As such, the prevalence of diverse ownership identities and the substantial variation in ownership structures among Chinese firms allows us to examine whether institutions matter for the choice of FDI entry modes and how they matter by capturing the effect of their interplay with home country government pressures in firms' FDI entry mode decisions relative to the choice between OIJVs and WOFSs.
These considerations may strengthen or weaken the effect of institutional pressures on the choice between OIJVs and WOFSs.
While the institutional context that influences the choice of FDI entry modes between OIJVs and WOFSs is multifaceted, the pressure exerted by the home country government is one of the core elements of institutional pressures in a transition economy.
Despite the well-recognized benefits of promoting inward FDI via IJVs, the Chinese government is more likely to use its existing approval system to force Chinese firms to choose risk-minimizing and learning-maximizing OIJVs over WOFSs when conducting outward FDI.
A transition economy government that emphasizes learning and asset-seeking investment can motivate firms to choose OJIVs over WOFSs.
Hypothesis 1: The extent of home country government pressure in transition economies will be positively associated with the likelihood that firms in these economies will choose OIJVs over WOFSs when conducting outward FDI.
Based on Armstrong and Overton's (1977) extrapolation method, we compared the early response group (the first 218 responses) with the late response group (the remaining responses) on major firm attributes, such as state ownership, the size and age of the firm, the profitability of the firm, and their perceptions of home government pressure to choose OIJVs over WOFSs.
As predicted, institutional pressures that favor OIJVs over WOFSs significantly increase the likelihood that Chinese firms will choose OIJVs (b = 0.
private firms and reformed firms) are less likely to conform to institutional pressures to choose OIJVs over WOFSs than are conventional firms (i.
The results indicated that home country government pressures have a positive effect on the propensity of firms in China's transition economy to choose OIJVs over WOFSs when they conduct outward FDI.
Only those firms with less institutional freedom and more resource dependence on the home country government will be willing and likely to conform to home country government pressure and thus be more likely to choose OIJVs over WOFSs when conducting outward FDI.
However, few studies have directly explored this issue in terms of the propensity of transition economy firms to choose OIJVs over WOFSs in their outward FDI.