Title: Outward foreign direct investment from Indian manufacturing firms - does transaction cost theory explains early choices?

Authors: Vinish Kathuria

Addresses: Shailesh J. Mehta School of Management, Indian Institute of Technology (IIT) Bombay, Powai, Mumbai – 400 076, India

Abstract: The objective of the paper is to see whether transaction cost theory explains early choices of Indian multinationals, when outward foreign direct investment (OFDI) policy was still not liberal. This is done through three research questions: 1) what determines choosing between joint venture (JV) and wholly-owned subsidiary (WOS) for Indian manufacturing firms; 2) whether factors are different from the one for the developed country firms; 3) do they differ if investment is made in another developing country vis-à-vis a developed country setting. The analysis is carried out on a sample of 88 WOS and 162 JVs made by 142 firms. Results indicate that different transaction cost variables influenced entry choice in developed countries vis-a-vis developing countries.

Keywords: foreign direct investment; internationalisation; diversification; joint ventures; wholly-owned subsidiary; WOS; emerging market multinationals; transaction cost theory; India.

DOI: 10.1504/IJCM.2018.093249

International Journal of Comparative Management, 2018 Vol.1 No.2, pp.133 - 161

Received: 03 May 2017
Accepted: 06 Oct 2017

Published online: 24 Jul 2018 *

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