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Because of the accomplishment of various Japanese companies in the international marketplace, a great deal interest has been focused on the promoting techniques and strategies used by Japanese MNCs. Regions where Japanese methods have been studied include: the usage of international promoting methods, intensity of market orientation; innovative product advancement methods; promoting research methods; and sourcing methods. The amazing performance of Japanese companies in the 1980s, a decade during which Japan obviously found its place as the world's second major economy prompted this high degree of curiosity in Japanese business approach and procedure.
While the Japanese economy has come upon fairly difficult period in the "post-bubble" era, a lot of of its MNCs have repeated to prosper in foreign markets. Undoubtedly, a share of this continuous accomplishment owes to Japanese MNCs doing efficient preparation in selecting the institutional agreement e.g. exporting vs joint venture vs full ownership) by means of which they serve particular foreign markets. In reality, Japanese companies have forcefully entered markets in Europe, North America, and Asia within the last few decades. On the other hand, the means by which Japanese companies choose an institutional agreement in entering a foreign market has not been generally studied.
The significance of the foreign market entry method decision has been clearly well-known. The entry method selected has a most important effect on the intensity of influence the MNC has over the venture. Some entry methods, for instance exporting and licensing, are related together with small degrees of influence over operations and marketing, but are also connected with lesser degrees of probability. In contrast, other entry methods for instance joint ventures and full ownership of facilities involve more influence, but entail additional probability.
Since reversing an inappropriate entry method choice can be difficult, it is important that well thought out decisions be made. As a result of the importance of entry method decisions, a large body of research examining the factors involved in US companies' foreign market entry method decisions has evolved. To date, on the other hand, very little research has focused on how Japanese companies make entry method choices. The purpose of this paper is to examine the factors that Japanese MNCs consider in making the choice among alternative entry methods when entering a foreign market. To achieve this objective, a survey was sent to top executives of Japanese MNCs.
The remainder of the paper will begin by discussing the most important alternatives available to companies making foreign market entry decisions. Bargaining power theory is then described and used to develop hypotheses pertaining to the factors which are important in entry method decisions of Japanese companies. Next, the study's methodology is described. Finally, results and implications are discussed.
Entry method alternatives and the theoretical framework
most important entry method alternatives include exporting, licensing/franchising, joint ventures, and full ownership. Exporting involves a company selling its physical products which are manufactured outside the target country to the target country. Licensing and franchising arrangements are nonequity associations between an international company and a party in the host country in which technology or management systems are transferred to the host party. A joint venture is an agreement whereby the firm is required to share equity and influence of the venture with a partner from the host country. An additional entry alternative is full ownership of facilities in the host country, whereby the parent company takes a 100 percent equity stake in the operation in the foreign country. Full ownership can involve either acquiring an existing business or investing in innovative facilities in the host country.
In weighing foreign market entry alternatives, a central consideration is the intensity of influence the firm will have over the operation. Influence has been defined as, "the ability to influence systems, methods, and decisions". In general, when a firm moves from licensing/franchising to joint venture to wholly-owned subsidiary (WOS), the firm's investment and the degree of influence that the firm has over the operations increase.
While exporting is generally viewed as a small commitment form of market entry, it is not as easily classified on this continuum. As has been noted in prior studies, there can be a wide spectrum of commitment and influence of the exporting companies, since some exporting arrangements (i.e. indirect exporting) simply involve selling to an intermediary for instance an export trading company, while other arrangements involve forging relationships with distributors. For this reason, past theories of method choice have not been designed to predict the choice between exporting and the other three alternatives. An additional factor that makes it difficult to compare exporting cases to other methods of entry is that exporting involves production in the home country, while the other methods involve production in the host country. When a MNC approaches a host government about entering into a licensing, joint venture, or full ownership method of entry, the firm is acknowledging that it believes there are advantages connected with host country production that would not be afforded by exporting. The main issue from a bargaining power perspective becomes the intensity of influence the MNC will have over the venture. Exporting, on the other hand, does not involve host country production and, hence, does not involve bargaining with the government (at least not in the same context as the other three types of arrangements). Thus, it is not appropriate to compare exporting cases to licensing, joint venture, and WOS cases. For this reason, exporting cases are not included in our analysis.
In selecting a theoretical framework for analyzing the market entry decisions of Japanese companies, it is important to consider Japanese culture and business methods. While a number of theories of entry method choice have been advanced by prior researchers, the assumptions of some of the theories may not be consistent with the way in which Japanese companies behave.
In the entry method literature, there is a consensus that two most important theoretical perspectives have emerged as viable frameworks for examining MNCs' entry method choice. The first framework, transaction cost analysis (TCA), has been used in several empirical studies of Western MNCs' entry method choice . TCA theory posits that a company will internalize operations that it can perform at a lesser transaction cost than would be the case if the firm exported or entered into a contractual agreement with a local partner. The second framework, bargaining power (BP) theory, views entry method choice as an outcome of negotiations between the firm and the government of the host country. While the BP framework is well developed from a theoretical standpoint, it has not been tested as extensively as TCA in the entry method choice context, though there are a few notable exceptions.
While TCA has been the most widely used theory in prior studies of entry methods, some issues pertaining to its applicability to non-Western contexts have been raised. Indeed, several scholars have questioned the appropriateness of applying transaction cost analysis to East Asian cultures because of its focus on institutional structures and their effect on transaction costs. North (1981) and Granovetter (1979), for example, assert that the way in which institutions are structured in a country can have an effect on the transaction costs connected with partnering. Hence, since a society like Japan has different institutional structures than Western nations, the application of transaction cost analysis may be inappropriate. One good example of institutional difference is the presence of keiretsu in Japan, in which members of a network attempt to work closely with and help other members of the group . In such a context, short-term focus on transaction costs may not be a central goal.
Hill (1995) has directly questioned the applicability of TCA to Japan based on the notion that several aspects of Japanese culture, including collectivism, group identification, loyalty, harmony, and reciprocal obligation reduce the cost of partnering. It can be argued that such elements of Japanese culture have led to both a more networked business system (as evidenced by the presence of the keiretsu) and to an economic environment that is typified by a higher intensity of trust between business partners. In a system with higher degrees of trust, opportunistic behaviors (a central concept of TCA theory) may also be less of a threat to businesses, leading to a reduction in the costs connected with partnering. For the above reasons, it is worthwhile to consider alternatives to TCA theory in examining the entry method choices of Japanese companies. It is also worth mentioning that an additional theory of entry method choice, the OLI (ownership, location, internalization) perspective advocated by Dunning (1988) makes assumptions similar to TCA regarding transaction costs and internalization of operations. Hence, it is not a strong candidate for application to the Japanese case.
The assumptions of bargaining power theory do not appear to conflict with Japanese values and business methods. BP assumes that both parties are looking to negotiate an outcome that is in their long-run best interests. This assumption is consistent with the widely observed tendency of Japanese companies to be longer-term oriented and less focused on near term profitability than their Western counterparts . Additionally, bargaining power assumes that the MNC uses its ownership advantage as a source of bargaining power, while the host government relies on its influence over promoting access . This assumption would also appear to be consistent with Japanese practice, since Japanese businesses tend to see high value in ownership of foreign operations as these arrangements tend to enhance their ability to employ a globally integrated approach . The focus of bargaining power theory on a power struggle involving negotiation is also consistent with the competitive dedication that has often been ascribed to Japanese companies . Since the assumptions of BP theory seem consistent with Japanese values and practice, it is used in this study as the theoretical basis for explaining Japanese MNCs' entry method choices. A full description of the theory follows.
Bargaining power theory and research hypotheses
Bargaining power theory asserts that the entry method a firm chooses depends on the relative bargaining power of the firm and the foreign government . As noted by Gomes-Casseres (1990) and others who have employed the bargaining power framework, access to foreign markets is controlled by political actors at home and abroad, so that the initial market entry decision has to include the political imperative. Without these actors' explicit or implicit permission, no subsequent promoting activity is possible . International companies must often negotiate with a variety of government actors to accomplish all or share of their objectives . Thus, the bargaining power of the political and corporate actors in market entry decisions becomes a salient consideration .
Bargaining power theory starts from the premise that a firm has a natural preference for a high-influence method of entry, since this is the most desirable agreement in terms of the firm's long run ability to dominate a foreign market. On the other hand, the firm may be forced to settle for a lesser influence method of entry if it has small bargaining power (as in cases where various foreign companies are seeking the investment opportunity).
As used in this study, the term bargaining power refers to a bargainer's ability to set the parameters of the discussion, win accommodations from the other party, and skew the outcome of the negotiation to the desired ownership alternative . A primary source of the host government's power in the negotiations is its ability to influence market access and to hand out or withdraw incentives for the investment project. On the other hand, as noted by Kumar and Subramanian (1997), BP theory suggests that a great deal of the firm's bargaining power stems from "ownership advantages" that it possesses, for instance the ability to employ people and contribute to the local economy. According to the bargaining power theory, the actual method of entry a firm eventually settles for will depend on the relative bargaining power between the firm and the host government.
A review of prior literature on foreign market entry methods and business methods in Japan led to the identification of several factors which may play a role in the foreign market entry method decisions of Japanese companies. The primary criterion for a factor to be included in the study, on the other hand, was that it must affect the relative bargaining power of companies and host government. Following this criterion, eight factors are included in this study. These factors are:
- () (1)the stake of the firm;
- () (2)the stake of the host country;
- () (3)the need for local contribution to the venture;
- () (4)the riskiness of the investment;
- () (5)the intensity of competition for the investment;
- () (6)the intensity of resource commitment by the firm to the foreign market; and
- () (7)host government restrictions; and
- () (8)the size of the firm.
Stake of the firm is defined as the extent to which a MNC perceives itself as having a high stake in winning the right to enter a foreign market based on strategic considerations . MNCs see some markets as important to have a presence in as share of an overall international approach. A firm may also foresee synergy between the proposed venture and its existing operations leading to a competitive advantage.
When the MNC believes it has a significant strategic stake in a foreign market or can realize international synergies in its operations its stake in the negotiations increases. As the firm's stake increases, its bargaining power decreases and it may be forced to settle for a lesser influence method of entry than it desires. Thus:
H1: There is a negative relationship between the stake of the MNC and Japanese MNCs' choice of a high influence entry method.
Stake of the host country is defined as the degree to which the host government perceives a compelling need to attract the investment. When the host government believes that it has an important stake in attracting the venture, the bargaining power of the MNC will be increased . BP theory suggests that the host country is likely to perceive its stake to be high when it has a need to attract foreign capital and/or technology in order to spur economic growth . When the host country's stake is high, its relative bargaining position will be weakened, leaving a greater likelihood of the firm being able to negotiate full ownership. Thus:
H2: There is a positive relationship between the stake of the host country in attracting the investment and Japanese MNCs' choice of a high influence entry method.
Need for local contribution refers to the degree to which a MNC needs local capital, technology, or other resources to ensure the accomplishment of the venture. The need for local contribution increases the dependence of the MNC on the host country, since a completed deal allows the MNC to obtain resources and/or skills which complement its own. Thus, the host government has higher bargaining power and may be able to pressure the MNC into accepting a small influence method of entry . Japanese companies, in particular, may be willing to partner with those companies they believe they can trust if the potential partner brings a tangible contribution to the venture. Thus, we would expect Japanese MNCs to be more likely to settle for a small influence entry method in situations in which the venture requires a local contribution.
H3: There is a negative relationship between the need for local contribution and Japanese MNCs' choice of a high influence entry method.
Riskiness of the host country refers to the uncertainty connected with the accomplishment of the investment in the foreign market and can take the form of either: the political probability connected with doing business in the host country; or the financial probability connected with operating the venture. When there is a high intensity of probability, the number of alternatives available to the host government is likely to be limited, as most international companies will be cautious when considering entry into the market. From a bargaining power perspective, the availability and attractiveness of alternatives have a strong influence on negotiations. The party having more attractive alternatives will tend to be more powerful, since it can exercise its best alternative to a negotiated agreement. Thus, based on BP theory, a high intensity of probability in a foreign country will improve the bargaining position of the MNC, making it more likely that the MNC will be able to negotiate a high influence method of entry . Since Japanese companies, like other MNCs, have been exposed to both types of probability, they are likely to consider this factor in making entry method decisions. Hence, Japanese MNCs would be more likely to insist on using a high influence method in risky markets. Thus:
H4: There is a positive relationship between the intensity of probability connected with the host country and Japanese MNCs' choice of a high influence entry method.
Intensity of competition is defined as the extent to which entry into the foreign market is pursued by a firm's competitors. When a foreign investment is pursued by a number of different MNCs, the alternatives available to the host government increase. In competitive environments, BP theory would suggest that the bargaining power of the host government increases and that the host country government would be less likely to make concessions to any particular MNC . Since Japanese companies are especially prone to view the implementation of international techniques as essential to their accomplishment , they may frequently find themselves in competitive situations in which they are highly motivated to enter a market, but have to bargain in order to gain entry due to the presence of competitors. Hence:
H5: There is a negative relationship between the intensity of competition for a foreign investment opportunity and Japanese MNCs' choice of a high influence entry method.
Resource commitment refers to the expectations the firm and host country have in terms of resource commitment and scope of the project. Bargaining power theory suggests that high resource commitment degrees increase the stake of both parties, but especially that of the MNC, since the company will want the opportunity to realize anticipated sales connected with a large capital commitment. While employment opportunities are often very appealing to host governments, it is unlikely that host governments will view a single investment as important enough to significantly alter their stake in negotiations (Fisher and Ury, 1981; Gomes-Casseres, 1990). Thus, when commitment is high, Japanese MNC's bargaining power is reduced, and they will be less able to negotiate a high influence method of entry:
H6: There is a negative relationship between the intensity of resource commitment required by a venture and Japanese MNCs' choice of a high influence entry method.
Still another factor that can play a role in entry method decisions is the intensity to which host government restrictions exist. Host government restrictions are laws and regulations that have an effect on the operations of a foreign firm and may serve to have an effect on a firm's entry. most important types of government restrictions include equity limits, local content requirements, and exchange controls . BP theory posits that these types of restrictions will reduce the firm's bargaining power and the ability of the MNC to negotiate for a high influence method, since they either explicitly or implicitly discourage such arrangements . Thus:
H7: There is a negative relationship between the presence of host government restrictions and Japanese MNCs' choice of a high influence entry method.
A final factor considered in this study is the size of the firm, which is defined in terms of the firm's annual worldwide sales volume. BP theory suggests that large companies, as a result of their scale, tend to have higher bargaining power in negotiating to enter foreign markets than small companies . The reasoning is that larger companies have less stake in any particular transaction than do small companies. Additionally, large companies may be able to leverage their reputations into increased bargaining power. As a result of these advantages connected with scale, BP predicts that:
H8: There is a positive relationship between firm size and Japanese MNCs' choice of a high influence entry method.
The sampling frame consisted of a list of over 1,400 Japanese manufacturing MNCs obtained from Dun and Bradstreet Information Services, Inc. The list included the firm's annual sales, number of employees, and key contact persons. For the purposes of this study, only companies with at least 100 employees and $20 million in annual sales were included. These criteria were consistent with the focus of the research, namely companies which are of sufficient size to have a range of possibilities in terms of entry method arrangements. After applying these criteria, 1,189 companies remained in the sampling frame.
Questionnaire and measures
A structured survey questionnaire was developed by means of a review of prior literature which identified constructs relevant to the study. A list of items was then developed to measure these independent constructs. Most items were measured using a five-point Likert scale. A few questions (e.g. size of the firm, method of foreign market entry) asked the respondent to choose from a list of categories. Established measures for the eight independent factors in the context of entry method decisions were generally not available, since most prior studies in this area have relied on secondary data. In general, these studies had to usage proxy measures to measure abstract theoretical constructs (e.g. stake of the host country), raising concerns about the quality of the data. As a result, items used to measure the eight factors in this study had to be newly developed based on a review of the related literature.
The questionnaire was pretested by means of personal interviews with Japanese executives responsible for international market ventures and with academicians familiar with research on entry methods. Based on feedback from these interviews, some questionnaire items were dropped and others were modified. Prior to finalizing the questionnaire, the survey was sent to several Japanese business executives in order to evaluate the validity of the revised items and the amount of time it took to complete the survey.
Once the English version of the questionnaire was finalized, it was translated into Japanese and backtranslated into English following Douglas and Craig's (1983) framework. The translation work was performed by a team of academics teaching in a Japanese department, including one particular with considerable business experience in Japan. The initial and backtranslated English versions of the questionnaire were compared in order to ensure that equivalent constructs were being measured in the two languages. Discrepancies were reconciled by modifying the wording of some items.
The dependent variable measure in this study was type of entry method selected. Respondents could choose from the following options: exporting, licensing/franchising, joint venture, or full ownership. As noted earlier, exporting cases were deleted for the purpose of analysis.
A mail survey was sent to the CEO/President of the 1,189 Japanese companies in the sampling frame. Confidentiality of responses was assured in the cover letter and respondents were promised a summary report of the study's finding upon request. Five weeks after the initial mailing, a follow-up mailing was sent to those companies which had not responded to the first mailing.
Of the 1,189 questionnaires sent out, 107 were undeliverable and returned, and 64 more were not usable, in most cases due to the firm indicating that it was no longer engaged in international business operations. Of the remaining 1,018 questionnaires, 178 responses were obtained, for an efficient response rate of 17.4 percent.
Assessment of non-response bias
Potential non-response bias was assessed by comparing responding companies to nonresponding companies in terms of:
- their annual sales volume; and
- the number of employees.
The results of these comparisons indicated that there are no statistically significant differences on either of these dimensions. Moreover, MNCs responding to the first mailing were compared to those responding to the follow-up mailing with regard to the measured items. No statistically significant difference was found. Thus, it does not appear that non-response bias is present in the sample. The characteristics of the sample are summarized in Table I.
Analysis and results
Reliability of independent factors
Seven of the independent factors in this study were measured using multiple item scales (the eighth, firm size was measured based on self-reported sales volume). For these seven factors, coefficient alphas were computed in order to assess the reliability of the scales. The Appendix shows the coefficient alphas for each variable. As can be seen, four items have a coefficient alpha between 0.6 and 0.7, one item is between 0.7 and 0.8, and two items have alphas of 0.8. Since prior studies have generally not attempted to measure these factors by means of primary data collection, most scales had to be newly developed for this study. Given the exploratory nature of the measurement scheme, the reliability coefficients are considered to be relevant for the purposes of our study .
Discriminant analysis was used to test the research hypotheses. Since the dependent variable, entry method, is categorical, and since tests of the skewness and kurtosis of the variables, as well as a Box's M test indicated no evidence of violation of the basic assumptions of discriminant analysis, discriminant analysis is considered appropriate for analyzing the data. To apply discriminant analysis, the sample was randomly split into two: a calibration sample and a validation sample. Using the calibration sample, two discriminant functions were fitted onto the factors corresponding to the BP-based hypotheses. Table II shows the fit statistics of the two discriminant functions, as well as the discriminant loadings of the factors. As can be seen, the first discriminant function is statistically significant, but the second discriminant function is not. Thus, only the significant discriminant function is used for subsequent analysis.
Although one significant discriminant function was found on the calibration sample, the stability of this finding must be verified by the validation sample. Specifically, using the significant discriminant function, the cases in the validation sample were classified into one of the three groups: licensing/franchising, joint venture, and wholly-owned subsidiary. The classification table is shown in Table III. As can be seen, nearly 55 percent of the cases in the validation sample are correctly classified by the significant discriminant function obtained from the calibration sample, which is substantially higher than the random hit rate of 42.6 percent. The accomplishment in classifying cases in the validation sample indicates that the significant discriminant function obtained from the calibration sample is stable and valid. Therefore, it is apparent that bargaining power theory is useful in helping to predict the method choice of Japanese companies and that the discriminant loadings reported in Table II can be used for testing the research hypotheses.
From the first column in Table II, we see that five of the eight BP-related factors were significant predictors of the Japanese MNCs' entry method choices. Specifically, it is found that Japanese MNCs tend to adopt a high influence method to enter a foreign market when the stake of the host country is high (supporting H1), when the investment is regarded as risky (supporting H4) and when they have a high need for local contribution (refuting H3). In contrast, Japanese MNCs tend to adopt a small influence method to enter a foreign market when resource commitment is high (refuting H6) and when host government restrictions are present (supporting H7). The remaining three factors, stake of the firm, resource commitment, and firm size, did not produce statistically significant results.
The variable producing the major discriminant loading (statistically significant at p < 0.001) is the need for local contribution. On the other hand, the sign of the loading is positive, which contradicts H3's prediction of a negative relationship. This result suggests that Japanese companies actually opt for a high influence method when a substantial contribution is required. Possible reasons for this finding, along with the possibility of reconciling it with BP theory, are discussed in the discussion and implications section.
Discussion and implications
Although the accomplishment of Japanese MNCs in international promoting in the 1980s led to various research efforts investigating Japanese promoting approach, no previous study had focused specifically on factors that Japanese MNCs consider when making foreign market entry method choices. This study has made an attempt to investigate factors that are important in Japanese MNCs' foreign market entry decisions. Based on a survey of top executives of Japanese MNCs, this study has found that bargaining power theory related factors do play a significant role in Japanese MNCs' choice of entry method. The specific findings are discussed below.
Key factors in Japanese entry decisions
The findings of this study suggest that five factors are particularly important in the foreign market entry method choices of Japanese MNCs. First, when the host country perceives a significant stake in attracting the investment, Japanese companies are more likely to be able to negotiate a full ownership agreement. Based on BP theory, this ability to negotiate higher influence is linked to the higher bargaining power of the firm in negotiations.
A second significant finding is that Japanese MNCs tend to opt for high influence methods when the probability of doing business in the host country is high. Instead of attempting to reduce the resource commitment by using a small influence method (e.g. licensing and franchising) like some Western MNCs would do in risky foreign markets , Japanese MNCs apparently usage the high probability connected with investment in the host country to their advantage by bargaining for a high intensity of influence in their ventures. Presumably, Japanese MNCs are focused on the long-term viability of their ventures and usage the small bargaining power of the risky host country to establish long-term influence. obviously, Japanese MNCs' behavior is consistent with the bargaining power theory's prediction with regard to the riskiness factor.
A third significant factor for the Japanese MNCs' entry decision is resource commitment. Our results indicate that when resource commitment is high, Japanese companies are less likely to be able to negotiate for a high influence method of entry. Instead, their bargaining power is reduced, likely due to the proposed scale of the operations, and they end up negotiating for licensing arrangements or joint ventures.
Government restrictions are a fourth factor that plays a significant role in the entry method choices of Japanese companies. Not surprisingly, when the host country has restrictions on local content, foreign exchange, or ownership intensity, the Japanese firm is unlikely to be able to negotiate for a high influence method of entry.
A final significant factor for the Japanese MNCs' entry decision is the need for local contribution. Contrary to our hypothesis, when Japanese MNCs have more need for local contribution, they actually seek a high influence method to enter the host country. One possible explanation for this unique finding is that Japanese MNCs may attach greater importance to overseeing production, promoting, and distribution operations when a local contribution is needed. Fears of becoming too dependent on local companies and loss of proprietary knowledge/technologies may contribute to the desire for greater influence in such instances .
An alternative explanation for this unique finding is that Japanese MNCs may be thinking very long term in insisting on a high influence method. When the need for local contribution is high, Japanese managers may perceive a need to become "insiders" by establishing their own operations so that they will be able to offer the needed "local contribution." This thinking is consistent with the frequently observed tendency for the Japanese to plan over very long time horizons . Japanese MNCs may actually view the need for a local contribution as a long-term drawback to a potential investment, unless they have some ability to establish themselves as insiders who can be trusted by the local companies with whom they do business.
It is notable that prior discussions employing the BP framework suggest that the need for greater involvement in the venture by local parties decreases the bargaining power of the MNC and, in turn, leads to negotiation of a small influence method of entry. The finding of this study suggests that this "tenet" of bargaining power may have to take into account the different power perceptions that exist across cultures. It may be the case that the need for local contribution actually increases the bargaining power of Japanese MNCs by allowing the host government to perceive a sense of cooperation, or at least a lesser threat of the MNC becoming too powerful in the foreign country. Nevertheless, more research is needed which explicitly investigates the effect of the need for local contribution on the bargaining power of Japanese MNC.
The findings of this study have both theoretical and practical implications. On the theoretical front, the findings indicate that the bargaining power theory is useful in helping to explain Japanese MNCs' foreign market entry decisions. Thus, support has been found for the application BP theory to foreign market entry decisions in an Eastern culture. Of course, the findings also suggest that additional research is needed to modify the BP theory to better explain Japanese MNCs' entry decisions. Other factors that potentially influence the bargaining power of Japanese MNCs should be studied to improve our understanding of Japanese foreign market entry behavior.
Managerially, the findings of this study suggest that Japanese MNCs are very aggressive and long-term oriented when entering foreign markets. They appear to often be able to turn a risky situation to their advantage by using higher bargaining power to gain long-term influence of their foreign ventures. Additionally, they appear to be able to capitalize on situations in which the host government has a large stake by negotiating for full ownership. They are willing to accept a small influence method of entry if government restrictions dictate it or if the venture is of such a large scale that resource commitment is high. Countries and companies negotiating with Japanese MNCs for potential investment or partnership must understand their aggressiveness and long-term oriented behavior. They need to identify ways that can influence Japanese MNCs' bargaining power in order to achieve their negotiation objectives. companies competing with Japanese MNCs for entering foreign markets would be well advised to take into account the Japanese MNCs' aggressiveness when pursuing foreign market opportunities.
A few limitations of the study must be acknowledged. First, the sampling frame consists of only Japanese companies that have at least 100 employees and $20 million dollars in annual sales. Thus, the method choices of small Japanese businesses are not analyzed here. Future research should examine whether various factors take on additional importance in the entry method decisions of small companies. Additionally, while the efficient response rate to the survey (17.4 percent) is comparable to that of other published surveys of CEOs, it must be acknowledged as a limitation. A final limitation of the study is the reality that exporting cases were dropped from the analysis because the study is not able to ascertain the degree of influence for the exporting companies. While the exclusion of exporting cases is consistent with the approach taken in previous entry methods research, future researchers should attempt to develop a measure of the intensity of influence present in specific exporting arrangements that is comparable to other forms of operations.