Economics & Finance / Business & Management / Corporate Strategy & Governance

Why Japanese Firms Skip Distributors in Risky Markets: A 1980-1998 Study

Andrew Delios, Witold J. Henisz

Conventional wisdom says companies enter foreign markets step by step: first distributors, then joint ventures, finally wholly owned factories. But a groundbreaking 2003 study by Andrew Delios and Witold J. Henisz, published in the Journal of International Business Studies, flips that script. Using data from 665 Japanese manufacturers across 49 countries from 1980 to 1998, they reveal a stunning reversal: in politically unstable countries, firms skip the distributor stage entirely and jump straight to joint manufacturing factories. Why? Because policy uncertainty changes the game. In low-risk environments, distributors help learn the market. In high-risk ones, they become liabilities. Instead, joint ventures act as shields against government betrayal—think of them as political insurance. This video breaks down the logic behind this counterintuitive strategy, showing you how to navigate risky markets without getting burned. By the end, you'll understand why sometimes the safest move is to invest big upfront.