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Many studies have examined the choice between different types of equity and non-equity modes; however, none has focused on the choice between different types of non-equity modes that service firms employ routinely. This study develops a theoretical framework based on the “organizational capability” perspective to explain the choice between two non-equity modes— franchising and management-service contracts. While previous studies are based on the premise that foreign market entrants choose a mode—equity or non-equity—that offers them most control given their particular circumstances, the premise of this study is that foreign entrants choose a non-equity mode that, in addition, offers effective transfer of the firm's capabilities to the host-country venture.


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© Palgrave Macmillan . Final version published as: Erramilli, M. K., Agarwa, S., & Dev, C. S. (2002). Choice between non-equity entry modes: An organizational capability perspective. Journal of International Business Studies, 33(2), 223-242. Reprinted with permission. All rights reserved.