EstablishmentModeChoicesofEmerging
Multinationals:EvidencefromPoland
MarianGorynia
PoznańUniversityofEconomics,Poland
m.gorynia@ue.poznan.pl
JanNowak
ibdBusinessSchool,Poland
jnowak@ibd.pl
PiotrTra ¸pczyński
PoznańUniversityofEconomics,Poland
piotr.trapczynski@ue.poznan.pl
RadosławWolniak
University of Warsaw, Poland
wolniak@wne.uw.edu.pl
Thisstudyidentifiesandinvestigatesthedeterminantsoffdimodesin
thecontextofoutwardforeigndirectinvestment(ofdi)undertakenby
companiesfromPoland.Theanalysiscoverstheinterfacesbetweense-
lectedhost-countryvariablesandfirmresourceswithfdimodes.Acon-
ceptualframeworkforfdimodedeterminantsispresentedasabasisfor
theensuingempiricalanalysis.Theresearchhypothesesbasedonprevi-
ousresearcharesubjectedtostatisticalverificationusingsurveydataof
60Polishforeigninvestorscollectedthroughout2013.Themainfindings
showthatanincreaseofprevioushost-countryexposure,aswellashost-
countrymarketattractiveness,favourthechoiceofgreen-fieldmode,while
thelackofsuchexposureandtherelatedknowledgefavoursacquisitions.
Moreoverthesaidgreen-fieldoperationstendtobelocatedinpolitically
stablemarkets.Thepossessionofintangibleresourcesturnsouttobeir-
relevantforfdimodechoice.
Key Words:foreigndirectinvestment,fdimodes,emerging
multinationals,CentralandEasternEurope
jel Classification: f21,f23,p20
Introduction
PolandandotherCentralandEasternEuropean(cee)countriesarecur-
rentlywitnessinganincreasingtideofoutwardforeigndirectinvestment
(ofdi)undertakenbytheirfirms(e.g.Radło2012).Polishofdi,which
ManagingGlobalTransitions13(2):101–124

102 Marian Gorynia, Jan Nowak, Piotr Tra ¸pczyński,andRadosławWolniak
table1 ofdiStocksinPolandandSelectedceeEconomies(inmillionusd)
Country    Country   
Poland    Georgia   
Hungary    Latvia   
Kazakhstan    Croatia   
CzechRepublic    Montenegro   
Ukraine    Belarus   
Slovenia    Bosnia&Herzegovina   
Azerbaijan    Albania   
Estonia    Armenia   
Lithuania    Moldova   
Serbia    ThefyrofMacedonia  
Bulgaria    Kyrgyzstan   
Romania    Total  
notes Adaptedfromunctad().
formstheempiricalsettingofthepresentstudy,hasbeenontheincrease
sincetheopeningupofformercentrallyplannedeconomiesinthecee
regionatthebeginningofthe1990s(seetable1).WhileinitiallySlovenia
displayedthehighestdynamicsoftheemergingoutgoinginvestment,it
wasalreadyintheearly2000sthatPolandappearedasthenewdominant
sourceofofdiintheregion.Thisgradualexpansionmaybeattributed
toseveralfactors,includinginteraliaPoland’slargedomesticmarketsize,
allowinglocalfirmstobenefitfromeconomiesofscale.Moreover,while
Polandgraduallyliberaliseditsforeigntradeandinvestmentpolicy,the
introductionofsupportmeasuresfortheinternationalisationofdomestic
firmsremainedlimited(Goryniaetal.2014).
Thisrisingtrendhasgeneratedaneedtoprovideexplanationscon-
cerningnumerousspecificissuesconnectedwiththenewbreedofforeign
investorsandtheircompetitivepotential(Jaworek,Szałucka,andSzóstek
2009),motivationstoinvestabroad(RosatiandWiliński2003),invest-
mentmodes connectedwith those motivations (Gorynia et al.2013a;
2013b;2014),theroleofpreviousexperience(Goryniaetal.2013b),sim-
ilarityofhomeandhostcountryinstitutionalenvironmentsaswellas
otherimportantcontextualfactors(SvetličičandJaklič2003;Svetličič,
Rojec,andTrtnik2000).
Howeverthevastmajorityofthisresearchtakesamacroeconomicper-
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EstablishmentModeChoicesofEmergingMultinationals 103
spective,wherethelocusofanalysisistheentirecountryeconomyand/or
itssectors(AntalóczyandÉltető2003;BohataandZeplinerova2003;Var-
blane,Reiljan,andRoolaht2003),oranumberofceecountriesincom-
parison(SvetličičandJaklič2003;Kalotay2004),althoughonecanfind
studiescombiningmacroandfirmlevelanalysis(Svetličič,Rojec,andTrt-
nik2000;Rugraff2010;Zemplinerová2012).Theabovestudiespointto
theemergenceofofdiinthelatterpartofthe1990sanditssubsequent
accelerationinthe2000s,albeitthegapbetweeninwardandoutwardfdi
isstillreportedtoberelativelylarge.Meanwhilethereisstillarelative
paucityofexplanatorystudiesdevotedtoceefirminternationalisation,
particularlythoselinkingspecificinternationalisationdecisionstotheir
firm-andhost-countryantecedentsandexplicitlyprovidingnormative
contributionstoresearchonemergingcountrymultinationals(Gorynia
etal.2013a;2013b).1Moreover,whiletherehavebeendifferentattemptsat
explainingfdimodechoicesofdevelopedmultinationals(e.g.Slangen
andHennart2008a;2008b;BrouthersandBrouthers2001;Kogutand
Singh1988),virtuallynosuchsystematicevidenceexistsforemerging
multinationalsfromtheceeregion.
Thepredominantlyexplorativecharacterofextantresearch,bothre-
latedtotheceeregioningeneralandPolandinparticular,resultsfrom
attempts focused on describing internationalisation paths, geographic
trendsandoverallmotivationsofoutwardinvestors.However,inorder
tobeabletodrawcomparisonsagainstmainstreamibtheory,amore
normativeapproachseemstobeneeded,formingtherationaleforthe
presentstudy.
Thepresentstudyaddressesthisgapbyattemptingtoquantitatively
investigatetherelationshipbetweenfdimodesandtheirspecificdeter-
minantswhicharerelevantinthecaseofemergingmultinationals.Inpar-
ticularthestudyconsiderstherelationshipbetweenselectedhostcountry
characteristicsandavailablefirmresources,andthechoiceoffdimodes,
i.e.acquisitionsandgreen-fieldinvestmentsbycompaniesregisteredin
Poland.Lastbutnotleast,thisstudyalsoaddressesthefundamentalissue
oflinearityoftheinternationalisationprocessofemergingmultinationals
byconsideringfdiprojectsinthecontextofearlierforeignoperations
ofthesamplefirms.Asalientfeatureofthisresearchresidesinitstimeli-
nessasprimarydatausedasresearchinputshavebeencollectedthrough
companysurveysinthesecondquarterof2013.Thisfactallowsforcon-
frontationofthefindingsofthisstudywithreceivedtheoryandprevious
researchinthesamesubjectarea.
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104 Marian Gorynia, Jan Nowak, Piotr Tra ¸pczyński,andRadosławWolniak
Thestudybeginswithareviewofkeyliteratureonofdiwithfocus
onitsmodes.Thisisfollowedbyasectionpresentingthejustification
ofresearchhypotheses,anchoredinthecontextofpreviousresearchon
theregionofCentralandEasternEurope.Thereafterananalyticalframe-
workisestablishedforstudyingfdimodesandtheirdeterminants.The
researchhypothesesaresubjectedtoaverificationprocessbasedonsta-
tisticalmodelling.Thelastthreesectionscontainrespectively:theprinci-
palfindingsofthestudy,adiscussionontheirrelevanceandimplications,
andfinallyabriefsummarywithfinalconclusions,limitationsonthesaid
findingsvalidityandsuggestionsforfurtherresearchoncurrentlyinves-
tigatedaspectsofPolishofdiandotherrelatedissues.
TheoreticalUnderpinningsof fdi Modes
Amongthemostcriticalissuesininternationalbusiness(ib)isunder-
standingwhyandhowfirmsinvestabroad(Dunning2002).Suchques-
tionsapplytofdimodeswhicharedeterminedbyanumberoffactors
thatcanbeconvenientlyclassifiedasfirm-level,industry-levelandhost-
countrydeterminantsoffdi(Slangen2005).Furthermore,theinterna-
tionalisationpathafirmfollowsprovidesacontexttofdimodeswhich
mayormaynotbeprecededbynon-equityentrymodes.Inthiscontext
theauthorspresentinfigure1.anappropriateanalyticalframework.It
showstheinvestigatedvariablesandtheirrelationships.Inconstructing
thisanalyticalframeworkanumberofwell-establishedtheoreticalcon-
ceptsderivedfromtheibliteraturewereconsidered.Atitsbaseareestab-
lishmentmodeswhichconstitutethedependentvariableofthepresent
empiricalstudy.Thechoiceoffdientrymodeisdeterminedbyfirm-
specificdeterminants,firmpriorinternationalexperience(intheformof
non-equityinternationalisationmodes)andhost-countrycharacteristics.
Thetheoreticalunderpinningsoftheindividualelementsoftheanalyti-
calframeworkarediscussedbelow.
Whileanumberofauthorsconsiderthreechoicesinfdiestablish-
mentmodes,i.e.green-fieldinvestment,acquisitionandjointventure
(seee.g.BuckleyandCasson1998;Gorg2000;KogutandSingh1988;
PadmanabhanandCho1995),SlangenandHennart(2007)arguethat
bothgreen-fieldinvestmentsandacquisitionscantakeeithertheform
ofawholly-ownedsubsidiary(wos)orajointventure(jv).Thisviewis
sharedbysuchauthorsasBarkemaandVermeluen(1998),andLarimo
(2003).Inthisstudythelatterviewisfollowedandthefdiestablish-
mentmodesexaminedareacquisitionsandgreen-fields.Alargenumber
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EstablishmentModeChoicesofEmergingMultinationals 105
ofvariablesinfluencingthechoiceoffdientrymodearehypothesised
intherelevantliterature.However,theempiricalresearchreviewedby
Slangen(2005)revealsalackofsignificanceofmostofthemaswellas
adivergenceoffindings.Reasonablyconsistentandsignificantfindings
concernonlyafewvariables,mostofthembeingatfirm-level,suchas
firmr&dintensity,degreeofproductdiversityandrelativesubsidiary
size(Slangen2005,9).Industry-andcountry-levelfactorsseemtoplaya
lesssignificantrole.
Thestudyoffdimodesshouldbeplacedinabroadercontextoffirm
internationalisation,addressingthequestionwhetherfirmsprecedetheir
directinvestmentabroadwithnon-equityentrymodes,suchasexport-
ing,licensing,franchisingorcontractmanufacturing.Accordingtothe
UppsalaModeldevelopedbyJohansonandWiedersheim-Paul(1975)and
JohansonandVahlne(1977;1990),firminternationalisationisasequen-
tialandgradualprocessofincreasingresourcecommitmentsinforeign
markets.Theseauthorsalsopostulatedthatinternationalisedfirmswill
firstselectforeigncountrieswithsimilarmarketconditionsandsimilar
culturestothoseoftheirhomecountry,andintroducedtheconceptof
‘psychicdistance’betweenhomeandhostcountries.Thus,accordingto
theUppsalaModel,fdimodesareexpectedtobepursuedbyfirmsthat
havealreadyinternationalisedthroughnon-equityentrymodes,notably
exporting.However,criticsofthisandsimilarstagesmodelspointtotheir
weaknessesandthelimitedexplanatorypower(e.g.Turnbull1987),and
callfordevelopingatheorywithbetterpredictiveabilityandmoreinline
withrecentchangesintheinternationalbusinessenvironment(Vissaket
al.2007).Inthecontextofthepresentstudyitisthereforegermaneto
alsoinvestigatehowdofdientrymodesofthestudiedcompaniesrelate
totheirnon-equityentrymodes.
FirmdeterminantsoffdidecisionscanbederivedfromDunning’s
EclecticParadigmofInternationalProductionandtheResource-based
ViewofInternationalBusiness.OneofthethreepillarsofDunning’s
EclecticParadigm(Dunning1993;1995;1998),firm-specificownership
advantages(O-advantages),concernsresources,proprietaryassetsand
capabilitiesthatthefirmcanexploitabroad.O-advantagescantakethe
formofaproprietarytechnologyorproductiontechnique,trademark,
managerialknowledgeandskills,andbenefitsofeconomiesofscale.Such
advantagesallowafirmtooffsetthe‘costsofforeignness,’inherentin
itsinternationaloperations.Similarly,accordingtotheResource-based
View(Peng2001),firmsneedtopossessownershipadvantagesinorderto
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106 Marian Gorynia, Jan Nowak, Piotr Tra ¸pczyński,andRadosławWolniak
successfullyexpandintoforeignmarkets.Inadditiontoexploitingtheir
uniqueassets,firmsseekassetsininternationalmarketstoimprovetheir
competitiveness.HeretheResource-basedViewprovidesausefulframe-
workforanalysingforeignaffiliates’roleinenhancingtheirparents’own-
ershipadvantages.
However,theviewthatinordertobeasuccessfulforeigninvestora
firmmustpossesssuchadvantagespriortoitsinternationalexpansion
hasrecentlybeenchallenged,basedontheexperienceofmultinational
enterprisesfromemergingeconomiesthatmaylackownershipadvan-
tagestobeexploitedandsustainedabroad,andratherseekstrategicas-
setsabroadinordertoenhancetheirinternationalcompetitiveness(see
e.g.,CuiandJiang2010;Yamakawa,Peng,andDeeds2008;Makino,Lau,
andYeh2002).Infact,Mathews(2006)proposed,thatemergingmulti-
nationalsskipconventionalstagesofforeignexpansioninordertocatch
upwithinternationalrivalsintechnologicalterms.Inhis‘lll’(linkage,
leverage,learning)conceptheperceiveslinkageswithotherfirmsasa
meansofacquiringnewresourcesnecessaryforcompetinginforeign
markets.Further,thesaidlinkageshavetobeleveragedbynewcomers
intheirinternationaloperations.Notleast,thelearningaspectrelatesto
thefactthatlatecomersneedtointernaliseanddistributenewknowledge
withintheinternalnetworksoastoenhancetheirinternationalcom-
petitiveness.Likewise,LuoandTung(2007)proposedintheir‘spring-
board’approachthatthelatecomerdisadvantageoffirmsfromemerg-
ingmarketscanbeovercomebyacquisitionsofintangibleassetsfrom
developedcountrymnes.Hence,thesaidfirmsfrequentlyfollowaccel-
eratedinternationalisationpaths.Accordingtotheimbalancetheoryof
MoonandRoehl(2001),fdiisundertakentoincreaseproductivityof
existingassetsortoacquireassetscomplementarytothem,inorderto
balanceouttheassetportfolio.Imbalanceindicatesasituationwhereby
thelatecomerdoeshavecertainfirm-specificassetsforwhichthecurrent
marginalvalueisbelowthemarketrate.Thelatterviewcanberegarded
aslessradicalasitdoesnotassumethatfirmsfromemergingmarketsare
entirelydeprivedofskillsandcapabilities,apointwhichwasalsoemphat-
icallyraisedbyNarula(2006).Inordertoaccommodatethesealternative,
context-specificperspectivestheauthorsofthisstudyconsidertheinflu-
enceoffirm-specificadvantagesonfdiestablishmentmode,depending
onwhetherafirmpossessesstrongorweakproprietaryassets.
Whiletherecanbeamyriadofhost-countryfactorsdeterminingfdi
decisions,fallingintosuchcategoriesaspolicyframework,economicde-
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EstablishmentModeChoicesofEmergingMultinationals 107
terminantsandbusinessfacilitation(seetable5inDunning2006),the
literatureonthesubjectpointstotheparticularsignificanceofsuchfac-
torsasmarketsizeandgrowth(Faeth2009),politicalrisk(Agarwaland
Ramaswami1992;Brouthers,Brouthers,andWerner2009;Broutherset
al.2009;BusseandHefeker2007),investmentclimate(Kinda2010;Fabry
andZeghni2002),factorendowmentsandcosts(Blonigen2005),geo-
graphicandculturaldistance(KuoandFang2009,SlangenandHennart
2008;BrouthersandBrouthers2001;KogutandSingh1998),government
incentives(Faeth2009),andinstitutionalinfrastructure(Dunningand
Lundan2008;Dunning2005;MeyerandPeng2005;Peng,Wang,and
Jiang2008).Asfarastheinfluenceofthesefactorsonfdiestablishment
modeisconcerned,itappearsfromtheabove-reviewedliteraturethat
politicalstabilityandculturaldistancemayplaythemostsignificantrole.
However,ontheotherhandthereisevidencethatsomefirms,particu-
larlythoseoriginatingfromemergingmarkets,maybebettersuitedfor
operatinginotheremergingmarkets,duetotheirabilitytocopewithpo-
liticallyunstableenvironmentsandthustomitigatedifferentdimensions
ofdistancebetweenmarkets(Cuervo-CazurraandGenc2008;DelSol
andKogan2007).
PreliminaryEvidenceandResearchHypotheses
Basedontheliteraturereviewpresentedintheprecedingsectionsand
theresultsofanexploratoryqualitativestudy,conductedbytheauthors
andpublishedseparately(Goryniaetal.2013a;2013b),anumberofhy-
potheseswereformulated.Theyweregroupedintothefollowingtwokey
areas:host-countryvariablesvs.fdimodesandfirm-specificresources
vs.fdimodes.
host-countryvariablesvs.fdimodes
The relationship between country-level determinants offdiandfdi
modesisexpectedtoberelevantalthoughempiricalevidenceislargely
divergentinthisrespect.Asrevealedinmainstreamstudiesthemostsig-
nificantcountry-levelvariablesdeterminingfdimodeseemtobepolit-
icalrisk(AgarwalandRamaswami1992;BusseandHefeker2007)and
culturaldistance(SlangenandHennart2008b;BrouthersandBrouthers
2001;andKogutandSingh1988).However,focusingonthePolishcon-
text,ObłójandWa ¸sowska(2012)didnotfindpoliticalriskspecifictothe
regiontobeanimpedimenttocapitalexpansion.Theyanalysedtheim-
pactofhost-countrydeterminantsonthelevelofPolishoutwardinvest-
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108 Marian Gorynia, Jan Nowak, Piotr Tra ¸pczyński,andRadosławWolniak
ment,pointingtothedominanceofmarketsizeandeconomicgrowth
askeydeterminants,whichwasalsoconfirmedbyotherPolishstud-
ies(Karpińska-MizielińskaandSmuga2007;Ke¸pka2011).Ontheother
hand,apreliminarystudybyGoryniaetal.(2013a)alsorevealedthepos-
sibleimpactofpoliticalriskandlegalrestrictionsonfdimodechoice,
suchthatitrefrainedfirmsfromundertakingacquisitionsoflocalfirms.
Atthesametime,somePolishfirmsperceivehigherpoliticalrisksasan
opportunityowingtotheirexperiencewithoperatinginhostileenvi-
ronments,thusincreasingtheirpropensitytoaccommodatemorerisk.
Therefore,thefollowingalternativehypothesesweresetforth:
h1a Firms perceiving high political stability of the host country tend to
useacquisitionsasthe fdi mode.
h1b Firms perceiving high political stability of the host country tend to
usegreen-fieldinvestmentasthe fdi mode.
Inasimilarvein,culturaldistancecanbeafactordeterminingtheper-
ceivedappropriatenessofagivenestablishmentmode,whichisrelated
interaliatointegrationcosts(SlangenandHennart2008a).Inthecontext
ofemergingmultinationalsitcanbeassumedthattheyhavetheadvan-
tageofcopingwithculturaldistance,particularlyforcountriessharing
asimilarinstitutionalheritage(DelSolandKogan2007).Thestudiesof
RosatiandWiliński(2003)andGorynia,Nowak,andWolniak(2011)re-
vealageographicconcentrationofofdiintheneighbouringEuropean
countries.AuniquepositioningofthePolisheconomyisrelatedtothe
factthattheseneighboursincludebothverycloseanddistantcountries
withrespecttocultureaswellastothelevelofinstitutionalandeconomic
development.However,regardlessofamoreorlessdevelopedcountry
marketentry,excessivedistancemayhindertheacquisitionprocess,in-
creasinginsteadthepropensityforinternalisingoperationsintheformof
green-fieldinvestments.Hence,thefollowinghypothesiswasestablished:
h2 Firms perceiving lowculturaldistance tend to useacquisition as the
fdimode.
firm-specificresourcesvs.fdimodes
Previousresearchindicatesthatinternationalandhost-countryexperi-
encebothhaveadirecteffectonfdiestablishmentmodes.Inlinewith
previousfindings,SlangenandHennart(2008b)foundthatfirmswithlit-
tlehost-countryexperienceweremorelikelytochoosegreen-fieldover
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EstablishmentModeChoicesofEmergingMultinationals 109
acquisitions.Ontheotherhand,itcanbearguedthatexperiencein-
creasestheconfidenceoffirmstoestablishownoperationsfromscratch
andrelyoninternalknowledge.However,inthepreviouslyquotedstudy
(Goryniaetal.2013a;2013b)Polishforeigninvestorsdidnotrevealasim-
ilarpattern.Infact,firmswithmoreexperienceinthehostcountryhad
morepreciseknowledgeoflocalmarketconditions,includingthestruc-
tureoftheirrespectiveindustry,thustheyweremorelikelytoselectand
integratetargetsabroadintotheircorporatenetworkviaacquisitions.
Therefore,thefollowingtwoalternativesofHypothesis3wereformu-
lated:
h3a Firmswithpriorexperienceinahostcountrytendtouseacquisition
asthe fdi mode.
h3b Firmswithpriorexperienceinahostcountrytendtousegreen-field
investmentasthe fdi mode.
Thefinalhypothesisconcernstherelationshipbetweenfirmintangi-
bleassets,suchastechnological,new-productdevelopmentandmanage-
rialcapabilities,andfdimodechoice.Theextensiveliteraturereviewof
empiricalstudiesonfdiestablishmentmodes,providedbySlangenand
Hennart(2007),clearlyshowsthatfirmresourcesandcapabilitiesplaya
centralroleinfdiestablishmentmodechoice.Itisalsoarguedtherethat
mnesexploitingfirm-embeddedintangibleassetsaremorelikelytoopt
forgreen-fieldthanacquisitions.
InthecontextofSlovenia,thestudybySvetličič,Rojec,andTrtnik
(2000)pointstotheemergenceofofdiinSloveniaasaresultoflack
ofownershipadvantagesoflocalfirmsandtheirdesiretoimprovecom-
petitivenessviafdi.Zemplinerová(2012)inturnconcludesthatCzech
companiesinvestinothercountriesnotonlytoexploittheirfirm-specific
advantagesbutalsotoaccessnewmarkets.Thus,inthecontextofemerg-
ingPolishmultinationals,giventheirlatecomerstatus,thepossessionof
higher-orderskillsandcapabilitiescanallthemoresoconstituteasource
ofcompetitiveadvantagetobeleveragedbyestablishingownoperations
abroad.Accordingly,itisproposedthat:
h4 Firms with superior intangible assets tend to use green-field invest-
mentasthe fdi mode.
Tosummarise,theanalyticalframework,aspresentedinfigure1,is
derivedfromconventionalibliteratureinordertoprovideabasisfor
analysing the context of firms from an advanced emerging market –
Poland.Thus,whilethedeterminantsdiscussedabovearenotnovelin
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110 Marian Gorynia, Jan Nowak, Piotr Tra ¸pczyński,andRadosławWolniak
Firmdeterminants
(firmcharacteristics,resources,proprietaryassets
andcapabilities,internationalexperience)
fdiestablishmentmodes
(acquisitionsandgreen-fields)
Host-countrydeterminants
(marketsizeandgrowth,politicalrisk,culturaldistance,
institutionalinfrastructure)
figure1 AnalyticalFrameworkforfdiModes(Variables
andRelationshipsInvestigatedinThisStudy)
themselves,norcontext-specific,itistheirapplicationtothePolishcon-
textwhichthepresentstudywillfocuson.
ResearchMethods
sampleanddatacollection
Giventheresearchobjectives,theinputdatacamefromasampleofcom-
paniesinvestingabroadandregisteredinPoland.Theuseofseveraldata
sources(includingAmadeus,KompassPolandorDealWatch)allowed
tocreateaproprietarydatabaseof910firms.BetweenMayandJune2013
aninvitationtoparticipateinthestudywithalinktoaweb-basedsurvey
(table2)wassenttotopmanagersdirectlyresponsibleforforeignopera-
tionsorothermanagerswitharequesttoforwardittotheformer.Dueto
frequentconcernsabouttechnicalreliability,responseratesorsecurity
ofelectronicsurveys(KimandGray2008),anitservicesagencywas
entrustedwiththepreparationofthesurvey,itsexecutionandrepeated
reminders.Theautomatedsurveymanagementsystemwassupportedby
asubstantialnumberofpersonalcontactswiththesamplefirmsinor-
dertoidentifyandpersuadeappropriaterespondentstotakepartinthe
study.Moreover,additionalinterviewsandsecondarysourcesincluding
annualreportswereusedtocompletemissingsurveydata.Therefore,a
totalsampleof60completesurveyswasobtained,whichcorrespondsto
ausableresponserateof6.6.
Whilethesamplesizecanbynomeansberegardedasrepresentative
forthetotalpopulationandallowforgeneralisations,theresponsesam-
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EstablishmentModeChoicesofEmergingMultinationals 111
table2 OverviewofSelectedItemsfromtheSurveyQuestionnaire
Question Scale α
Legalrestrictionsinthehostcountry Five-pointLikertscale(–
significant,–none)
Culturaldistanceperception(legalregulations,
economicsystem,politicalstructure,cultural
environment)
Five-pointLikertscale(
–verysimilar,–very
different)
.
Politicalstabilityatthestartofinvestment Five-pointLikertscale(–
verylow,–veryhigh)
Marketattractivenessatthestartofinvestment
(industrygrowthrate,marketsize)
Five-pointLikertscale(–
verylow,–veryhigh)
.
Intangibleassetsinrelationtothemajorcom-
petitor(technologicalcapabilities,newproduct
developmentcapabilities,managerialcapabilities)
Five-pointLikertscale(–
farworse,–farbetter)
.
table3 SectoralDistributionofMajorfdiofEachFirmintheSample
Sector Totalmanufacturing Totalservices Other
Numberoffdi   
Percentage . . .
notes N =60.
table4 GeographicDistributionofMajorfdiofEachFirmintheSample
Country Germany Ukraine Romania CzechR. Slovakia Russia Other
N o . o f f d i   
Percentage . . . . . . .
notes N =60.
table5 FirmSizeDistributionoffdiintheSample
Size* – – – – – – >
N o . o f fi r m s   
Percentage . . . . . . .
notes N =60.*Numberofemployees.
pledistributionistoalargeextentsimilartothatoftheentirepopula-
tionwithregardtoindustryclassificationandparentnationality.Thus,
thecollecteddataallowforadetailedexplorationofthesectoral,geo-
graphic,modalandorganisationalstructureofPolishofdi(seetables
3–5).Whileinordertoqualifyforthestudythefirmshadtoberegis-
Volume13·Number2·Summer2015

112 Marian Gorynia, Jan Nowak, Piotr Tra ¸pczyński,andRadosławWolniak
teredinPoland,theirultimateownersmightbelocatedabroad.Thus
firmswithmorethan10offoreigncapitalconstituted47ofthesample.
Withregardtothefdiformsused,58ofthefirmshadexperiencewith
wholly-ownedgreen-fieldsubsidiarieswhile20hadestablishedjoint
venturesabroad.Also48ofthesamplefirmshadundertakenforeign
acquisitions,outofwhich12couldbeclassifiedasbrownfieldinvest-
ments(MeyerandEstrin2011).Thestudiedfirmslocatedtheirmajor
fdiprojectsmostlyinGermany(20),Ukraine(17),Romania(12)
andtheCzechRepublic(10).Thestilllimitedscopeofforeignopera-
tionswasreflectedbythefactthat70ofthefirmshadforeignaffiliates
inuptoonly3countries,wheresalesandmarketingactivitieswerepre-
dominant.
dependent,independentandcontrolvariables
Theestablishmentmodeofthelargestforeignsubsidiaryintermsofto-
talassetsinthelastfiscalyearwaschosenasthedependentvariable.It
assumedavalueof0ifitwasagreen-fieldsubsidiaryand1ifitwasan
acquisition(DikovaandvanWitteloostuijn2007;SlangenandHennart
2008b).Whiletherearestudiesjointlycomparingjointventures,green-
fieldsandacquisitions(e.g.KogutandSingh1988;AnandandDelios
1997),establishmentmodescanbeperceivedasaseparatedecisionprob-
lemininternationalexpansion.Thus,ownershipchoices(jvvs.wholly-
ownedsubsidiaries)werenotanalysedhere(alsoseeGorynia,Nowak,
andWolniak2007;2012).
Onthelocationadvantagesidepoliticalriskwasmeasuredastheman-
agerialperceptionofpoliticalstabilityatthemomentofmajoraffiliate
establishment(AgarwalandRamaswami1992;Brouthersetal.2009).A
five-pointbi-polarscalewasusedforthisquestion.Further,culturaldis-
tancewaslikewisemeasuredonafive-pointscaleinrelationto4items:
legalregulations,economicsystem,politicalstructureandculturalenvi-
ronmentwithCronbach’sα = 0.86(Brouthers,Brouthers,andWerner
1996).Thisrelativelybroadoperationalisationremainsinlinewiththe
understandingofBrouthers(2002,91),wherebytheculturalcontextis
notconfinedtoculturalvalues,butalsoembraces‘differenthostcoun-
tryeconomic,legal,politicalandculturalsystems.’Asforownershipad-
vantages,host-countryexperiencewasmeasuredasadichotomousvari-
able,adoptingthevalueofoneifthefirmhadpriorexperienceinthe
hostcountryintheformofequityornon-equityoperationmodes(La-
rimo1993;SlangenandHennart2008b).Intangibleassets(technological
ManagingGlobalTransitions

EstablishmentModeChoicesofEmergingMultinationals 113
capabilities,newproductdevelopmentcapabilities,managerialcapabili-
ties,Cronbach’sα = 0.85)wereevaluatedonafive-pointbi-polarscale
withreferencetoeachfirm’smajorcompetitor(Brouthers,Brouthers,and
Werner2008).
Finally,giventhemultitudeofpotentiallyrelevantfactorsaffectingthe
establishmentmodechoice,severalcontrolvariableswereintroduced.
Host-countrylegalrestrictionsatthemomentofmarketentryweremea-
suredonafive-pointLikertscale,with1meaningsignificantrestrictions
and5standingfornorestrictions(Brouthers2002).Marketattractiveness
atthemomentofmarketentrywasmeasuredbytwoitemsonafive-point
Likertscale(1-verylow,5-veryhigh):industrygrowthrateandmarket
size(AgarwalandRamaswami1992),yieldingaCronbach’salphavalue
of0.66.Asummaryofkeyvariables,theirscalesandmeasurementreli-
abilityisprovidedintable2(p.111).
modellingprocedures
Sincethedependentvariable,fdimodechoice,isdichotomous,logistic
regressionanalysis(usingspsssoftware)wasusedtotestthehypothe-
sesreferringtotheeffectsofexplanatoryvariablesonfdimodechoice
(PengandSo2002).Precisely,abackwardstepwisemethodemploying
the Wald statistic was employed. Accordingly, the modelling process
startedwiththeinclusionofallvariablesintheinitialmodelandcon-
tinuedbyagradualreductionofthemodelwiththeaimofmaximis-
ingthenumberofstatisticallysignificantvariables.Beforerunningthe
regressionmodelsseveralstatisticalchecks(correlationanalysis,inde-
pendentsampletests,Mann-Whitneytest)wereconductedinorderto
detectanymulticollinearitybetweentheexplanatoryvariablesaswell
astoprovideaninitialunderstandingoftherelationshipsbetweenfdi
modesandbothindependentandcontrolvariables.Inthecaseofseveral
variableslistedaboverecodingwasnecessary.Duetotheproblemofrare
data,politicalstabilityandlegalrestrictionsalsorequiredrecodingfrom
afive-pointtoathree-pointcategoricalvariable.
Findings
Giventhenominalcharacterofsomeofthevariables,correlationanal-
ysiswasonlypossibleforculturaldistance,intangibleassets,firmsize
andmarketattractiveness(table6).Itdidnotrevealanymulticollinearity
problemsexceptaweakcorrelationbetweenmarketattractivenessand
thesaidculturaldistance.Chi-squaretestswerealsoconductedtodetect
Volume13·Number2·Summer2015

114 Marian Gorynia, Jan Nowak, Piotr Tra ¸pczyński,andRadosławWolniak
table6 Spearman’sRankCorrelationforContinuousVariables
Variables    
Culturaldistance
Intangibleassets –.
Firmsize –. .
Marketattractiveness .* . –.
notes *** p<0.01,**p<0.05,*p<0.10,N =60.
therelationshipbetweenfdimodeandtheexplanatoryvariables.Itonly
revealedasignificantrelationshipbetweenpoliticalstabilityandexperi-
ence(p<0.05).
Inordertotestallhypotheses,theauthorsranseverallogisticregres-
sionmodels,usingthestepwisebackwardmethod(seetable7).Accord-
ingly,thebaselinemodelcontainedallindependentandcontrolvariables,
whilethesubsequentmodelswerecomputedwiththeaimoffinding
theoptimalmodelintermsofstatisticalsignificanceoftheinvestigated
variable.Thus,insignificantvariablesweregraduallyeliminatedfromthe
model.Allfivemodelswerestatisticallysignificantatp<0.05.TheHos-
merandLemeshowtestrevealedagoodfitofthemodelswiththeem-
piricaldata.Mostimportantly,allthemodelswereabletocorrectlyclas-
sifymorethan70offdimodechoices,whichisarelativelyhighvalue
(PadmanabhanandCho1996;BrouthersandBrouthers2001).
Inallfivemodelspoliticalstabilityofthehostcountrywasfoundto
beasignificantpredictorofthechoiceofacquisitionmode.However,
duetoitsrecodingtoacategoricalvariablewith3levelsitneedstobe
interpretedstepwise.Theparameterofthesub-variableStability(1)im-
pliesthechangeintheoddsofchoosingacquisitionratherthangreen-
fieldifstabilitydecreasesfromlevel3to1ascomparedto3,whilethat
ofStability(2)referstothedecreasefromlevel3to2ascomparedto1.
Sincethecoefficientsofbothsub-variablesarepositive,itcanbestated
thatacquisitionsarepreferredwhenstabilitydecreases,thusconfirming
Hypothesis1bandrejectingHypothesis1a.Furthermore,host-country
experienceprovedtobesignificantinallmodels,particularlythefinal
model.Culturaldistanceturnedoutnottobesignificant,henceshowing
nosupportforHypothesis2.ContrarytoHypothesis3a,theincreaseof
previoushost-countryexposurefavoursthechoiceofgreen-fieldmode,
thusprovidingstrongsupportforHypothesis3b.Finally,theinfluence
ofintangibleassetsonfdimodechoicewasnotfoundtobesignificant,
henceHypothesis4cannotbesupported.Amongcontrolvariables,legal
ManagingGlobalTransitions

EstablishmentModeChoicesofEmergingMultinationals 115
table7 LogisticRegressionEstimatesoftheProbabilityofAcquisitionEntry
Variable Model Model Model Model Model
Stability() .*** .*** .*** .*** .***
(.) (.) (.) (.) (.)
Stability() . .* .* .** .*
(.) (.) (.) (.) (.)
Experience –.* –.* –.* –.* –.**
(.) (.) (.) (.) (.)
Marketattractiveness –. –. –. –.* –.**
(.) (.) (.) (.) (.)
Firmsize .* .* .* .*
(.) (.) (.) (.)
Restrictions() . . .
(.) (.) (.)
Restrictions() . . .
(.) (.) (.)
Resources –. –.
(.) (.)
Culturaldistance –.
(.)
Constant . . –. . .
(.) (.) (.) (.) (.)
HosmerandLemeshowTest . . . . .
Percentagecorrectlyclassified . . . . .
Chi-square .** .*** .*** .*** .***
notes Standarderrorsinparentheses.*** p<0.01,**p<0.05,*p≤0.10,N =60.
restrictionsinthehostcountrywerenotsignificant,whilefirmsizewas
foundtobeslightlysignificant(p<0.1)andwithmarginalinfluenceon
modechoice.Theriseofhost-countrymarketattractivenesswasfound
tofavourgreen-fieldinvestments(Models4and5).
Discussion
Theaboveanalysisshowsthat–inlinewithextanttheoryandstudieson
theinternationalisationoffirmsfromemergingandtransitioneconomies
(Goryniaetal.2013a)–theexperiencewithdoingbusinessinthecee
regioncanberegardedasakeyadvantageinembarkingoncapitalex-
Volume13·Number2·Summer2015

116 Marian Gorynia, Jan Nowak, Piotr Tra ¸pczyński,andRadosławWolniak
pansioninforeignmarkets.Thiscorrespondstopreviousfindingsinthe
ceecontext,wherebyfirmsfromtheregioninternationalisegradually
(seee.g.AntalóczyandÉltető2003),butalsotosomeofthoserelatedto
advancedeconomycontexts(seee.g.Holmlund,Kock,andVanyushyn
2007).However,inthecaseoffirmsoriginatingfromceecountries,evo-
lutionarybehaviourintheinternationalisationprocesscanbeinterpreted
asaphenomenondrivenbytheexploitationofpreviousbusinessties,
establishedfrequentlybeforethebeginningofthetransitionprocessin
theearly1990s.Infact,mostceecountriesshareasimilar,historically
shapedinstitutionalbackground,whichtendstofacilitateforeignexpan-
sionand–incertaincases–evenomitcertainstagesofthegradualexpan-
sionsequence(DelSolandKogan2007).Thisaspectofceefirminter-
nationalisationstillrequiresfurtherinvestigationinordertounderstand
therelevanceoftheadvantageofstemmingfromasimilarinstitutional
context.
Withregardtotheimpactofpoliticalstabilitythisstudysuggeststhat
firmsfromaceecountrywillenterpoliticallymorestablemarketsby
establishinggreen-fieldoperations,whichmaypointtotheaversionto
assumeexcessiveriskofbecomingexposedtohost-countryconditions
while investing in the establishment of a new affiliate. This is some-
whatcontradictorytotheevidenceprovidedbyBarkemaandVermeulen
(1998) that green-fieldinvestments are preferredin more risky coun-
tries.Giventheabovementionedroleofinstitutionalsimilarityinthe
ceeregion,theimpactofstability(orrisk)perceptioninforeignexpan-
siondecisionsshoulddeservemoreattentioninfutureresearchinthis
field.Inthesamevein,thelackofsignificanceofculturaldistanceinthe
presentstudyshouldbenotedbearinginmindthatmostinvestmentsof
Polishfirmsarelocatedinneighbouringcountries.Moreover,priorexpe-
rienceinhostcountries,whichfrequentlycommencedbeforetheactual
beginningofthetransitionprocessintheceeregion,mightalsohave
playedamoderatingroleonthesaiddistance.Theformerindeeddoes
provetobesignificantinthepresentstudyforthechoiceofgreen-field
operations.Thispreferencemightsuggestthathost-countryexperience
increasesthepropensityoffirmstointernalisetheirownadvantagein
theformofstart-upoperations,whilethelackofsuchexperienceand
therelatedknowledgefavoursacquisitionsoffirmsalreadyestablishedin
lessfamiliarmarkets.
Finally,thepossessionofintangibleresources–contrarytoauthors’
expectations–turnedoutnottoberelevantforfdimodechoices.One
ManagingGlobalTransitions

EstablishmentModeChoicesofEmergingMultinationals 117
ofthepossibleexplanationsthereofmightbethelimitedscopeofintangi-
bleresourcesofceefirms,whichleavesroomfortherelevanceofhome
country-relatedadvantagesinexplainingtheexpansionprocess.Thisob-
servationisalsoconfirmedbythecurrentfocusofPolishfirms’ofdion
seekingmarketsandmuchlessonacquiringstrategicassets.Thusthis
preliminaryevidencefromthePolishcontextcanenrichthedebatetak-
ingplaceinexistingresearchonbriccountriesandextendtheunder-
standingaboutdifferencesacrossemergingmarkets,whichdonotconsti-
tuteahomogeneouscategory.ThefactthatPolandisanadvancedemerg-
ingeconomyalsoaddstothenoveltyofscholarlydiscussioninthisfield,
showingthatfirmsfromupper-middleincomecountriesdosharefea-
turesoftheircounterpartsfrombothmoreandlessdevelopedcountries.
Conclusions,LimitationsandFurtherResearchProjections
Whiletheaimofthepresentstudywasnottocontributetomainstream
theoriesofinternationalbusiness,itusedthemasastartingpointforex-
ploringthestillunder-researchedphenomenonofforeignexpansionof
firmsfromdeveloping/transitioneconomies.Theresultsofquantitative
analysisonasampleofoutwardinvestorsbasedinPolandpointtothe
roleofhost-countryexperienceinentrymodechoice.Polishfirmstend
toleverageknowledgeofregional,morefamiliarmarketsbyestablishing
theirownoperationsfromscratch.Atthesametime,whiletheirknowl-
edgeoftheregionaltransitioncontextwouldsuggestahigherrisktol-
erance,green-fieldoperationstendtobeestablishedinpoliticallymore
stablemarkets.
Thisstudyisobviouslyburdenedwithseverallimitations,themajor
onebeinglimitedsamplesize.Nonetheless,itispartofabroaderongo-
ingresearchprogram,hencetheseinitialresultsshouldberegardedas
explorationoftheinternationalexpansionpatternsofPolishfirms.An-
otherlimitationreferstotheuniqueuseofsurveydatainmeasuringthe
appliedvariables.Whiletheintentionwastocapturemanagerialpercep-
tionsrelevantinexpansiondecisions,theuseofsecondarydatamight
haveimprovedthereliabilityandrobustnessoftheobtainedresearchre-
sults.Furthermore,someoftheindicators,suchasthebinaryvariablefor
thepresenceorlackofhost-countryexperience,mightnotcapturethe
subtletiesoflearningfromdifferenttypesofhost-countryoperations.
Futurestudiesontheexpansionoffirmsfromceecountriesshould
investigatetherolewhichdifferentfdimotiveshaveindifferentloca-
tions,notablyeconomicallyandinstitutionallylessormoreadvanced
Volume13·Number2·Summer2015

118 Marian Gorynia, Jan Nowak, Piotr Tra ¸pczyński,andRadosławWolniak
thanthehomecountry.Thesemotivesmightaffectboththeentrymode
aswellaslocationchoice.Anotherrelevantresearchproblemistheim-
pactofdifferenttypesofdistanceontheinternationalisationofemerging
multinationals,giventheirlimitedexposuretointernationaloperations.
Whiletheperceivedculturaldistanceturnedoutnottobesignificantin
thisstudy,furtherresearchshouldlookintootherspecifictypesofdis-
tance,notablytheinstitutionalone,thevariationofwhichevenwithin
theceeregionisquitesignificant.Moreover,thepresentstudydidnot
lookintotheeffectofindustryonthechoiceofestablishmentmode,
whichdefinitelyconstitutesanotherpromisingavenueforfuturestudies.
Finally,theperformanceoutcomesofcapitalexpansion,giventheinflu-
enceoffirm-andhost-countryleveldeterminants,wouldcertainlyadd
morenormativeevidenceandsubstancetothisfieldofinquiry.
Acknowledgments
Thisstudyisbasedonempiricaldatagatheredwithintheresearchgrant
oftheNationalScienceCentre,awardedbasedonthedecisionno.dec-
2012/07/n/hs4/00283.
PiotrTr˛ apczyńskiissupportedbytheFoundationforPolishScience(fnp).
Notes
1 oecd(2008,p.12)definesmnesas‘companiesorotherentitiesestab-
lishedinmorethanonecountryandsolinkedthattheymayco-ordinate
theiroperationsinvariousways.’
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