Understanding the motives for SMEs entry choice of international entry mode

Abstract

PurposeWhat drives small to medium‐sized enterprises’ (SMEs’) internationalisation strategy remains a significant issue in international business research, despite the huge research efforts on this subject over the past three decades. The purpose of this paper is to investigate and compare the motives behind the equity modes of foreign market entry in Norway.Design/methodology/approachEmploying a cross sectional survey, a sample of 146 firms consisting of 42 international equity joint ventures (IJVs), 53 cross‐border mergers & acquisitions (CBM&As) and 51 wholly owned subsidiaries (FWOS) from Norway was collected and analysed.FindingsIt was found that whereas market development and power influence the choice of IJVs and CBM&As, the need to access resources and control resources appear to be the most important motives behind FWOS as an entry mode choice. Moreover, the regression results indicate that market development and power, technology development, location advantage and synergistic gains appear to have a significant bearing on different entry mode choice in Norway.Research limitations/implicationsThe paper examines the motivation for the choice of foreign entry mode from the point of view of senior managers in Norway. Future research should accommodate multiple perspectives simultaneously from the parent companies and subsidiaries in a single paper to significantly advance the field.Practical implicationsThe paper discovers that the motives behind the choice of cooperative modes of entry tend to be more linked with market development, technological development while FWOS are motivated by the need to control proprietary resources. The implication for the Norwegian government is that its financial incentives do not affect the mode choice of entry.Original/valueThe paper finds that different motives and theories influence the choice of foreign market entry by SMEs in Norway and provides insights for senior managers on the factors taken into account in making choice decisions in Norway.