MNCs' Propensities to Reevaluate and Change Foreign Modes of Operations during a Financial Crisis

Talin Eshaghoff, Tao Gao

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The major goal was to investigate multinational companies??(MNCs) propensities to reevaluate and change their foreign operational modes during a financial crisis in a big emerging market. We grounded our study in the contingency perspective of foreign entry mode decisions, which implies that foreign entry/operating mode decisions should be dynamic in nature, and fine-tuning should take place whenever major changes occur to contingency factors. In a survey conducted during the current Argentine financial crisis, we found that the majority of multinational firms (64.4%) indeed regarded a reevaluation of the foreign mode of operations during the crisis as important, while about one third viewed it as either neutral or unimportant. On whether to change their level of resource commitments during the crisis, most firms (57.7%) would remain the same, 35.6% prefer small changes, and 6.4% would consider major changes. MNCs using exporting, licensing, joint ventures, and sole ventures were found to be equally patient during the crisis. Exporters and licensors willing to change their foreign operational modes uniformly preferred increases in resource commitments, mostly in the form of FDI. Conversely, 4.2% of joint venture partners and 15.8% of sole venture owners chose to decrease resources during the crisis. The research, managerial, and policy-making implications were discussed.

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Round Building

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