3.3 Analysis of entry mode
3.3.3 Testing for contingencies by sector
If regions differ in the volume of Japanese FDI they receive in each sector, and WOS-JV proportion is dependent on sector, then this dependence and the uneven sector development across regions might explain the regional distortion. It is necessary to test for independence between sector and WOS-JV choice, and for independence between sector and region. Since government policy is
most likely sector-specific, descending to sector level might give further evidence to support or reject the assumption for free choice of the ownership structure by the foreign investors.
It is evident from Table 6 that the biggest difference in WOS-JV preference exists in electronics (bigger WOS/JV proportion relative to the other sectors) and in cars (smaller proportion relative to the other sectors). No deviations from the total average seem to exist for chemicals, machines and the rest. The 2-sample t-tests confirm those results with a 5% levels of significance.
Car has significantly the lowest WOS/JV ratio, Electronics has significantly the highest and none of the other differences are significant. The conclusion of the chi-square test is confirmed both from the counts measure (Table 6) and the monetary one (Table 7).
When serendipity is adjusted (one case in Chemical and one case in rest), the difference between Electronics and the other sectors becomes even bigger and more significant, while Car difference becomes insignificant. Therefore, Electronics shows consistently the highest WOS/JV ratio from all the sectors. This explains partially the UK effect found above, because the concentration of subsidiaries in the electronics is higher than for that of the other industries in the UK, except maybe for cars (see Table 8).
In conclusion, the generic Hypothesis III is confirmed because government incentives do seem to make difference. The analysis of the proposed influence of asset insufficiency on WOS/JV choice remains for future extension of the study.
Part IV Conclusion and limitations
The purpose of this paper was to analyze the network pattern, by viewing entry mode as a part of it, of the Japanese multinational enterprises in Europe. Network pattern stands for the characteristics of the organization of the subsidiaries of an MNE in the world or in a region, where region means generally a continent. The focus of the present study is regional because it is not easy to generalize about network pattern across continents due to the different strategic use the MNEs have of them and the specific political and economic circumstances of each of them. The basic features of a regional network pattern are network extensiveness (number of subsidiaries), industry distribution (type of industry entered), concentration of network control (direct or indirect investment) and entry mode (greenfield, acquisition, joint venture). The paper analyzed the first two and the last features.
The paper focused on the network pattern of Japanese manufacturing MNEs since they represent the bulk of Japanese foreign direct investment (FDI) in Europe and broader focus will dilute the analysis. The network extensiveness of the analyzed 462 MNEs is significantly and positively associated with their size (Hypothesis I.1 confirmed), and European focus (Hypothesis I.2 confirmed), but not with their average age (Hypothesis I.3 not confirmed). The industry controls reveal that precision goods have the fastest extendable network, followed by electronics and in the third place cars, machines, chemicals and others. The industry distribution, for those MNEs with extended networks,
reveals that manufacturing subsidiaries are substitutes for commerce ones (Hypothesis II confirmed). Finally, entry mode turns out to be dependent on country, due to risk and acquisition rule differentials (Hypothesis III confirmed), and on sector with electronics having significantly the fewest joint venture formations. The shift of the unit of analysis from FDI transactions to the MNE and the combination of the above three network features reveal empirically the regional implementation of the MNE strategies.
The paper has, however, certain limitations and they may be divided to three groups. First, some fine-tuning of the analysis is possible by analyzing the available databases for the motivation of the UJPs to invest in Europe and for the joint venture types based on partner nationality. The former will strengthen the claim that the Japanese FDI in Europe are horizontal, while the latter will contribute to the better integration of the entry mode and network pattern analyses. Second, network theory and empirical studies related to networks will improve much the content of the analysis. The paper had to start inevitably with the theory and study of the MNE activity, but once this basis exists, the network approach will give more depth to the argument about network patterns. Third, one additional network feature, concentration, and the concurrent profitability analysis remain for further research, which may represent a second stage of the present study.
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Appendix: List of the sampled 462 companies
Aderans Co. Ltd. Advanex Inc Advantest Corp. Aichi Steel Corp. Aida Engineering, Ltd. Aisin Seiki Co., Ltd. Aiwa Co., Ltd. Ajinomoto Co., Inc.
Akebono Brake Industry Co., ltd. Allied Telesis
Aloka Co. Ltd. Alpine Electronics, Inc. Alps Electric Co., Ltd. Amada Co., Ltd. Amano Corp.
Amatsuji Steel Ball Manufacturing Co Ando Electric Co., Ltd.
Anest Iwata Corp. Anritsu Corp. Asahi Breweries, Ltd. Asahi Broadcasting Corp. Asahi Denka Kogyo K.K. Asahi Diamond Industrial Co., Ltd. Asahi Glass Co., Ltd.
Asahi Kasei Corp. Asahi Optical Co., Ltd. Ashimori Industry Co., Ltd. Asics Corp.
Bandai Co., Ltd.
Bando Chemical Industries Ltd. Bosch Automotive Systems Corp Bosch Braking Systems Co., Ltd. Bridgestone Corp.
Brother Industries, Ltd.
Calsonic Kansei Corp Canon, Inc.
Capcom Co. Ltd. Casio Computer Co., Ltd. Chiyoda Corp.
Chori Co., Ltd.
Chugai Pharmaceutical Co., Ltd. Chugoku Marine Paints Ltd. Citizen Watch Co., Ltd. Clarion Co., Ltd. CMK Corp. Cosel Co. Ltd.
Dai Nippon Printing Co., Ltd. Daicel Chemical Industries, Ltd. Daido Metal Co., Ltd.
Daido Steel Co., Ltd. Daifuku Co., Ltd. Daihen Corp.
Daiichi Pharmaceutical Co., Ltd. Daikin Industries, Ltd.
Dainichiseika Color&Chemicals Manuf Dainippon Ink & Chemicals, Inc. Dainippon Screen Manufacturing Co Daishinku Corp.
Daiwa Seiko, Inc. Denki Kagaku Kogyo KK Denso Corp.
Disco Corp. Dynic Corp.
Eagle Industry Co., Ltd. Ebara Corp.
Eisai Co., Ltd. Enplas Corp. Enshu Ltd.
Exedy Corp. Ezaki Glico Co., Ltd. Fanuc Ltd. FDK Corp.
Footwork International Corp. Foster Electric Co., Ltd. Fuji Electric Co., Ltd. Fuji Heavy Industries, Ltd. Fuji Kiko Co., Ltd.
Fuji Machine Manufacturing Co., Ltd. Fuji Oil Co., Ltd.
Fuji Photo Film Co., Ltd. Fuji Seal Inc.
Fujikura, Ltd. Fujirebio, Inc.
Fujisawa Pharmaceutical Co., Ltd. Fujitec Co., Ltd.
Fujitsu General Ltd. Fujitsu Ltd.
Funai Electric Co., Ltd. Furukawa Co., Ltd. Furukawa Electric Co., Ltd. Furuno Electric Co., Ltd. Futaba Corp.
Futaba Industrial Co., Ltd. Glory Ltd.
Goldwin Inc. GSI Creos Corp Gunze, Ltd. Hakuto Co., Ltd. Hamamatsu Photonics KK Hashimoto Forming Industry Co Ltd Hino Motors, Ltd.
Hitachi Koki Co., Ltd.
Hitachi Kokusai Electric Co., Ltd. Hitachi Seiki Co., Ltd.
Hitachi Zosen Corp. Hitachi, Ltd. Hochiki Corp. Hokushin Co., Ltd. Honda Motor Co., Ltd. Horiba Ltd.
Hosokawa Micron Corp. Hoya Corp.
Ibiden Co., Ltd. IDEC IZUMI Corp. Ikegai Corp.
Ikegami Tsushinki Co., Ltd. Inabata & Co., Ltd. Inax Corp. Iseki & Co., Ltd.
Ishikawajima Construction Materials Isuzu Motors, Ltd.
Itoham Foods, Inc. Iwaki & Co. Ltd.
Iwasaki Electric Co., Ltd. Iwatani International Corp. Jamco Corp.
Janome Sewing Machine Co., Ltd. Japan Aviation Electronics Industry Japan Metals & Chemicals Co., Ltd. Japan Storage Battery Co., Ltd. Japan Tobacco Inc.
Jeco Co Ltd Jeol Ltd. JGC Corp.
Jidosha Denki Kogyo Co., Ltd. JMS Co., Ltd.
JSP Corp. JSR Corp. Juki Corp.
Kaga Electronics Co., Ltd.
Kajima Corp. Kanebo Ltd. Kaneka Corp. Kansai Paint Co., Ltd. Kao Corp.
Kawai Musical Instrument Manuf. Kawasaki Heavy Industries Ltd. Kawasumi Laboratories Inc Kayaba Industry Co., Ltd. Keihin Corp. Kenwood Corp. Keyence Corp. Kikkoman Corp. Kimoto Co. Ltd. Kinseki, Ltd.
Kissei Pharmaceutical Co., Ltd. Kitz Corp.
Koa Corp Kobe Steel, Ltd.
Koike Sanso Kogyo Co., Ltd. Koito Manufacturing Co., Ltd. Kokuyo Co., Ltd.
Komatsu, Ltd. Komori Corp. Konami Co., Ltd. Konica Corp. Koyo Seiko Co., Ltd. Kubota Corp. Kuraray Co., Ltd.
Kureha Chemical Industry Co., Ltd. Kurita Water Industries Ltd. Kuwayama Corp.
Kyocera Corp.
Kyowa Hakko Kogyo Co. Ltd. Lintec Corp.
Lion Corp.
Mabuchi Motors Co., Ltd. Mahle Tennex Corp.
Makino Milling Machine Co., Ltd.
Makita Corp. Marubun Corp. Maruha Corp.
Matsushita Electric Industrial., Ltd. Matsushita Electric Works, Ltd. Max Co., Ltd.
Mazda Motor Corp. Meidensha Corp. Meiji Seika Kaisha, Ltd. Mikuni Corp.
Minebea Co., Ltd. Minolta Co., Ltd. Misawa Homes Co., Ltd. Misumi Corp.
Mitsuba Corp.
Mitsubishi Chemical Corp. Mitsubishi Electric Corp. Mitsubishi Heavy Industries Ltd. Mitsubishi Kakoki Kaisha, Ltd. Mitsubishi Materials Corp. Mitsubishi Motors Corp. Mitsubishi Paper Mills Ltd. Mitsubishi Pencil Co., Ltd. Mitsubishi Rayon Co., Ltd. Mitsui Chemicals, Inc.
Mitsui Engineering & Shipbuilding Co. Mitsui Mining & Smelting Co., Ltd. Mitsumi Electric Co., Ltd. Mizuno Corp.
Mori Seiki Co., Ltd. Morimoto Corp. Morinaga & Co. Ltd. Morita Corp.
Murata Manufacturing Co., Ltd. Musashi Seimitsu Industry Co., Ltd. Mutoh Industries Ltd.
NABCO Ltd. Nachi-Fujikoshi Corp. Nagase & Co., Ltd.
Nakamichi Corp. NEC Corp. Neturen Co., Ltd. NGK Insulators, Ltd. NGK Spark Plug Co., Ltd. NHK Spring Co., Ltd. Nichias Corp. Nichicon Corp. Nidec Copal Co., Ltd. Nidec Corp.
Nihon Dempa Kogyo Co. Nihon Kohden Corp. Nihon Parkerizing Co., Ltd. Nihon Plast Co., Ltd. Niigata Engineering Co., Ltd. Nikka Whisky Distilling Co., Ltd. Nikkiso Co., Ltd.
Nikko Co., Ltd. Nikon Corp. Nintendo Co., Ltd. Nippei Toyama Corp. Nippon Antenna Co., Ltd.
Nippon Beet Sugar Manufacturing Co. Nippon Cable System, Inc.
Nippon Carbide Industries Co., Inc. Nippon Ceramic Co. Ltd. Nippon Chemi-Con Corp. Nippon Columbia Co., Ltd. Nippon Electric Glass Co., Ltd. Nippon Kayaku Co., Ltd. Nippon Paint Co. Ltd.
Nippon Paper Industries Co., Ltd. Nippon Piston Ring Co., Ltd. Nippon Sanso K.K. Nippon Seiki Co., Ltd. Nippon Shokubai Co., Ltd. Nippon Suisan Kaisha, Ltd. Nippon Thompson Co., Ltd. Nipro Corp
Nissan Chemical Industries, Ltd. Nissan Motor Co., Ltd. Nissei Sangyo Co., Ltd. Nisshin Steel Co., Ltd. Nisshinbo Industries, Inc. Nissin Electric Co., Ltd. Nissin Food Products Co., Ltd. Nissin Kogyo Co., Ltd. Nitta Corp.
Nittan Co., Ltd. Nitto Denko Corp. Nitto Kohki Co., Ltd NKK Corp.
Noevir Co., Ltd NOF Corp. NOK Corp. Noritake Co., Ltd. Noritsu Koki Co., Ltd. NSK Ltd.
NTN Corp. Obayashi Corp. Ogura Clutch Co., Ltd. Oiles Corp.
Oji Paper Ltd.
Okamoto Machine Tool Works Ltd Okaya & Co., Ltd.
Oki Electric Industry Co., Ltd. OKK Corp.
Okuma & Howa Machinery Ltd. Okuma Corp.
Olympus Optical Co., Ltd. Omron Corp.
Ono Pharmaceutical Co., Ltd. Ono Sokki Co., Ltd
Onward Kashiyama Co., Ltd. Organo Corp.
OSG Corp. Oshino Lamp Ltd. Oyo Corp.
Paris Miki Inc Pilot Corp. Piolax, Inc. Pioneer Corp Pokka Corp. Press Kogyo Co., Ltd.
Rheon Automatic Machinery Co,. Ltd. Ricoh Co., Ltd.
Riken Corp. Riso Kagaku Corp. Rohm Co., Ltd.
Rohto Pharmaceutical Co., Ltd. Roland Corp.
Ryobi, Ltd.
Sagami Rubber Industries Co., Ltd. Sakata INX Corp.
Sanden Corp.
Sanken Electric Co., Ltd. Sanko Gosei., Ltd. Sankyo Co., Ltd.
Sankyo Seiki Manufacturing Co., Ltd. Santen Pharmaceutical Co., Ltd. Sanyo Electric Co., Ltd. Sato Corp.
Satori Electric Co., Ltd. Sega Corp
Seika Corp. Seiko Corp. Seiko Epson Seiko Instruments Seirei Industry Co., Ltd. Sekisui Chemical Co., Ltd. Sekisui Jushi Corp. Sharp Corp. Shima Seiki Mfg., Ltd. Shimadzu Corp. Shimano, Inc. Shimizu Corp.
Shin-Etsu Chemical Co., Ltd. Shin-Etsu Polymer Co., Ltd. Shionogi & Co., Ltd. Shiseido Co., Ltd. Showa Aluminum Corp. Showa Corp.
Showa Denko K.K. Sintokogio, Ltd. SMC Corp. SMK Corp.
Snow Brand Milk Products Co., Ltd. Sodick Co., Ltd.
Sokkia Co., Ltd. Sony Corp Square Co., Ltd. SSP Co., Ltd.
Stanley Electric Co., Ltd. Star Micronics Co., Ltd. Sumitomo Bakelite Co., Ltd. Sumitomo Chemical Co., Ltd. Sumitomo Electric Industries, Ltd. Sumitomo Heavy Industries, Ltd. Sumitomo Metal Industries, Ltd. Sumitomo Osaka Cement Co. Ltd. Sumitomo Precision Products Co. Sumitomo Rubber Industries, Ltd. Sunstar Inc.
Suzuki Motor Corp. Sysmex Corp. Tadano, Ltd. Taiheiyo Cement Corp Taikisha Ltd.
Taisho Pharmaceutical Co., Ltd. Taiyo Kogyo Co., Ltd.
Taiyo Yuden Co., Ltd. Takasago International Corp. Takeda Chemical Industries, Ltd. Takenaka Corp.
Takiron Co., Ltd.
Takisawa Machine Tool Co., Ltd Tamura Corp.
Tanabe Seiyaku Co., Ltd. TCM Corp
TDK Corp. TEAC Corp. Teijin, Ltd.
Teikoku Piston Ring Co., Ltd. Tenma Corp.
Terumo Corp. THK Co., Ltd. Toa Corp. Toda Kogyo Corp. Tokai Carbon Co., Ltd. Tokai Corp.
Tokai Rika Co., Ltd. Tokico Ltd. Tokimec, Inc. Toko, Inc. Tokuyama Corp. Tokyo Electron, Ltd. Tokyo Ohka Kogyo Co., Ltd. Tokyo Sangyo Co., Ltd. Tokyo Seimitsu Co., Ltd. Tokyo Style Co., Ltd. Tomoegawa Paper Co., Ltd. Tomoku Co., Ltd.
Tomy Co., Ltd. Topcon Corp.
Toppan Printing Co., Ltd. Topy Industries, Ltd. Toray Industries, Inc. Toshiba Ceramics Co., Ltd. Toshiba Corp.
Toshiba Machine Co., Ltd. Toshiba Tungaloy Co., Ltd. Tosoh Corp Ltd
Toto, Ltd.
Toyama Chemical Co., Ltd.
Toyo Aluminum K.K.
Toyo Communication Equipment Co. Toyo Corp.
Toyo Engineering Corp. Toyo Ink Manufacturing Co., Ltd. Toyo Kanetsu K.K.
Toyo Tire & Rubber Co., Ltd. Toyobo Co., Ltd.
Toyoda Gosei Co., Ltd. Toyota Industries Corporation Toyota Motor Corp. Tsubaki Nakasima Co., Ltd. Tsubakimoto Chain Co. Tsukamoto Co., Ltd.
Tsurumi Manufacturing Co., Ltd. TYK Corp.
Ube Industries, Ltd. Uchida Yoko Co., Ltd. Uni-Charm Corp. Union Tool Co. Unipres Corp. Ushio Inc.
Victor Co. of Japan, Ltd. Wacoal Corp.
World Co., Ltd.
Yachiyo Industry Co., Ltd. Yakult Honsha Co., Ltd. Yamada Corp. Yamaha Corp. Yamaha Motor Co., Ltd. Yamaichi Electronics Co.Ltd. Yamanouchi Pharmaceutical Co., Ltd. Yamazaki Baking Co. Ltd.
Yamazen Corp. Yaskawa Electric Corp. Yazaki Corp.
Ye Data Inc. YKK Corp.
Yokogawa Electric Corp. Yokohama Rubber Co., Ltd. Yokowo Co., Ltd.
Yonex Co Ltd. Yuasa Corp. Yuken Kogyo Co., Ltd.
Yushin Precision Equipment Co., Ltd. Zeon Corp.
FIGURE 1:JAPANESE FDI IN EUROPE: UJPS BY INDUSTRY AND TRANSACTIONS
UJPs by industry and
data availability ...
462 252 41 112 94 20 MANUF (avail): 462 MANUF (n.a.): 252 Commerce: 41 Service: 112 Finance: 94 Resource: 20...and their European
transactions
2125 366 457 284 225 40 JAPAN EUROPEFIGURE 2:LEVELS OF ANALYSIS AND FLOW OF RESEARCH First Stage of the research Second Stage of the research
Unit of analysis UJP Individual transaction
entry mode analysis (ownership level) Network Extensiveness Manufacturing - Trade Substitution ANALYSIS OF NETWORK PATTERN ANALYSIS OF PROFITABILITY
TABLE 1THEORIES OF MNE AND ENTRY MODE AND PARALLELS BETWEEN THEM
Theory of MNE Theory of entry mode Comments
Firm - based I TAs in proprietary (or intangible) asset hypothesis (Caves 1996)
Resourced-based theory (Andersen 1997) Transaction -
based integration (Williamson TCs in vertical 1985)
TC theory (Williamson 1985)
It is difficult to separate horizontal and vertical FDI, it is difficult to observe
and measure TC as well
Firm - based II Penrose’s expansion
theory (Penrose 1972) - Accounts for product diversification too Firm and
transaction based Dunning’s OLI paradigm (Dunning 1988) Dunning’s OLI paradigm (Dunning 1988) Lacks parsimony, but is useful for defining controls
TABLE 2JAPANESE FDI IN EUROPE AND THE REST OF THE WORLD (US$ MILLION) 1994 1995 1996 1997 1998 1999 2000 World 41051 50694 48019 53972 40747 66694 26033 North America 17823 22761 23021 21389 10943 24770 8695 The US 17331 22193 22005 20769 10316 22296 8634 Europe 6230 8470 7372 11204 14010 25804 11184 The EU na na na 10963 13850 25191 11079 Asia 9699 12264 11614 12181 6528 7162 2821 Latin America 5231 3877 4446 6336 6463 7437 3088 Oceania 1432 2795 897 2085 2213 894 221
Source: JETRO White Paper on FDI 2001 (http://www.jetro.co.jp). Data for 2000 are for the first half only. Only major regions in terms of inflows are shown.
TABLE 3ANALYSIS OF NETWORK EXTENSIVENESS
Panel A: Linear regression model of network extensiveness (NetExt) Coefficient S.E. t p-value Lower 95% CI Upper 95% CI
Intercept -3.4864 0.8495 -4.1041 0.0001 -5.1578 -1.8149 FirmSize 0.1268 0.0059 21.5971 0.0000 0.1153 0.1384 AverAge 0.0266 0.0385 0.6909 0.4901 -0.0491 0.1022 EurFoc 0.1131 0.0126 8.9559 0.0000 0.0882 0.1379 FinMkt -0.0000 0.0000 -2.0559 0.0406 0.0000 0.0000 D(Constr) -3.1003 1.1456 -2.7063 0.0072 -5.3543 -0.8462 D(CH) -1.8027 0.6737 -2.6758 0.0078 -3.1282 -0.4771 D(MA) -0.9113 0.7061 -1.2905 0.1978 -2.3007 0.4781 D(CA) -0.8284 0.7120 -1.1636 0.2455 -2.2293 0.5724 D(PR) 3.1988 1.0153 3.1505 0.0018 1.2010 5.1965 D(RB) -2.8496 0.9201 -3.0969 0.0021 -4.6601 -1.0391 D(rest) -1.3612 0.7509 -1.8127 0.0708 -2.8387 0.1163 R2 Adj. R2 0.67 0.659 F11,312 (p-value) 57.63 (0.0000) Sample size 324
Panel B: Zero-order correlation table and variance-inflation factors FirmSize AverAge EurFoc FinMkt VIF
FirmSize 1 1.321
AverAge 0.0757 1 1.110
EurFoc -0.1518* 0.1296* 1 1.097
FinMkt 0.4343* 0.0503 -0.0175 1 1.309
Note: FirmSize equals the square root of total revenues of a UJP, AverAge equals the