To empirically investigate how the location‐specific variables and strategic motives influence the ownership strategies of Finnish manufacturing firms in ten South and Southeast Asian countries from 1980 to 2000.
Because of the nature of the dependent and independent variables, the binomial logit model is used in the analysis. The regression coefficient estimates the impact of independent variables on the probability that the wholly owned subsidiary (WOS) is market, efficiency and/or a risk‐reduction seeking type of foreign direct investment (FDI). A positive sign for the coefficient means that the variable increases the probability of choosing WOS and undertaking a certain type of investment.
The research results indicate that the low cultural distance, large market size, and high levels of economic welfare in the target country increases the probability of choosing WOS in order to undertake market‐seeking and efficiency‐seeking FDIs. Similarly the low level of risks in the target country increases the probability to choose WOS in order to undertake risk‐reduction seeking FDIs.
Due to the lack of information about the absolute and relative size of FDIs and competition related data could not be included in this study. Adding those variables would also be interesting for future research.
This study may also help the different governments to understand the strategic motives of different multinational firms and fine‐tune existing investment policies or criteria to better satisfy some of their motives.
To the best of our knowledge, this is the first study trying to analyze how the location‐specific variables and strategic motives have influenced the ownership strategies of Finnish manufacturing FDIs in Asian countries.
