Who Determine The Enterprise’s Choice Of Foreign Direct Investment Mode?

When a company decides to invest overseas, one of the core strategic decisions is how to enter the host countries market. Different entry modes mean different ownership and control, and different levels of investment commitments and risk-taking. Thus, under the background of economic globalization, it is important theoretically and practically to explore what decides the Chinese firms’choice of foreign direct investment modes.The managers could be identified as the CEO, the chairman of the board and TMT, all of whom are important in the strategic decision-making. It is important to analyze whose impact is much stronger than others. Based on the empirical evidence of Chinese enterprises, this thesis firstly considers three different levels of managers including the CEO, the chairman of the board and the TMT, in order to analyze who, among the CEO, chairman of the board, and the TMT, will mostly influence the strategic decisions of foreign direct investment modes. At the same time, the foreign direct investment modes are divided into two categories in this thesis:the Entry Mode and the Establishment Mode. The former is based on the nature of overseas subsidiary ownership; in this case it can be divided into joint venture and wholly-owned subsidiary. The latter is based on how to achieve the overseas subsidiary ownership; in this case it can be divided into greenfield and cross-border M&A. Secondly, this thesis discusses the influence of managerial international experience on the choice of foreign direct investment modes. Thirdly, the managerial irrational perspective has been also extensively concerned by scholars in recent years. Some scholars pointed out that overconfidence is one of the most robust findings in the psychology of judgment. Therefore, in the process of choosing foreign direct investment modes, managerial overconfidence will also have an impact on the decision making. Fourthly, if a manager not only has a background with international experience, but also overconfidence, then the process of making strategic decision will be affected. This thesis will make an empirical research on the four questions mentioned questions mentioned above. This thesis investigates the foreign direct investments launched by the enterprise listed in Shenzhen and Shanghai stock exchange market during the period of2002-2011. In detail, the thesis explores the influence of international experience and overconfidence on the choice of foreign direct investment modes among CEO, the chairman of the board and TMT. The results show that TMT international experience have a significantly positive influence both on the choice of entry mode and establishment mode; CEO international experience have a significantly positive influence on entry mode but no influence on establishment mode; chairman of the board have no influence both on entry mode and establishment; the overconfidence of all the decision makers including the CEO, the chairman of the board and the TMT will positively influence the choice of entry mode and establishment mode. It is interesting to find that if a manager with international experience who also has a characteristic of overconfidence, he will prefer to choose joint venture rather than wholly owned subsidiary and cross-border M&A rather than greenfield.