Venturing Early or Following Late?

Abstract

The concept of the establishment chain has been subject to extensive research during the last decades and has received support as well as criticism. We test this concept for market entries in Central and Eastern European countries. We also evaluate both the impact of following this pattern and the impact of the timing of market entry on the performance in the foreign market. We test our hypotheses with empirical data collected in a survey among German manufacturing companies that have entered markets in Central and Eastern Europe. The data covers 524 cases of internationalization from 204 companies. We find that most companies start with low-intensity market entry modes and increase their commitment over time. Yet, only a small fraction actually follows the path of internationalization described by the establishment chain. It seems that this pattern is more relevant for companies entering these markets early and loses relevance as foreign competition in the foreign market increases. Levels of performance tend to be higher for companies entering CEE markets early in comparison to later entries. However, we do not discover any performance impact of market entry according to the establishment chain.