Entry Mode Choice Research Articles

A big step for a small company: How can Fumajet scale its innovation globally?

Objective: This paper is a teaching case designed for graduate and undergraduate courses on subjects involving international business, international marketing, or international entrepreneurship. It describes how a small entrepreneurial company – Fumajet – could recognize and exploit an international opportunity, and the dilemmas its founders confronted regarding the choice of internationalization strategy and entry mode. Dilemma or problem: Faced with several potential alternatives to structure Fumajet’s international activities, the entrepreneurs had to analyze and select an international entry mode strategy to present to the recently created board of directors, following a significant infusion of capital into the company. Relevance/Originality: Grounded in real-life experiences, this case study draws from primary and secondary sources gathered over two years, presenting students with a real, practical, and relevant dilemma. By the end of this case study, students should be able to apply these learnings to real-world scenarios. The unique challenges portrayed make this case study particularly engaging and thought-provoking for students.

A knowledge-based perspective on SME foreign market entry mode choices and changes

PurposeDespite the importance of foreign market entry mode (FMEM) decisions for the internationalisation of small and medium-sized enterprises (SMEs), there is insufficient understanding of the knowledge types and sources necessary for such decisions. This study addresses this issue by investigating the knowledge configurations that underpin FMEM initial choices and subsequent changes in SMEs.Design/methodology/approachThis study adopted an interpretive approach and analysed empirical data from 37 in-depth interviews with decision-makers in internationalised SMEs from the United Kingdom.FindingsThe findings reveal that different knowledge configurations drive FMEM decisions in SMEs. Based on the analysis conducted for this study, initial FMEM choices draw on prior experiential knowledge combined with knowledge from desk research and knowledge acquired from peers, competitors and international partners. However, unlike many previous contributions, this research shows that foreign market experiential knowledge does not influence mode changes. Within-mode changes rely mainly on mode-specific knowledge and on knowledge about exploiting the benefits of the internet and digital platform ecosystems. Conversely, between-mode changes draw on diverse knowledge that is frequently created in interaction with international stakeholders or acquired externally.Originality/valueThis study contributes to the SME internationalisation literature by highlighting the knowledge configurations that inform not only initial choices but also between- and within-mode changes. Moreover, it reveals the importance of distinct types of digital technology-based knowledge for facilitating mode changes. It also adds to the knowledge-based perspective by underscoring that dynamic and heterogenous knowledge configurations, often created in interaction with international stakeholders, promote firm internationalisation.

How do creative assets affect overseas market entry modes of enterprises- the moderating role of internal and external factors.

In the process of transnational investment management, the choice of entry mode is one of the key decisions, and creative assets will affect the choice of overseas market entry mode. However, few studies have analyzed how creative assets affect firms' overseas market entry patterns. This paper takes 480 overseas investment data of 134 Chinese listed enterprises from 2012 to 2019 as research samples and uses the Logistic model to study the influence of creative assets owned by enterprises on their choice of the joint venture and wholly owned modes. At the same time, we examine the formal and informal institutional distance between home and host countries, and the moderating effect of firms' own experience in the process of model selection. In addition, using the fuzzy-set qualitative comparative analysis (fsQCA) from the perspective of configuration to explore the different paths of overseas market entry mode. The research results indicate that marketing intensity and technical intensity of enterprises have a positive and significant impact on overseas investment patterns, that is, higher marketing intensity or technical intensity will prompt enterprises to preferentially choose wholly-owned mode. Formal institutional distance and experience can moderate the relationship between creativity and investment mode to some extent, while informal institutional distance has no significant moderating effect on creative assets and investment mode. Three configurations can induce firms to choose the wholly-owned mode, and only one configuration can induce firms to choose the joint venture mode. This study lays a theoretical foundation for enterprises to enter the overseas market.

MNEs Entry Mode Choices: The Impact of Past on Current. Evidence from an Emerging Economy

The paper examines the effect past entry strategies have on current ones on a country level, Turkey. It illustrates how international experience and institutional distance affect the way an entry-strategy is formed, and the procedure followed -mode learning, mode inertia, mode dynamics. To do so, it synthesizes the literature review within the framework of Benito et al. (2009). This paper’s modifications are empirically tested through a sample of 408 foreign equity investments. The econometric testing method implemented is that of Binary Logistic Regression. The period of investigation extends between 2011 and 2017. Results indicate that MNEs entering the Turkish secondary and tertiary Turkish sectors tend to utilize past entry mode strategies. Furthermore, the higher the past mode strategy is for an MNE, then it is 4.4 more possible for them to choose a wholly owned subsidiary.

Coping with uncertainty in FDI entry mode choices: differences between family and non-family businesses

Coping with uncertainty in FDI entry mode choices: differences between family and non-family businesses

Foreign market entry modes of family firms: A review and research agenda

Although research on foreign market entry mode choice is spread across various aspects and dimensions, a comprehensive review that accumulates the knowledge holistically in the context of family firms is sparse. To address this gap, the study systematically reviews 50 research articles and presents state-of-the-art literature for around three decades (1993–2021) by employing PRISMA and Theory – Context – Characteristics – Methodology (TCCM) framework. The objective of the study is to understand: (i) the theories that explain the factors affecting the entry mode choice of family firms (ii) the contexts (i.e. industries and countries) in which the underlying research has been investigated (iii) the characteristics or the factors (i.e. independent, moderating, and dependent variables) that explain the entry mode choice of family firms, and (iv) the methods that have been employed to understand the underlying research area. Based upon the review, the study set forth the future research agenda with respect to each of the dimensions of the TCCM framework. The study proposes a holistic framework offering the future direction to the research scholars, to explore - How “peculiar family firm characteristics” play a moderating role in determining the foreign market entry mode strategies of family firms?

Foreign subsidiary performance: social trust–entry fit

PurposeThis paper aims to study whether the adoption of an entry mode that fits the social trust level contributes to the improvement of foreign subsidiary performance.Design/methodology/approachThe authors used the Probit model, linear regression, strategic fit approach and instrumental variable regression. The sample was made up of 11,095 observations of Chinese multinational enterprises' foreign subsidiaries in 54 countries from 2005 to 2020.FindingsThe results suggest that a host country with a high level of social trust results in fewer difficulties for enterprises in gaining legitimacy, thus foreign subsidiaries are more likely to select the wholly owned entry mode. The results also show that the effect is contingent on the formal institutions of host countries. The results of the mechanism test suggest that social trust influences subsidiaries' entry mode choice by reducing information asymmetry, costs and uncertainty risks. This study further finds that selecting a fit entry mode based on social trust level substantially increases foreign subsidiary performance and this effect is more significant when multinational enterprises (MNEs) are state-owned enterprises (SOEs).Research limitations/implicationsThe main limitation of this paper is its only focus on foreign subsidiaries of Chinese MNEs, which may limit the generalizability of research findings.Originality/valueThis paper responds to the call for conducting more research on informal institutions. Findings highlight the critical role of informal institutions in helping foreign subsidiaries in gaining legitimacy in host countries and the essentialness of selecting a fit entry mode based on the informal institutions of host countries for the development of foreign subsidiaries.

Distance Dimensions and Entry Mode Choices: An Empirical Study of Multinational Firms in South Korea

Distance Dimensions and Entry Mode Choices: An Empirical Study of Multinational Firms in South Korea

The impact of disaggregated formal institutional distance variables on entry mode decision: Evidence from Japan

Abstract Grounded in the organizational legitimacy perspective, this study examines the influence of formal institutional distance (FID) on the entry mode choice of Japanese cross-border acquirers. By disaggregating the FID variable using the Worldwide Governance Indicators, we provide a nuanced understanding of the relationship between FID dimensions and acquisition behavior. We find that out of the six disaggregated FID measures, three dimensions significantly impact acquisition decisions. Specifically, FID related to ‘regulatory quality’ and ‘control of corruption’ negatively affects the likelihood of full acquisitions, while FID related to the ‘rule of law’ positively influences full acquisitions. Our findings challenge the use of aggregated measures and highlight the importance of considering institutional variations. Japanese acquirers demonstrate a preference for higher control in uncertain legal environments. This study contributes to the literature by offering insights into the specific FID dimensions that drive the choice between partial and full acquisitions for Japanese firms.

The Impact of Past Successful Entry Modes on Choice of Subsequent Equity-based Entry Modes

The Impact of Past Successful Entry Modes on Choice of Subsequent Equity-based Entry Modes

Institutional distances and equity-based entry modes: a systematic literature review

The institutional distance between home and host countries influences the benefits and costs of entry into markets where a firm intends to conduct business. Entry mode choice is a function of a firm's strategy to increase its competitiveness, efficiency, and control over resources that are critical to its operations. This systematic literature review aims to explain the influence of institutional distances on equity-based entry modes in international markets. The present study contributes to the literature on international business using institutional theory to address the entry mode, and by analyzing the nature of the constructs used to measure the influence institutional distances have on the choice of entry mode into foreign markets.

Institutional Differences and the Choice of Outward Foreign Direct Investment Mode under the “Belt and Road” Initiative: Experience Analysis Based on China’s Manufacturing Enterprises

Based on 1692 outward foreign direct investment (OFDI) events of 735 A-share listed companies in China’s manufacturing industry from 2010 to 2019, this paper empirically examines the effect of investment motivation and the impact of institutional differences between China and the host country on the choice of OFDI entry mode; the paper also investigates the moderating effect of the “Belt and Road” Initiative (BRI) on Chinese manufacturing enterprises (CMEs) through use of the logit model. The empirical results show that, with greater institutional differences, CMEs become more inclined to choose cross-border mergers and acquisitions (M&A). Furthermore, a positive moderating effect of resource-seeking motivation on the choice of M&A OFDI by CMEs is observed. The signing of the “Belt and Road” cooperation document positively moderates institutional differences in promoting CMEs—especially state-owned CMEs—to choose the M&A mode. The “Belt and Road” Initiative provides an efficient supply system for OFDI by CMEs. This study enriches and extends existing institutional theories and provides suggestions for the promotion of the geopolitical pattern and international cooperation regarding the “Belt and Road” Initiative.

The effect of CEO prominence on cross-border acquisitions: An international entrepreneurship approach

Cross-border acquisitions and cross-border alliances are two of the most popular entry modes for firms, although each entails different levels of risk. In addition to its industry and location, a firm’s choice of entry mode may also be affected by its chief executive officer (CEO). We explore how a CEO’s level of prominence influences a firm’s entry mode choice. Studying the relationship between CEO prominence and firm entry mode choice is imperative because CEO prominence is a predictor of both an individual’s personality and their risk-propensity. We use data from US-based S&P 1500 firms to test how CEO media appearances influence a firm’s choice between cross-border acquisitions and cross-border alliances. The results indicate that prominent CEOs are more likely to engage in cross-border acquisitions than in cross-border alliances. Furthermore, this tendency increases when the CEO has broad managerial experience or international human capital.

FDI Motives and Location Decisions of Emerging Country Business Groups: Entry Mode, Ownership and Institutional Environment

The purpose of this paper is to introduce and explain our understanding of the internationalization process of emerging country business groups (EBGs) according to the entry mode choice, ownership structure, and formal institutional environment of the host country. The internationalization models of Dunning and Mathews are integrated with the institutional environment in the internationalization process of EBGs because they are unable to explain the rise of EBGs alone. Content analysis is used to investigate the internationalization strategies of EBGs. The findings of this study revealed three categories of FDI motives: main motives (market-seeking and strategic asset-seeking), sector-based motives (efficiency-seeking and resource-seeking), and facilitative motives (relational asset-seeking). FDI motives, entry mode, ownership, formal institutional environment, and location decisions are investigated together in the context of emerging country dynamics. This exploratory study contributes to the expanding global research on EBGs based on a suggested framework that can provide novel insights regarding the internationalization processes of EBGs.

Home Country Institutions and Legitimacy on Chinese High-Tech MNEs’ Entry Mode Choices: A Conceptual Framework

The institutional factors of the home country play an increasingly important role in the process of the rise of MNEs in developing countries. A Through studies in literature, this paper finds that domestic institutional support and institutional restrictions can effect the entry mode of Chinese high-tech enterprises into the target country's market, and the legitimacy of enterprises in the target country plays an intermediary role between the two. The hypothesized effect of variables and entry mode choice of Chinese high-tech MNEs needs to be tested in future research based on survey data drawn from official sources and questionnaires. This study expanded the theoretical tools that determine the decisions of the FDI entry mode.

Effect of operating multiple affiliates on the performance of subsidiaries in the same host country

Little has been reported on the effect of affiliates on their foreign subsidiary performance. In the context of multinational banks (MNBs), we empirically investigate how the establishment of multiple affiliate forms affects the performance of their subsidiaries in the same host country. We also examine the factors influencing and effective entry mode choices. Based on the transaction cost theory, we hypothesize that MNBs can benefit foreign subsidiaries using entry modes based on cost minimization and value maximization. For the period 2005–2015, we test this hypothesis on a sample of 1026 subsidiaries established by 96 MNBs across 106 countries. The results show that the simultaneous operation of multiple affiliate forms positively influences their foreign subsidiary’s performance. The transaction costs determine MNBs’ entry choices. MNBs can enhance their subsidiary’s performance using entry modes considering institutional and cultural contexts and achieving cost and value targets in the host country. This study has policy implications in that it calls for collaboration between host and home countries to develop effective supervision and resolution regimes for MNBs operating multiple affiliate forms in host countries.

Entry Mode Choice: A Meta-Analysis of Antecedents and Outcomes

The entry mode decision is a critical topic in international business. Several studies have tested the antecedents of entry mode choices and compared the outcomes after entry. However, the results reported in these studies are contradictory and difficult to explain. Furthermore, the reviews using qualitative approaches cannot statistically combine empirical results and fail to fully discuss these relationships. Additionally, the mediating effects remain unexamined in the existing studies. Drawing upon transaction cost economics and the resource-based view, this paper presents a meta-analysis that combines entry mode choices, antecedents and post-entry outcomes to address these issues. This meta-analysis is based on 1499 effect sizes from 230 published empirical studies. This study focuses on 15 antecedents as well as post-entry performance and survival of entry mode choices. In addition to bivariate relationships (i.e. how a single antecedent affects entry mode choices), the paper uses meta-analytic structural equation modelling to analyse the mediating effects of entry mode choices on the antecedent - outcome relationship.

Imbalanced trade dependence and Chinese firms’ entry mode choices: the moderating effects of state ownership and marketization

PurposeApplying resource dependence theory (RDT), this research paper aims to examine the effect of imbalanced trade dependence (ITD) on entry mode choices and how state ownership and marketization each can moderate this effect.Design/methodology/approachUsing data on 1,404 foreign projects made by 493 Chinese listed firms during the 2009–2015 period of time, this study applies logit regression to do the statistical analysis.FindingsIt finds that ITD positively affects the choice of wholly-owned subsidiaries. State ownership and marketization each can moderate this influence.Originality/valueIt develops the concept of ITD, applies it to examine entry mode choices and lets us better understand the substitutive or complementary relationship between governments and foreign firms as two sources of resources. It helps us better understand some competitive advantages of emerging market firms (EMFs) and the impacts of the state on EMFs’ outward FDI. It contributes to entry mode research by applying RDT to explain how ITD influences entry mode choices and how state ownership and marketization each can moderate this relationship.

A conceptual framework of the entry mode choices' determinants: the ownership-location-internalisation approach

A conceptual framework of the entry mode choices' determinants: the ownership-location-internalisation approach

SMEs prefer JVs: why SMEs' equity entry mode choices are different from those of large firms

SMEs prefer JVs: why SMEs' equity entry mode choices are different from those of large firms