Foreign direct investment (FDI) in banking (i.e., the establishment of branches, representative offices, agencies, subsidiaries, or affiliates abroad) is one of the key features of the international monetary system, yet it has received relatively little attention, particularly from empirical researchers. This thesis first reviews the existing work on FDI in banking, and then proposes a theoretical framework for understanding the sources of competitive advantage which lead to multinational banking. This framework integrates earlier work on the theory of financial intermediation with Durming's eclectic theory of FDI. Sources of competitive advantage (Dunning's "ownership-specific advantages") are found to lie in the areas of transaction cost reduction, asset transformation, information production, monitoring, and signalling. Empirical proxies for these variables are then identified.
The importance of these variables is then tested using data on foreign banks operating in Japan and Korea. The first test uses survival time analysis (Cox proportional hazards model) to identify the factors associated with early entry into these markets after they were opened to foreign banks. The second uses multinomial logit analysis to examine the factors distinguishing banks which have established a branch or representative office in Japan and Korea from those that have not. The results of the two models are consistent for the most part and are generally in accordance with the predictions of the theory.
The final part of the thesis explores the reasons for the strategic choices of the foreign banks in these markets and their relative success in implementing them. A cluster analysis reveals the presence of strategic groups in each market whose membership is broadly consistent with the types of advantages they have, as revealed by a review of the trade press. The most profitable foreign banks are found to be those that pursue niches with high barriers to entry, usually due to a natural advantage such as nationality.
Implications for further research are then discussed. / Business, Sauder School of / Graduate
| Identifer | oai:union.ndltd.org:UBC/oai:circle.library.ubc.ca:2429/32180 |
| Date | January 1990 |
| Creators | Ursacki, Terry |
| Publisher | University of British Columbia |
| Source Sets | University of British Columbia |
| Language | English |
| Detected Language | English |
| Type | Text, Thesis/Dissertation |
| Rights | For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use. |
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