Host and Home Country Determinants of Foreign Entry Modes: Evidence from the Chinese Natural Resource Industries

The purpose of this paper is to examine the home and host country co-determinants of entry modes among Chinese natural resource-based multinational enterprises. We propose that home country factors have an indirect effect on entry modes while the host country factors have a direct effect. Our database consists of investment data on 415 entry mode decisions by 335 Chinese firms in natural resource sectors investing in 75 destination countries over the period 2004 to 2015. By using the hierarchical linear model, the disparate roles of the host country and the home country can be examined. Our findings suggest that firms are more likely to pursue acquisition in a host country with a rule-based governance environment. However, this relationship becomes weaker when the resource endowments of the home province increase (negative interaction). Firms are also more likely to pursue acquisition in a host country scarce in natural resources. This relationship becomes stronger when the quality of the business environment of the home province increases (positive interaction). This article contributes to improving the framework for analyzing simultaneous host country and home country determinants of entry mode choice and deepens the understanding of the mechanisms through which country level factors assert their influence.