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The objective of this study is to identify the determinants of a firm’s foreign entry mode choice and the relationship between mode selection and firm performance for the specific case of R&amp;D—a topic not yet investigated in entry mode research. Separate estimates of a Heckman selection model for Austria and Switzerland based on comparable firm-level data and variable specification show for both countries that the OLI model is well-suited to explain not only the propensity to invest in R&amp;D abroad but also the related choice between an equity-based and a non-equity governance mode. Moreover, the research reveals that foreign R&amp;D activity is positively related to firm performance and that this relationship is stronger in the case of an equity-based mode of governance, however only in the Swiss case. The differences between the two countries primarily reflect the much higher degree of internationalisation of the Swiss economy.

Choice of Foreign R&D Entry Mode and Its Relation to Firm Performance: A Firm-level Analysis for Switzerland and Austria