1. ^aFaculty of Arts & Social Sciences, Department of Japanese Studies, National University of Singapore, Block AS4, Level 3, 9 Arts Link, 117570 Singapore. E-mail: marioga@nus.edu.sg
2. ^bGraduate School of Accounting, Aichi University and University of Tsukuba, 2-10-31 Tsutsui, Higashi-ku, Nagoya 461-8641, Japan. E-mail: hoshino@aichi-u.ac.jp

Received 12 October 2006; Revised 6 June 2007; Accepted 12 July 2007.

Abstract

This paper examines the effects of entry strategy and inter-firm trust on the survival of overseas subsidiaries in an emerging market, recognizing different types of firm exit, levels of ownership equity and types of joint venture in the analysis. The findings demonstrate that international joint ventures are more likely to be exited than wholly owned subsidiaries, though the high exit rate is due to capital divestiture, not firm closure. Further, when controlling for different levels of equity ownership and considering other types of joint ventures, only subsidiaries with minority equity ownership show a higher likelihood of divestment than other entry modes. Concerning inter-firm trust, the results suggest that partners having prior partnership experience will experience less exiting than first-time alliance partners. A sample of 224 Japanese manufacturing subsidiaries established in Brazil over 1989–2003 provides empirical evidence for this study.