Title:Caution or Causation: How Earlier Entrant Failures Influence New Entry

Speaker: Jane Wenzhen Lu, Associate Professor, NUS.

Time: 10:00-11:30, May 12

Seminar Room: 215,New Building

ABSTRACT

This study examines how early entrant failures in a host market affect a focal firm’s own decisions on entry and scale of investment in the market.In general, firms respond to earlier entrant failures by reducing their rates and scale of investments in the host market. However, the intensity of such response is affected by how a firm causally attributes the failures. Drawing on the attribution theory, we differentiate internal causes and external causes to which failures are attributed. Failed FDIs with heterogeneous attributes are likely attributable to internal firm-specific causes, and hence would weaken the firm’s tendency to react to the failures. In contrast, failed FDIs with heterogeneous investors tend to be attributed to external environmental causes, which would strengthen a firm's tendency to reduce its entry rate and scale in the country. Our analysis of 925 Japanese firms’ entries into China from 1979 to 2000 largely supported these arguments.