Loading...
A Dynamic Model of the Choice of Mode for Exploiting Complementary Capabilities
Chi, Tailan Seth, Anju
Chi, Tailan
Seth, Anju
Citations
Altmetric:
Abstract
This paper examines the choice of mode for an MNC and a local firm to exploit their complementary capabilities. We develop a combined real options and game-theoretic model of modal choice by incorporating a range of factors drawn from the dynamic capabilities theory and transaction cost or organizational economics. The factors scrutinized in the model include the parties’ absorptive capacities, frictions in knowledge and asset markets and associated incentive problems, cost of switching from one mode to another and cost associated with power-jockeying. The model uses simulation to examine how these factors interact to influence the choice of mode. The results identify a number of conditions for one factor to dominate another and help to reconcile different theories that have made contradicting predictions with regard to the effects of such factors as uncertainty and capability divergence on the optimal choice of mode.
Description
This is the author's final draft. The publisher's official version is available from: http://dx.doi.org/10.1057/jibs.2008.65
Date
2009
Journal Title
Journal ISSN
Volume Title
Publisher
Palgrave Macmillan
Research Projects
Organizational Units
Journal Issue
Keywords
Market entry mode, Alliances and Joint Ventures, Absorptive Capacity, Transaction Cost, Real options, Dynamic programming
Citation
Chi, Tailan. (2009) A Dynamic Model of the Choice of Mode for Exploiting Complementary Capabilities. Journal of International Business Studies, 40 (3), 365-387. http://dx.doi.org/10.1057/jibs.2008.65