Timing Market Entry: The Mediation Effect of Market Potential

Abstract

Timing a multinational firm's entry into a new country is a pivotal decision with long-term impact on the firm's overall performance; thus, a deeper understanding of the drivers of the decision and their interrelationship can yield significant managerial benefits. The authors explore the mediating role of market potential by decomposing the total effects of the decision's main drivers—macroeconomic attractiveness, market concentration, social heterogeneity, and population density—into direct and indirect effects. These decompositions explain the countervailing effects of some drivers that simultaneously make both positive and negative impacts. The data set encompasses mobile 4G broadband penetration in 130 countries, including market entry timings for 28 international operators in 79 countries. The authors establish the nature of the mediation effect of market potential on the drivers of entry timing. Using early penetration data, they utilize growth mixture modeling to divide the countries into four latent segments. They validate this segmentation using machine learning with the four key drivers as classifiers; the process establishes macroeconomic attractiveness as the predominant classifier. The analysis offers entry-timing guidance at both pre- and postlaunch stages.