determinants of EMNEs’ entry mode choice. The entry mode choice we examined is mainly wholly-owned subsidiary versus international joint venture. We categorized the environmental volatility determinants investigated in the literature we reviewed into country-level factors (such as cross-national distance) and industry-level factors (such as industry condition). The main contributions are: (1) the review reveals three research gaps in extant studies, which are lack of research on external environmental factors, lack of research on multinationals from less concerning emerging economies, and lack of research on small-to-medium (SMEs) enterprises. (2) Practically, the study highlights the importance of understanding external environmental factors for EMNEs to make the most suitable entry mode decisions.

FDI and Institutions in BRIC and CIVETS Countries: An Empirical Investigation

“…The international capital allocation is determined by the operation of multinational enterprises (MNEs), which hold and control capitals and revenues in two or more countries (Dunning 1973;Dunning and Lundan 2008). FDIs can be implemented as greenfield (GF) investments, which refer to the creation of a subsidiary abroad from the ground up to take advantage of complementarities, or as cross-border mergers and acquisitions (M&A), which include the transfer of ownership of an existing asset (Moghadam et al 2019;Li et al 2021). Additionally, FDIs can be either horizontal, which are applied by MNEs that undertake the same activities in multiple countries, or vertical, which include several fragments of the production process and each stage is located in a country where it is performed at minimum cost (Dunning 1993;Pečarić et al 2021).…”

Green Process Innovation on Msmes Performance Moderate Perceived Environmental Volatility: Study on Food and Beverage MSMEs in Solo City

“…H1: green process innovation has a positive effect on the performance of MSMEs. Environmental volatility conditions the deployment of capabilities aimed at environmental strategies and improving firm performance (Li et al, 2021;Zheng et al, 2021). Companies are limited by the possibility of environmental volatility which ultimately influences strategic actions (Kiyabo et al, 2020).…”

Home Countries Matter for the Internationalisation of Emerging Market Multinational Enterprises

“…The theoretical contributions of these five articles vary between different perspectives. Li et al (2021) have reviewed the determinants of EMNEs' entry strategies when considering volatile external environments. They claim that institutional theory and transaction cost economics are the two most prevalent theories in discussing environmental impacts on EMNEs' entry strategies among the reviewed studies.…”

“…The fifth article by Li et al (2021) (Determinants of EMNEs' Entry Mode Decision with Environmental Volatility Issues: A Review and Research Agenda) reviews the internationalisation strategies of EMNEs. As EMNEs have higher risk tolerance compared to DMNEs, they may adopt different entry strategies in host countries even during a volatile global environment.…”