Title: SMEs prefer JVs: why SMEs' equity entry mode choices are different from those of large firms?

Authors: Maria Cristina Sestu; Alfredo D'Angelo; Antonio Majocchi

Addresses: University of Groningen, Nettelbosje 2, 9747 AE Groningen, The Netherlands ' Università Cattolica del Sacro Cuore, Via Necchi 5, 20123 Milano, Italy ' Università di Pavia, Via S. Felice 5, 27100 Pavia, Italy

Abstract: Using a sample of 770 foreign market entries in the time period 2005-2015 we examine whether the equity entry mode strategies chosen by SMEs are different from those of large firms. Our findings reveal that when compared to large firms, SMEs tend to rely more on cooperative entry modes. More specifically, SMEs prefer joint venture rather than wholly owned subsidiary. Using a propensity score matching approach to avoid sample bias issues, our results show that the choice between joint venture and wholly owned subsidiary is strongly influenced by the size of the investing firm and by their financial resources, while the family ownership structure is not a significant discriminant. We discuss the theoretical underpinnings of our findings along with the managerial implications emerging from this research.

Keywords: entry modes; joint venture; wholly owned subsidiary; SMEs.

DOI: 10.1504/EJIM.2023.133934

European Journal of International Management, 2023 Vol.21 No.3, pp.489 - 508

Received: 12 Nov 2018
Accepted: 06 Aug 2019
Published online: 06 Oct 2023 *