Commercial diplomacy's role in entering foreign markets in the age of global value chains

Abstract

We examine the role played by commercial diplomacy in firms' outward internationalisation. Based on interviews with economic counsellors and a comparative case-study analysis of firms entering foreign markets, we explore the antecedents and consequences of commercial diplomacy for foreign market entry. The moderating effects of commercial diplomacy vary with regard to the foreign market's level of institutional development as well as the entry mode. The greatest potential effect is identified in less developed, institutionally and politically less stable countries and while engaging in internalisation-related entry modes. The results also depend on firms' perceptions, the timing of the relationship that is established between firms and counsellors as well as the economic counsellors' capabilities. Commercial diplomacy is important for both recognising and exploiting opportunities in international markets. We discuss the managerial and policy implications and develop propositions for testing in later entry mode research and commercial diplomacy research.