Determinants of entry mode choice of MNCs in emerging markets: evidence from South Africa and Egypt

Sumon Bhaumik, Stephen Gelb

Research output: Contribution to journalArticle

Abstract

It is now stylized that the importance of foreign direct investment for developing countries and emerging markets arises from the impact of the presence of multinational corporations (MNCs) in the host country on the productivity of local firms, by way of technology diffusion and competition. There is also general agreement that the extent of technology transfer by an MNC to a developing country affiliate depends on the extent of its control on the local affiliate and that, in turn, the extent of this control depends on the mode of entry of the MNC into the host country. However, the existing literature is based on the experience of developed countries and as such does not contribute to the literature on development economics. This article addresses this lacuna using unique firm-level data from South Africa and Egypt. Our results indicate that the determinants of entry mode choice not only differ between developed and developing countries, but also among developing countries. They also bring into question the role of MNCs in fostering productivity growth in developing countries.
Original languageEnglish
Pages (from-to)5-24
Number of pages21
JournalEmerging Markets Finance and Trade
Volume41
Issue number2
Publication statusPublished - Mar 2005

Keywords

  • entry mode choice
  • local institutions
  • local knowledge
  • multinational corporations
  • technology transfer
  • MNC

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