The fit of home to foreign market environment: An exploratory study of the relationship of congruence to performance

Abstract

This research draws on the foreign market entry and organizational strategy literatures to address the relationship between home and foreign market environmental congruence and overseas venture performance. Theoretical arguments from prior studies have been juxtaposed in that transaction cost and diversification perspectives hypothesize different outcomes of firm entry into heterogeneous or homogeneous market environments. Using polynomial regression we test hypotheses regarding the home and overseas environmental congruence–venture performance relationship, and the organizational factors which act as moderators of this relationship. The results show that traditional transaction cost and market replication theories fail to fully explain the value of environmental fit when matching overseas market with domestic market profiles. Furthermore, the findings reveal that the moderating effects of organizational factors on the market congruence–venture performance relationship are also counter-intuitive to traditional perspectives. Managerial implications, study limitations, and directions for future research are offered.