Abstract
<p class="abstract">This paper analyses the factors that play a role in determining entry of new firms into markets from a theoretical point of view. We analyse the traditional interpretation of entry as a mechanism of re-equilibrating profits towards their long-run level. Then, we concentrate on other theoretical approaches, showing how the characteristics of technological innovation, the endowment of skills and competencies of the entrants, the role of information signals, the phases of the industry life cycle, the sociological concepts of legitimization and competition, and the psychological aspects might play fundamental roles in explaining new entry. The paper debates possible cross-fertilizations among theories: The discussion results in some fruitful intertwinements among the different relevant features about entry and spawns new collaborative and interdisciplinary research to create additional knowledge about entry. Insights about international entrepreneurship (IE) are also discussed.</p>
Highlights
This paper analyses the process of entry of firms into markets from a theoretical point of view
In order to understand entry and international entrepreneurship (IE), what we really need to investigate is why potential entrants consider their expected level of profits after entry has occurred sufficient to cover the entry cost. 3.1.1 Profits, Industry Life Cycle, and Technological Competencies We identify the basic relevant explanation in the industry life cycle model which argues that each i-th firm is characterised by given capabilities and innovative expertise si and firm’s expected profit is a function of this expertise
The contribution of this paper is to propose a framework of study for deepening the knowledge about entry and intertwining the potentials of various approaches
Summary
This paper analyses the process of entry of firms into markets from a theoretical point of view. Our conclusions require studies on entry and IE to focus on 3 aspects: a) to deepen the analyses on the explanations which lead firms to consider the expected level of profits after entry larger than the entry cost: The role of capabilities is the key variable in these studies; b) to tailor the analyses on the specific features of the given industry under examination: an operational and effective study about entry and IE strategies need to be industry-specific; c) to explicitly give a crucial role to the dynamics of the context and analysis: Entry and international entry strategies should be different according to epoch of the evolution of the specific industry under consideration and management needs to monitor the disclosure of information and manage the uncertainty in order to identify and act upon profit opportunities in foreign market over the stages of the industry life cycle.
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