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Article
Equity Commitment under Uncertainty: A Hierarchical Model of Real Option Entry Mode Choices
School of Public Policy Working Papers
  • Luisa Blanco, Pepperdine University
  • Rossitza Wooster, Portland State University
  • W. Charles Sawyer, Texas Christian University
Document Type
Article
Publication Date
2-4-2014
Abstract

We develop a real option hierarchical model of entry mode choice and test predictions using a sample of US companies in Latin America and the Caribbean between 1980 and 2005. Probit results indicate that the choice between a real option non-equity mode and equity commitment is influenced by previous acquisition experience, R&D and advertising intensities, and country risk. The choice of the more flexible real option JV mode over WOEs is positively related to greater firm size and market-to-book ratio in countries with better infrastructure. In contrast, greater marketing intensity and lower country risk encourage WOEs.

Citation Information
Luisa Blanco, Rossitza Wooster and W. Charles Sawyer. "Equity Commitment under Uncertainty: A Hierarchical Model of Real Option Entry Mode Choices" (2014)
Available at: http://works.bepress.com/luisa_blanco/9/