How do past mode choices influence subsequent entry? A study on the boundary conditions of preferred entry modes of retail firms

Abstract

This study analyzes whether the preferred entry modes, i.e., the foreign market entry modes that have been most frequently used in the past, influence a retail firm's subsequent mode choices. We discuss the limitations of this relationship by highlighting the external and internal factors that determine the effects of preferred modes on later entry decisions. To provide insight into these issues, we refer to institutional- and knowledge-based reasoing and use a data set that includes 309 market entries by the 30 leading retailers between the years 1960 and 2008. The results indicate that preferred entry modes show strong explanatory power with regard to the subsequent choice of full- and shared-control modes in entering new country markets. Although this relationship is diminished by the external institutional environment (e.g., political distance), firm-specific capabilities, e.g., international experience and internationalization speed, reinforce the use of preferred entry modes.