Arrival of the fittest: Evolutionary strategies for foreign manufacturing investment.

Abstract

Recognizing that a large number of foreign firms' main concern in the U.S. market has shifted from the issue of marketing in the U.S. to the issue of manufacturing in the U.S., and proposing that the choice of foreign manufacturing entry strategies should be understood in the context of an evolutionary market participating process, the present study investigated how Japanese multinational corporations (MNCs) have conducted manufacturing entries into the U.S. electronics industry. Specifically addressed were what manufacturing entry strategies they have used, what factors have determined their choice of strategies, and what strategic choices have brought the best post-manufacturing entry performance Latent Variable Partial Last Squares (LVPLS) estimation was applied as a prime analytic method. The major findings and conclusions of this study are: (1) Japanese MNCs preferred to establish manufacturing affiliates in the U.S. by wholly-owned new set-ups rather than by acquisitions or by joint ventures and majority of them launched manufacturing facilities of similar size, and manufactured their prime product lines in the U.S. (2) In addition to parent firm-level characteristics, such as firm size, degree of diversification, and multinationality, the pre-manufacturing entry operational characteristics which represent the Japanese MNCs' various activities in the U.S. prior to their manufacturing entries were found to have significant influence on manufacturing entry strategic choice behavior. These results strongly support the evolutionary perspective of foreign manufacturing investment. (3) It was found that group-level analysis was an important complementary approach to individual firm-level analysis in studying foreign market entry phenomenon. (4) No universal relationship between manufacturing entry strategic variables and post-manufacturing entry performance was supported. Instead, it was proposed and supported that the relationship was contingent upon the MNCs' parent firm-level characteristics and pre-manufacturing entry operational characteristics.