Entry Modes for Manufacturers’ International After-Sales Service: Analysis of Transaction-specific, Firm-specific and Country-specific Determinants

Abstract

This paper investigates which criteria influence a company’s entry mode choice for its after-sales service in a foreign country. With a focus on the decision between integrative and cooperative entry modes, an empirical study of 80 foreign entry mode decisions by German manufacturing companies identified determinants of particular importance for after-sales service. Country-specific variables exert a dominant influence on entry mode choice. Country risk, fluctuations in demand, and the availability of suitable service partners increase the probability of choosing a cooperative entry mode. Cultural distance from the host country leads to integrative modes. As transaction-specific variables, a difficult service quality evaluation is shown to increase the likelihood of establishing wholly-owned subsidiaries, as are high resource requirements. Service as competitive advantage also leads to the internalization of the service-function. The companies surveyed are highly satisfied with the entry mode chosen for their after-sales service in foreign markets, which implies that managerial implications can be drawn from the results.