INTERNATIONALIZATION OF U.S. EQUIPMENT LEASING FIRMS - AN EMPIRICAL STUDY USING COVARIANCE STRUCTURE MODELING (UNITED STATES)

Equipment leasing is the fastest growing form of financing capital equipment in the United States and around the world. The leasing industry is currently undergoing 'internationalization': the expansion of leasing firms into countries outside their headquarters. The trend is to set up subsidiaries, joint-ventures, and licensees in foreign countries. The most prominent lessors have already established extensive networks of affiliates and subsidiaries to strengthen their position in the growing world market and more firms are entering into the game at a rapid rate. However, for some reason a firm may choose different forms of foreign involvement in different countries. Also, two different firms may choose different forms of involvement in one particular country.;The Eclectic theory does not, however, consider the perceptual process in decision making that has been shown by behavioral theorists to have significant influence on the firm behavior. Moreover, the methodology used in attempts at providing empirical corroboration of the Eclectic theory have been problematic.;The problem is to develop and empirically test a theoretical model, incorporating the major determinants of international involvement of U.S. equipment leasing firms and their effects on the choice of the form of foreign involvement by firms. It has been hypothesized that the firms perceive/have a set of ownership advantages, which together with their perceptions of internalization and location-specific advantages determine the choice of the form of foreign involvement. Since, the study involves theorization based on unobservable variables, it was considered appropriate to use covariance structure modeling.;The empirical analysis is based on mail responses from 95 leasing firms for three different countries. The data suggest that the choice of the form of foreign involvement is significantly influenced by the perceived ownership and location advantages but not internalization advantages. However, internalization advantages are dependent upon ownership and location advantages. Moreover, there are significant differences in the perceived advantages among the different choice groups. It was also found that, though it is possible to broadly classify the firms into different choice groups based on their advantages, these classes were not mutually exclusive.;The Eclectic theory of international production suggests that the firms have a set of ownership, internationalization, and location-specific advantages that determine the choice of the form of foreign involvement.