Resource Combination,Combinative Capability, Multiple Institutional Differences,and International Market Entry Mode Choice

Since China’s entry into World Trade Organization, the internationalization of Chinese firms has developed quickly. Despite of the great achievement, the internationalization of Chinese firms still stands in a relatively low level. The constraints for the further improvement of Chinese firms’ internationalization are the weak international management capability inside the firms on the one hand, and the multi-dimensional and complex international environment outside the firms on the other hand.Entry mode choice is the core of firm’s international strategic decisions, as well as the key topic in international business research all the time. Since the long time development, three mainstream theories-transaction cost theory, institutional theory, and resource-based view-have formed. However, there are still two major limitations in current studies. First, there are still many overlaps and controversies between transaction cost theory and resource-based view, which is worth further clarifying. Scholars have found that it is neccerary to distinguish the firm specific resource that firms need to transfer with the combinative capability that firms utilize to control or promote the transfer. Nontheless, the exploration remains in the theoretical stage, while it still lacks the empirical studies in the filed of entry mode choice. Second, the utilization of institutional factors in current studies is over general. Although scholars have already noticed that, the institutional factors would include various aspects such as political factors and cultural factors, and utilized different aspects of institutional factors simutaneously, most of current studies make the predictions based on different institutional dimensions with same direction, without precisely distinguishing the potential different effect from different institutional factors in different contexts.The two practical challenge Chinese firms confronted exactly correspond to the latest theoretical focus of entry mode research. The research problem of this dissertation just lies in the common focus of both practical background and theorectical background-in a multi-dimensional institutional environment constitute of political and cultural issues, how does the consideration towards the combination between firms’specific resource and the resource in host market, and the combinative capability influence the entry mode choice of Chinese firms. This basic problem includes three sub-problems. (1) As two different types of resource/capability, what is the difference between the roles played by specific resource and combinative capability in entry mode choice? (2) As two key pillars of institutional environment, what is the difference between the impacts of political issues and cultural issues towards the entry mode choice of a firm with multiple types of resources? (3) When considering the influence of combinative capability and multiple institutional environments, how would the impact of combinative capability vary?Towards these three research problems, this dissertation builds up a three-stage research model, which respectively investigates the moderation effect of combinative capability on the influence of resource combination, the moderation effect of regulative difference and cultural difference on the influence of resource combination, and the the variation of the moderation effect of combinative capability in different groups categorized by the level of regulative difference and cultural difference, and proposes relative research hypothesis. Through an empirical study based on the secondary data from the sample of 538 outward foreign direct investments carried out by 210 Chinese listed companies from 2008 to 2012, this dissertation finds out that:First, in the entry mode choice of Chinese firms, the impact of combinative capability mainly demonstrates a kind of mode substitution effect. That is, firm’s base of specific resource forms a certain requirement about the acquisition, transfer and combination of resources in the entry mode choice, while a stronger combinative capability would help to achieve these resrouce combination objectives, which weakens firm’s requirements towards certain ownership or establishment mode to achieve the objectives. The confirmation of the mode substitution effect prove that resource-based view provide transaction cost theory with a beneficial supplement in such a way. which responds the query of transaction cost theory toward the contribution of resource-based view in explaining entry mode choice, and provides a reference for the integration of these two theories in other fields.Second, different types of institutional differences do have different impacts towards the transfer of different types of resources. Regulative difference moderates the influence of technological resource more significantly, while cultural difference modertes the influence of marketing resource more significantly. This finding supplement the explantion of institutional theory on entry mode choice in more detailed dimenstions, which would deepen our understanding towards the influence of institutional factors.Third, when institutional differences vary, combinative capability demonstrate the expectant function from its theoretical definition, showing more significant moderation effect in the group with higher institutional differences, but occur with the transfer barrier of combinative capability itself with the increase of institutional differences, which means the failure of its moderation effect. This finding clarifies how the moderation effect of combinative capability in entry mode choice changes according to the variation of institutional differences, which supplement the explaination on this junction point between resource-based view and institutional theory, and provide clearer understanding towards the boundaries in which the combinative capability would impact.These theoretical contributions also leads to relavant insights for the international management practices of Chinese firms, which suggest that firms could utilize flexible combinative capability to substitute the rigid mode requirement; firms should concern different institutional impacts according to their different requirements of resource combinations; firms should pay attention to the utilization of combinative capability when confronting higher instutional differences.