Institutional and transaction cost influence on partnership structure of foreign affiliates

Mehmet Demirbag, Ekrem Tatoglu, Keith Glaister

    Research output: Contribution to journalArticle

    23 Citations (Scopus)

    Abstract

    This paper considers the determinants of foreign affiliate structure in the context of foreign equity ventures in Turkey. Institutional variables and transaction costs variables are examined as determinants of choice between wholly owned subsidiary, dyadic joint venture and multi-partner joint venture.
    The findings support the majority of the hypotheses. We find that research and development (R&D) intensity, cultural distance, location of affiliate, affiliate size, political risk and corruption perception distances are particularly important in determining the choice of affiliate structure. Some partial support has also been found for the impact of foreign direct investment (FDI) concentration and linguistic distance on partnership structure of foreign affiliates. No support, however, has been noted for the effect of advertising intensity of the target industry. Both transaction cost specific and institution specific variables were found to be significant in explaining affiliate formation decisions.
    Original languageEnglish
    Pages (from-to)709-745
    Number of pages37
    JournalManagement International Review
    Volume50
    Issue number6
    DOIs
    Publication statusPublished - Dec 2010

    Keywords

    • institutional variables
    • transaction cost variables
    • FDI
    • dyadic JVs
    • multipartner JVs
    • wholly owned subsidiaries
    • Turkey
    • cost influence
    • partnership structure
    • foreign affiliates

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