The impact of mode of operation on sales performance in international services

Abstract

PurposeTo investigate the impact of current mode of operation on service firms’ sales performance in international markets, and to examine the role of managerial control as a mediator of the mode of operation‐sales performance relationship.Design/methodology/approachA conceptual framework and a set of hypotheses were developed to posit that managerial control on marketing activities act as a process variable between the level of vertical integration of the mode of operation and firm success in international markets. The proposed hypotheses were tested using regression analysis with data from a sample of tour operators from Turkey.FindingsThe choice of mode of operation is a critical decision that impacts the performance of service firms in international markets, such that firms which use more vertically integrated modes of operation obtain higher sales performance as a result of their high levels of control on marketing activities.Research limitations/implicationsAlthough the present findings can be generalized to other soft service industries such as consulting, accommodation services, and health care, they provide limited insights for hard service industries (i.e. construction, insurance, banking and financial services).Practical implicationsThis article offers guidance in the internationalization process of service firms by highlighting the importance of managerial control on marketing activities as a factor that should be considered in reviewing and evaluating alternative modes of operation in foreign markets.Originality/valueThis study contributes to the extant research by testing one of the basic assumptions of the mode of entry literature: the relationship between vertical integration and managerial control. Also, the findings reveal that the level of vertical integration of the mode of operation is positively related to performance because vertical integration provides service firms with managerial control.