Entry Strategy of Korean Construction SMEs in the African Market

Abstract

Africa is emerging as a promising land for companies exploring foreign market entry opportunities. The purpose of this study is to address the factors influencing entry mode decision of Korean construction SMEs in the African market. Using a cross-country comparative case study approach, we analyzed entries of Korean specialty contractors in three African countries: Morocco, Nigeria, and Algeria. Findings reveal that entry mode is highly influenced by host country factors such as regulations and safety. In particular, SMEs stagger entry mode and entry process to the host country uncertainty level. To keep an option to expand the investment later in Algeria and Nigeria having a high uncertainty level, SMEs start with low level engagement, for instance subcontractor, and extend further when they have acquired enough proprietary information as well as a strong local network. This staged entry mode is grounded in real option theory. This research emphasizes on industry factors relevant on the entry mode decision and the unique traits of the construction industry. It also builds a systematical approach of Korean construction SMEs towards the African market. Another implication of this research is to raise the awareness for the reciprocal growing interest of Korean SMEs for the African market that needs to be stimulated by more incentive policies.