Resource Commitment, Entry Timing and Market Performance of Foreign Direct Investments in Emerging Economies: The Case of Japanese International Joint Ventures in China

Resource Commitment, Entry Timing and Market Performance of Foreign Direct Investments in Emerging Economies: The Case of Japanese International Joint Ventures in China

By David Bruce Montgomery, Takehiko Isobe, Shige Makino
1998Working Paper No. 1538

As emerging economic regions (EERs) play a significant role in global economies, managers of multinationals have become increasingly aware of the importance of relevant international expansion in these regions. Facing potential market opportunities, the managers are eager to gain first-mover advantages and build technology leadership in the EERs. However, given nontrival uncertainties in EERs, the efforts to be first movers and technology leaders in these regions may not result in successful performance. This study examined whether first movers and technology leaders would attain superior performance in EERs. Building on the literature on entry strategy, we focused on two key constructs of entry strategy: resource commitment and timing of entry. We argued that the former would increase the likelihood that firms gain technology leadership, and the latter is related to first-mover advantages in the local marketplace. The study examined botht he determinants and (JVs) in China. The results suggest that both resource commitment and speed of entry had positive impacts on the perceived economic performance of the JVs, suggesting that first movers and technology leaders did attain superior perceived performance in EER markets. Yet, this relationship was found to be significantly contigent upon several internal and external factors, such as the strategic importance of the investment, the extent of parental control within the JV, and the availability of complementary assets.