The impact of entry mode choice on foreign affiliate performance: The case of foreign MNEs in South Korea

Abstract and Key ResultsThis study examines the performance impacts of entry mode choice based on the perceptions of managers of a large sample of foreign MNEs in South Korea. Using an extended transaction costs model, an evaluation of performance relative to predicted entry mode is carried out.We find that affiliate performance is a multidimensional and complex phenomenon, which may be properly explained by multiple factors, including the coordination and control of the affiliate by the MNE, that go beyond initial entry mode choices.Foreign MNEs following the entry mode predicted by the extended transaction costs model showed poorer performance than non-followers in respect of non-financial performance. However, no significant differences were found for financial performance. The findings appear to reinforce a recent call to re-examine transaction costs theory and lend further support for incorporating additional potentially important determinants of affiliate performance.