Department of Economics and Business Economics

Interpreting Marginal Effects in the Multinomial Logit Model: Demonstrated by Foreign Market Entry

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This paper presents the challenges when researchers interpret results about relationships between variables from discrete choice models with multiple outcomes. The recommended approach is demonstrated by testing predictions from transaction cost theory on a sample of 246 Scandinavian firms that have entered foreign markets. Through the application of a multinomial logit model, careful analysis of the marginal effects is performed through graphical representations, marginal effects at the mean, average marginal effects and elasticities. I show that increasing cultural distance is associated with a substantial increase in the probability of entering a foreign market using a joint venture, while increases in the unpredictability in the host country environment are associated with a lower probability of wholly owned subsidiaries and a higher probability of exporting entries.
Original languageDanish
JournalAcademy of Management Proceedings
Number of pages40
ISSN2151-6561
Publication statusPublished - 2014
Event74th Annual Meeting of the Academy of Management - Philadelphia, PA, United States
Duration: 1 Aug 20145 Aug 2014

Conference

Conference74th Annual Meeting of the Academy of Management
CountryUnited States
CityPhiladelphia, PA
Period01/08/201405/08/2014

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