تصمیمات ایجابی یا سلبی در انتخاب محل سرمایه گذاری مستقیم خارجی

Firms have variable risk preferences in decision-making processes, but previous studies in the field of international management tend to view firms as inherently risk averse, and risky location choice as rare and exceptional. Drawing upon the arguments of problemistic search and slack search, we investigate the conditions under which firms make risky choices of location for foreign direct investments. Using longitudinal international expansion data on firms in the Japanese auto parts industry, we find that although firms generally avoid risk in choosing foreign direct investment destinations, they take risks when facing intense home-country competition and a lack of business group affiliation. Nonetheless, we find that small firms with business group affiliation are more likely to enter host countries with high political instability than are large firms with such affiliation.

International expansion is associated with high levels of risk, because it involves a considerable amount of resources under conditions of uncertainty. Risk is the “unpredictability or downside unpredictability of business outcome variables”, and uncertainty refers to “the perceived unpredictability of environmental and organizational contingencies” (Bromiley et al., 2001: 261). Specifically, the central premise in the international management literature is that although international expansion is certainly an important means to achieving competitive advantage, growth, and positive returns (Zahra et al., 2000), it requires firms to overcome various types of uncertainty arising from their lack of knowledge about local demand in foreign markets and the unpredictability of political, social, and economic systems (Ghoshal, 1987). As such, studies on international expansion reflect the widespread assumption that firms are inherently risk averse and primarily consider risk reduction strategies in international expansion. Drawing from institutional theory, a number of previous studies have centered their efforts on the imitative behavior of firms. Firms reduce foreign investment risk by imitating the patterns of internationalization by other firms, because imitation not only grants legitimacy to firm decisions but also provides informational cues about the foreign market (Chan et al., 2006, Guillen, 2002, Guillen, 2003, Henisz and Delios, 2001, Li and Kun, 2010, Martin et al., 1998 and Xia et al., 2008). Moreover, a more straightforward strategy suggested in the literature is to avoid unfamiliar and politically hazardous countries as destinations for foreign investment (Globerman and Shapiro, 2003, Henisz and Delios, 2001, Henisz and Macher, 2004 and Jones, 1984). These studies have certainly advanced our understanding of organizational strategies for reducing risk in the processes of international expansion. However, the presupposition in the international management literature that organizations are inherently risk averse is not consistent with the view prevalent in other fields, such as strategy, that firms have variable risk preferences responsive to changing uncertainty and situations (March and Shapira, 1992). Firms do not always avoid risk but may engage in risk-taking behavior under some circumstances. A number of empirical studies have examined what accounts for variations in risk preferences and what motivates firms to take risks by using data on strategic change (Greve, 1998), investment in innovation (Greve, 2003), and diversification (Palmer and Wiseman, 1999). Unlike those in the international expansion literature, these studies have persistently considered risk taking as a foundational element of organizational changes and strategies that are essential for organizational success and survival. This inconsistency obscures the mechanisms underlying the evident risk-taking behavior of firms in choosing foreign direct investment (FDI) locations. For example, despite uncertain market demand, the Honda Motor Company made the fortunate decision to establish its first plant in the U.S.A. in 1979, while all other Japanese automobile manufacturers, including Toyota and Nissan, hesitated. Similarly, rather than wait until the growth potential of India was realized and for its competitors to enter the country, the Japan Credit Bureau, a Tokyo-based credit card company, located its foreign investments in India in 1979. In the 1960s, Gulf Oil and Shell entered Nigeria, where risk was high because of political and social turmoil caused by the civil war and the overthrow of the government (Frynas and Mellahi, 2003). In 1995, the Ford Motor Company established a plant in Vietnam, which was fraught with political problems, and even the rule of law was not assured. In addition to these historical cases, Rose and Ito (2008) found that some firms prefer foreign markets with few or no rivals and tend not to imitate other firms' choices of FDI locations. Although we have such historical and empirical evidence of firms entering risky foreign markets, we lack theory that explains their actions in a coherent manner. This lack of theoretical models limits our capacity to understand the factors that influence firms' entry into risky foreign markets or to suggest strategies to attract FDI in such markets. We know little about which firms are more likely to enter foreign markets despite high levels of risk or how policy makers should allocate scarce resources to lure foreign investors. In this study, we overcome these shortcomings and extend the existing literature by investigating the conditions under which firms make direct investments in foreign markets with high levels of risk. In developing our framework, we follow previous studies and focus on two types of risk: (1) the unpredictability of potential demand and the feasibility of doing business in the host country market (i.e., market opportunity risk), and (2) the unpredictability of legal, political, and regulatory conditions that may affect business activities in the host country market (i.e., political risk). Then, we argue that while firms avoid entering foreign markets characterized by high market opportunity risk and political risk, this aversion is reduced when firms face threats to their survival in the home market (i.e., problemistic search) and possess slack resources that allow exploration of emergent opportunities and afford firms the ability to react to potential crises or poor performance in risky markets (i.e., slack search). We test our hypotheses using conditional logistic regression analysis of longitudinal data on the international expansion of Japanese auto parts manufacturers. The results support our theory and provide critical implications not only for managers who consider international expansion an important means to achieve higher performance and secure survival but also for policy makers who aim to develop competitive strategies to attract FDI in their country. Furthermore, our findings suggest different strategic requirements for risk takers and non-risk takers to expand into global markets.

International expansion is a viable, although risky, option for firms to enhance growth and to secure survival. Some firms take rather than avoid risks and enter a foreign market where very limited or no information from prior entrants is yet available and where political hazards are great. However, research in the international expansion literature has focused primarily on the ways by which firms reduce or avoid risks in making international expansion decisions, leaving the risk-taking behavior of firms unexamined. As a result, we lack theory that predicts which firms are more likely to enter foreign markets with high levels of risk. The purpose of this paper has been to fill this gap in the literature. Our research focuses on risk taking in choosing FDI locations and provides a framework for answering the question of why some firms are more likely to enter host countries with high levels of risk. The findings of our analysis of market-seeking FDI location choice by Japanese auto parts manufacturers can be summarized as follows: (1) firms exhibit a general tendency to avoid risky market entry; (2) a high intensity of competition in home-country markets prompts firms to make risky entries when we operationalize risk as the number of buyers that have previously entered and political instability, whereas we obtain partial support for this finding when we operationalize risk as the number of prior entries by rivals; (3) firms without business group affiliation are more likely to enter host countries where no rival exists; and (4) while there is no evidence that business group affiliation reduces the propensity of either large or small firms to avoid risky markets when we operationalize risk as the number of rivals and buyers that have previously entered, we find that small firms with business group affiliation are more likely to enter host countries with high political instability than are large firms with such affiliation. Our results suggest several implications for theory and practice. First, while previous studies underscore the negative influence of risks arising from the unpredictability of customer demand and political institutions on foreign market entry (Henisz and Delios, 2001 and Martin et al., 1998), our study demonstrates that under some conditions, such risks may not deter foreign market entry. For example, our results show that firms facing greater competition in their home countries tend to take risks in choosing FDI destinations, plausibly because competitive pressures trigger problemistic search and create a sense of urgency for taking risky strategic options (Bromiley, 1991 and Wiseman and Bromiley, 1996). Moreover, we find that such effects of competition are common for both small and large firms, indicating that competition threatens organizations of any size and thus may overcome the problem of inertia stemming from size (Hannan and Freeman, 1989). Second, our findings indicate partial support for our hypothesis of the positive effect of business group affiliation on risk taking, which relies on the logic of slack search. Firms with business group affiliation are buffered from environmental jolts and have easier access to external resources. Business group affiliation hence affords firms opportunities to engage in risk-taking behavior such as entry into risky markets. Our analysis using samples of small firms provides support for this hypothesis and shows that small firms with business group affiliation are more likely to enter host countries with high political risk. On the other hand, we find that large firms with business group affiliation are less likely to enter politically risky markets. Taken together, these findings suggest that business group affiliation may serve as a slack resource for small firms but not for large firms. This is plausible because unlike small firms, large firms generally have abundant slack resources (Singh, 1990), which may make the additional resources generated by business group affiliation redundant and cause inertia (Hannan and Freeman, 1989). Managers of large firms are satisfied with their resource abundance and thus tend to avoid risky options that may challenge their status quo (Chen and Hambrick, 1995 and Cyert and March, 1963). Such inertial effects of business group affiliation also coincide with our finding that when firms, whether large or small, lack business group affiliation, they become more likely to enter host countries where no prior rival exists, which is contrary to our expectation. It seems that a lack of business group affiliation causes disadvantages and threats that can trigger problemistic search and motivate firms to enter markets without home country rivals, despite the high market opportunity risk associated with such entry. This finding corroborates previous findings that firms without business group affiliation are at a disadvantage in home countries where business groups constitute a major part of the economic system (Khanna and Palepu, 2000 and Lincoln et al., 1996) and that some types of business group resources are highly embedded in the home country, which, in turn, inhibits international growth (Tan and Meyer, 2010). Third, although we follow previous studies and use the number of prior entries by rivals and buyers and political stability as indicators of risky entry, it appears that the effects of these variables are not consistent. It is likely that managers' perception of risks associated with international expansion is highly dependent on their situations. It appears that risk taking in FDI location choice is less sensitive to the type of risk when firms engage in problemistic search but becomes more so when firms engage in slack search. This could explain why slack resources may not always lead to risk taking (Voss et al., 2008) and why risks may not always lead to cautious decision making (Greve, 2003). Future research needs to develop some comprehensive typologies of risks and to be more specific about how risk taking is related to both the nature of the situations and the risks involved. Fourth, while our results corroborate the premise in previous research about the significant relationship between the number of prior entries by buyers and rivals and firms' entry behavior, we find that this relationship is nonlinear and that host countries with no prior entrants have characteristics essentially different from those with a few entrants. A shift from zero to one prior entrant is different from that from one to two entrants, because of great uncertainty in markets with no prior entrant. Scholars should avoid making a simple linear premise and should reconsider research methodologies to understand better the follow-the-leader or imitative behavior of firms in internationalization (Guillen, 2002 and Henisz and Delios, 2001). Fifth, the results advance our understanding of follow-the-client behavior of firms, demonstrating the tendency of firms to expand into a foreign market where more buyers from the home country exist. However, our findings indicate that firms under great pressure from competition in the home market may choose to enter foreign markets where no buyer has yet entered. One possible explanation for this risk-taking behavior is that firms proactively seek new opportunities by acquiring foreign buyers. Martin et al. (1995) argue that parts manufacturers may establish a plant in a foreign country before any domestic buyer expands, to sell components to foreign buyers and to dominate the foreign market. Further, Qian and Delios (2008) suggest that a bank's entry into a foreign market may encourage its domestic clients to follow it into the foreign market. Sixth, this study also identifies firms entering foreign markets where political risk is high. An underlying assumption in prior research (e.g., Henisz and Delios, 2001) is the propensity of firms to choose markets with low levels of political risk, whereas our analysis shows that this preference for low-political-risk markets is less salient among some firms expanding abroad. We find that firms facing high competitive pressure in home markets and small firms with business group affiliation are more likely to enter host countries with political risk. Finally, our findings offer implications for both risk takers and non-risk takers. For risk takers, our results imply that because they tend to have higher tolerance for risk, it is vital for them to be extra tactical by committing significant resources to strengthen their foothold in foreign markets, to preempt entry by other firms, and to reduce the possibility that the government will change the conditions under which their investments are made. For non-risk takers, on the other hand, our results imply that they may be able to reduce their exposure to potential loss by avoiding risky foreign markets, but at the same time they may also lose the opportunity to obtain the advantages of risky foreign markets, especially those with greater strategic opportunities (e.g., emerging markets). Non-risk takers should thus develop competencies and formulate strategies not only to maximize their late-mover advantages but also to minimize the first-mover advantages of risk takers. Our findings also have important implications for policy makers seeking to develop competitive strategies to attract FDI. Because promotion of FDI in host countries requires a significant amount of resources and time, identifying firms to target is crucial and offers key benefits. Policy makers can presumably better design and fine-tune their promotions to provide targeted incentives. Our results suggest that such host countries should allocate more resources to lure small foreign firms that suffer from intensive competition in home markets and are not affiliated with a business group. This resource allocation strategy should efficiently and effectively promote FDI in their countries. This study also suggests a number of avenues for future studies. One limitation is its focus on the automobile parts industry in Japan to test the hypotheses. This focus on one industry in a specific country may limit the interindustry and international generalizability of our findings. In this study, automobile and parts manufacturers develop strong and long-term vertical relationships and exhibit interdependent behavior in FDI. Such practices may be unique and rare. However, as argued by Martin et al. (1995), automobile and parts manufacturers in Europe, North America, and elsewhere are likewise placing greater importance on building stable vertical relationships. Moreover, if the relationship of Japanese parts manufacturers with their buyers were merely based on relation-specific assets, the effect of competition would be insignificant and parts manufacturers would consistently be more inclined to follow their buyers and to avoid a risk, which was not found to be the case in this study. Nevertheless, using other contexts would undoubtedly increase our understanding of firms' risk-taking behavior in FDI. Second, research on risk-taking behavior in international expansion could also benefit from the introduction of other factors that influence it. For example, although we focus on business group affiliation as a slack resource that triggers risk-taking behavior, other forms of slack resources such as financial slack and human resource slack can be explored as well. Furthermore, it is also theoretically and empirically important to examine whether risk taking in international expansion is a function of founders' overconfidence and hubris. In addition, we enhance the connection of our findings to prior research by focusing on two types of risks and drawing upon the existing literature on FDI location choice (e.g., Dunning, 1973 and Henisz and Delios, 2001). However, future research can still enhance the comprehensiveness of our model by considering other types of risks or ways of conceptualizing risks in internationalization processes. Third, our findings on the negative effect of business group affiliation on the risk-taking behavior of firms also call for further research. Considering that adaptation to today's fast-changing business environment necessitates firms' engagement in activities often associated with high levels of risk such as innovation, strategic change, and strategic collaboration, it is imperative to investigate whether business group affiliation restricts firms from engaging in these activities. Fourth, future studies can synthesize our findings with those on firms' postentry performance in foreign markets. Do firms that enter risky foreign markets perform better or worse than other firms? Do firms without business group affiliation maintain their first-mover advantage in risky markets even after the entry of firms with business group affiliation? We believe that this synthesis will open up exciting new research opportunities. In summary, where to locate FDI is a critical decision and is subject to a considerable amount of risk. The basic strategy often emphasized in the international expansion literature is to avoid risky markets. The results in this study, however, demonstrate that some firms are tolerant of risk and that risk taking in FDI location choice is largely driven by problemistic search. This is partially because of our focus on market-seeking FDI, which tends to aim for scale and scope economies through incremental adaptation and expansion of a preexisting customer base. For firms that consider FDI a means to explore other resources and to develop new competencies, such as in the case of resource-seeking or asset-seeking FDI, the presence of slack resources may better explain firms' risk taking in FDI location choice. Further research on risk-taking behavior in international expansion seems warranted. Risks in foreign markets, after all, may well signal new opportunities for greater profitability, growth, and survival.