FOREIGN DIRECT MINORITY‐EQUITY INVESTMENTS AS STRATEGIC ALLIANCES: AN EMPIRICAL STUDY OF THE IMPACT ON U.S. FIRMS (1979–1991)

This research considers the incidence of foreign firms investing between 10 percent and 50 percent equity in U.S. corporations, or Foreign Direct Minority‐Equity Investment (FDMI). FDMI relationships are viewed with respect to international strategic alliances in general and are hypothesized to be motivated by market, technology, or production considerations. Both financial and operational performance measures are examined comparing three years prior to the FDMI with three years after. The research follows an ex post facto, quasi‐experimental design with two control groups consisting of 99 companies each. Results indicate declining performance measures related to FDMI companies receiving FDMI as compared to a matched sample of peer firms. Strategic management, agency theory and other explanations are explored in light of these findings.