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Entry Mode Choice between Wholly-Owned Subsidiary and Joint Venture: A Case Study of the Automotive Industry in India

Volume 6, Number 6, November 2010 -Paper 7 - pp. 605-614

HWY-CHANG MOON1, and DA-BIN KWON2

1  Professor: Graduate School of International Studies, Seoul National University, Seoul, South Korea, 151-742
2  Researcher: Graduate School of International Studies, Seoul National University, Seoul, South Korea, 151-742

(Received on October 19, 2009, revised on May 06, 2010)

Abstract:

This paper compares two competing entry mode choices-wholly owned subsidiary and joint venture-utilized by the Korean and Japanese automakers in India. The motivation of entry into India is explained by the extended diamond model through an analysis of country-specific and firm-specific factors. The result shows that Hyundai Motors exploited the country-specific factors by establishing a wholly-owned subsidiary and Suzuki Motors appropriated firm-specific factors using a local partner. While existing studies generally argue on types of entry mode chosen over others as a guideline for entering a foreign country, this paper demonstrates that both wholly-owned subsidiary and joint ventures can be successful depending on the situation. An important implication related to this finding is that policy makers have to consider not just engineering performability, but also other business performability aspects such as marketing and management capabilities.

 

References: 31

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