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Exploitation versus Exploration in Location Choices by Developing Country Multinationals
Lin Yuan
Conference Name2011 Academy of International Business
Source PublicationProceedings of the 53rd Annual Meeting of the Academy of International Business
Conference DateJune 24-28, 2011
Conference PlaceNagoya, Japan

In this paper, I draw mainly from organizational learning theory, and model the trade-offs between exploitation and exploration in location choice. I use a unique and comprehensive panel dataset including 661 new market entries (FDI location choices) by 207 listed Chinese MNCs between 1992 and 2005. My analyses provide strong support for the hypothesized relationships. Specifically I find that firms are affected by exploitation considerations (i.e., they leverage their own prior experience) as well as exploration considerations (i.e., leveraging of rivals' experiences) in choosing FDI location. However, the positive effect of exploration considerations on firm's location choice is much weaker than the exploitation considerations. I also find that exploitation and exploration considerations are substitutable to each other in location choice. My analyses also reveal that the exploitation as well as exploration effects are stronger in more uncertain country environments— countries that are less open and characterized by lower stability.

Fulltext Access
Document TypeConference paper
AffiliationUniversity of Macau
First Author AffilicationUniversity of Macau
Recommended Citation
GB/T 7714
Lin Yuan. Exploitation versus Exploration in Location Choices by Developing Country Multinationals[C],2011:148.
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