Know-how-, experience- and competition-related considerations in foreign market entry: An exploratory investigation

Abstract

With increasing globalization, the foreign market entry decision has come to acquire increasing strategic significance. This study is based on information drawn directly from managers through in-depth interviews. Drawing from the literature, an investigation was conducted into the manner in which know-how-, experience- and competition-related issues influenced multinational firms' recent foreign market entry decisions, the kinds of concerns managers had regarding their partners and how they dealt with these concerns. The results of the interviews clarify some of confusion in the literature regarding the way in which know-how-related considerations influence market entry preferences and, relatedly, the centrality of opportunism in this decision. They also provide some insight into why prior large-scale statistical studies on foreign market entry have yielded mixed results. Broadly speaking, the results suggest that competitive forces and the capabilities of the firm are increasingly dominant factors influencing firms' entry decisions and driving them towards collaborations. Two interesting findings were the apparent lack of concern with opportunism and the predominant emphasis on the benefits of collaboration rather than the costs. While the efficient exploitation of the know-how may create some pressures towards internalization, its tacit nature also shields the firm from opportunism, thereby mitigating apprehensions about collaborating. In general, the findings of this paper demonstrate the need to re-examine key issues fundamental to foreign market entry and the desirability of shifting the focus of the approach to these issues from cost to value. Basically, the constraints posed by the bounded rationality of economic actors outweigh the constraints posed by opportunistic behavior and, in this light, know-how-related considerations are mediated by competition and capability-related considerations. Accordingly, the paper urges a shift in emphasis from opportunism to capability-related issues and concerns, these being especially critical in today's intensely competitive business environment.