Influence of location factors on establishment and ownership of foreign investments: The case of the Japanese manufacturing firms in Europe

We test the hypothesis that location factors have strong predictive power for mode of establishment and ownership choice of MNEs, by controlling for parent experience and capabilities in a sample of 751 manufacturing subsidiaries of 405 Japanese MNEs. In the European context of few ownership restrictions we find that host competitiveness, host culture type, and industrial growth are the most appropriate location predictors for entry mode. We create a profile of joint venture, full acquisition and wholly owned greenfield modes and reveal how different strategic contexts interact with location factors to determine the MNE expansion approach. Our results imply that location variables are important determinants of expansion strategy, indispensable in analysing subsidiaries of MNEs even in hosts with stable political environment.