Economic freedom and foreign direct investment ownership mode strategy of multinational enterprises in Asia and Latin America

Increased foreign direct investment (FDI) activities in the emerging economies of Asia and Latin America have attracted the interest of international business (IB) researchers studying different aspects of market entry strategies in these markets. This paper contributes to the existing literature by being one of the first studies using the size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally and regulation of credit, business and labor to study choice between wholly owned subsidiaries (WOSs) and joint ventures (JVs) by the MNEs from an open, small and highly internationalized Nordic country (i.e. Finland). The empirical analysis of 147 FDIs made by 65 Finnish firms in Asian and Latin American economies indicates that strong legal structure and high security of property rights lead to the choice of JVs, easy access to sound money and high freedom to trade internationally lead to the choice of WOSs by the investing Finnish MNEs. However, the impacts of size of government and regulation of credit, labor and business on the FDI ownership mode strategy have been found to be nonsignificant in our analysis.