Asset specificity, experience, capability, host government intervention, and ownership‐based entry mode strategy for SMEs in international markets

Abstract

PurposeThe purpose of this paper is to propose an integrated theoretical framework to examine the determinants of the choice of ownership‐based entry mode strategy for small to medium‐sized enterprises (SMEs) in international markets.Design/methodology/approachThe statistical data sources were mail survey and secondary data collection. Logistic regression was used in the testing of the hypotheses.FindingsAll four theoretical views (including transaction cost theory, the views of Uppsala process model, organizational capability perspective, and bargaining power theory) have relevance for the choice of SMEs' ownership‐based entry mode strategy in international markets.Research limitations/implicationsThis study was limited to the manufacturing sector only. Given the limited scope, caution must be exercised in generalizing from this study's sample to firms in the service sector. Furthermore, this study is a cross‐sectional analysis and may not draw a complete picture of the course of SMEs' ownership‐based entry mode choice over time. Future research should use longitudinal analysis to explore the evolution of SMEs' international expansion over time.Practical implicationsThis study proposes a decision path diagram that can give the SMEs some suggestions about how they should consider their choice of ownership‐based entry mode strategy in international markets. The executives of SMEs that invest in international markets can draw useful lessons from this study.Originality/valueThis study proposes a well‐rounded theoretical framework based on four theoretical views (including transaction cost theory, the views of Uppsala process model, organizational capability perspective, and bargaining power theory) to examine SMEs' choice of ownership‐based entry mode strategy in international markets. The limitations for past research that are inherent in focusing on a single theoretical view can be overcome.