1. ¹College of Business Administration, San Diego State University, San Diego, USA
2. ²Department of Management, College of Business Administration, University of Texas at Arlington, USA
3. ³Management Department, College of Business, Iowa State University, Ames, USA

Correspondence: M Musteen, College of Business Administration, San Diego State University, 5500 Campanile Drive, SSE 3302, San Diego, CA 92182–8238, USA. Tel: +1 619 594 8340; Fax: +1 619 594 3272; E-mail: mmusteen@mail.sdsu.edu

Received 28 September 2006; Revised 15 August 2007; Accepted 31 August 2007; Published online 25 September 2008.

Abstract

Drawing on agency theory, corporate governance, and international business literatures, we develop arguments relating equity ownership structures and CEO compensation mix to a firm's choice of foreign market entry modes. Based on a sample of 432 foreign market entries by 118 non-diversified firms in the US manufacturing sector between 1991 and 1998, our findings indicate that greater equity ownership by institutional shareholders and inside directors is positively associated with a preference for full-control entry modes. In addition, our results suggest that CEOs with a greater proportion of pay tied to firm long-term performance are more inclined to choose full-control entry modes over shared-control modes.