The host-country regulatory institutional environment influence on the entry mode choice: oil and gas exploration and development

Abstract

The present research looks into relations between institutional environment and institutional arrangements and builds a more complex view on the entry mode choice. Specifically, it investigated the entry mode choices in oil and gas exploration and development activities. The probabilities of the exact operation and investment methods occurrence depending on the host-country regulatory environment factors are estimated. The research results into the development of the two-dimensional framework of the entry-mode choice which characterizes the entry mode as two simultaneous choice (operational and investment) and evaluates their dependency on the host-country regulatory environment. The study uses the unique and detail dataset from Scandinavian oil and gas companies that work with exploration and development. The analysis shows that companies tend to establish new wholly-owned entities in countries with expensive contract enforcement and simple taxation and the partial acquisition modes in the countries with opposite characteristics. The two other alternatives lie in-between with relation to the regulatory environment characteristics.