Motivations for selecting cross-border e-commerce as a foreign market entry mode

Abstract

This article is an in-depth case study examining a foreign firm deploying Cross-border E-commerce as an entry mode to the Chinese market, integrating services provided by a major technology provider and a leading marketplace platform. Selecting which foreign market entry mode is an important internationalization strategic decision of firms and could have a considerable impact on the firm's performance. The CBEC mode emerges as a plausible choice: e-commerce has grown rapidly in many markets, particularly in China. Additionally, foreign firms face high transaction costs due to unfamiliar consumer behavior and institutional barriers. It is especially difficult for SMEs.This study deploys transaction cost theory as the underpinning framework to explain the motivations for selecting a CBEC entry mode. The findings suggest that CBEC could reduce uncertainties and opportunistic behaviors, while increasing trust. Foreign firms could lower their asset investment in physical shops, staff requirements and training, logistics and warehousing: these supports are provided by marketplace platforms. This new entry mode also takes advantage of the involvement and the dependency of intermediaries. In addition to providing market knowledge, technology providers help to build trust and reduce risks and thereby transaction costs, despite the high transaction frequency of e-commerce.