Entry Decisions Research Articles

Hiding and herding in market entry

We model entry decisions of rival firms into a new market with uncertain common entry costs, potential product market competition, and experimentation. We show that a separating equilibrium, where firms enter only when they learn that the cost is low and are immediately followed by their rival, always exists. We also show the existence of pooling equilibria. In these equilibria, uninformed firms coordinate to enter at specific entry dates with positive probability and firms that learn that the cost is low before those dates strategically delay their entry to hide under the cover of the uninformed firms. We show that these pooling equilibria, which do not trigger immediate entry, are more likely to exist with an early than a late entry date, that they are unique given a fixed entry date, and that equilibrium payoffs are nonmonotonic in the entry date. We also study recurrent-entry pooling equilibria with multiple entry dates for uninformed firms.

The Determinants Influencing Foreign Banks’ Entry into Saudi Arabia

The study investigates the determinants of foreign banks’ entry decisions into Saudi Arabia and their relative importance. Seventy-one questionnaires were analyzed using the Distribution Fitting Algorithmic Approach (DFAA). This paper is situated in the existing literature on the Internalization Theory, Eclectic Paradigm, and Follow-the-Customers hypothesis. While we confirm the Follow-the-Customers hypothesis, we also found that the host market’s characteristics influence entry decisions. We envisaged that this paper would not only contribute to the existing literature but also inform policymakers and industry participants to better understand foreign banks’ entry into emerging and developing markets. Keywords: Foreign banks, Determinants, Entry decisions, Saudi Arabia.

Strategic Entry Decisions, Accounting Signals, and Risk Management Disclosure*

ABSTRACTThis study provides evidence that hedge accounting information under Statement of Financial Accounting Standards (SFAS) 133, Accounting for Derivative Instruments and Hedging Activities, is related to rivals' market entry decisions. Documenting accounting information's relevance to competition decisions requires context‐specific settings. Using data for the airline industry in the United States, I predict and find that entrants are less likely to enter routes in which incumbents report higher accumulated other comprehensive income from fuel hedging, an indication of lower future operating costs. As predicted, this relation is stronger after the adoption of SFAS 161, Disclosure about Derivative Instruments and Hedging Activities, in 2008, a systemic shock that significantly increases risk management disclosure requirements. The findings illustrate the product market relevance of hedge accounting signals and disclosure in the US airline industry and extend the understanding of SFAS 133 and SFAS 161 beyond the capital markets.

Exploring market choices in the US ornamental horticulture industry

AbstractIn 2019, the US ornamental horticulture industry had a farm gate crop value of roughly $17 billion, contributed $348 billion in total output to the nation's economy, and created 2.32 million employment opportunities. However, as the industry matures and reaches a slow‐growing stage, interfirm rivalry may appear among grower firms for marketing channels and sales opportunities. Independent garden centers and retailers report facing increased competition from mass merchandisers. Market channel choices, as part of the competitive strategy, are alternative ways for ornamental production to reach consumers. However, marketing practices of this industry have not received adequate attention from researchers despite the economic significance of the industry. Combining four waves of the National Green Industry Survey from 2004 to 2019, this study provides a comprehensive analysis of factors influencing firms' market participation and market channel choices. Over the survey period, traditional wholesale market channels such as landscape services companies, rewholesalers, and single‐location garden centers have remained mainstream channels. The direct‐to‐consumer (DTC) channel showed the potential to gain significant market share. Thirty percent of the firms participated in DTC channel in 2018, and their sales represent about 22% of total sales by all survey firms. Our empirical results show firms' wholesale market participation and choices of market channels are largely influenced by plant types and firm perceptions (variables potentially affecting firms' assessment of the “size” of their market) and variables approximating the market size such as regional dummies and housing price index, confirming the impact of market size on entry decision. [EconLit Citations: C50, M31, L14].

Optimal remanufacturing strategy in the presence of consumer reviews

This paper investigates the informative role of consumer reviews and its impact on the original equipment manufacturer’s (OEM) pricing decisions as well as the third-party remanufacturer’s (TIR) entry decisions. The TIR may free ride the consumer reviews to disseminate the experienced quality information of the remanufactured product whereas the OEM may counteractively adjust its pricing strategy to manipulate consumer reviews. We uncover three strategic effects including the informative effect of consumer reviews, the incremental effect of the remanufactured product and the cannibalization effect, which jointly determine the OEM and TIR’s strategies and profits. We show that the presence of consumer reviews endows the OEM and the TIR with more flexibility in crafting their pricing strategy and remanufacturing strategy, respectively, wherein in equilibrium: (1) the TIR are more likely to choose the “partial-remanufacturing” strategy when the experienced quality level of the new product is relatively low but the “full-remanufacturing” strategy otherwise; (2) the OEM prefers to adopt the skimming strategy when the experienced quality level is moderate but the penetration pricing strategy otherwise. Counter-intuitively, we find that the TIR’s entry will attain a “win–win” situation for both players when the experienced quality level is sufficiently low. Our results also show that consumer reviews are not always beneficial to both players, which is closely dependent on the new product’s quality level. We further find that consumers’ heterogeneity in the incremental effect has certain influence on the choices of the OEM’s pricing strategy and the TIR’s remanufacturing strategy.

The strategic determination of the supply of liquid assets

We study asset liquidity in a model where financial assets can be liquidated for money in over-the-counter (OTC) secondary markets, in response to random liquidity needs. Traders choose to enter the market where they expect to find the best terms, understanding that their chances to trade depend on the entry decision of other investors. We find that small differences in OTC microstructure can induce very large differences in the relative liquidity of two assets. We use our model to rationalize, qualitatively and quantitatively, the superior liquidity of U.S. Treasuries over equally safe corporate debt.

Where do firms come from? Knowledge Relatedness and Firm Entry

The role of knowledge, in particular its relatedness to that of the target industry, has often been emphasized as one of the main drivers in firms’ entry decisions. However, empirical analyses seem to show that knowledge relatedness may not always have a positive impact on entry, because the relationship is potentially nonlinear and may vary by entrant type. This study aims to explore these issues by proposing a perspective that may shed light on the mechanisms that govern the relationship between knowledge relatedness and firm entry. It then empirically tests these mechanisms by using a dataset constructed from the Western Electronics Manufacturer Association (WEMA) directory, spanning a time period from 1960 to 1990. The results suggest that the relationship takes an inverted U shape, which however can change drastically depending on the type of entrant.

Relatedness, Organization Structure, and Market Entry: Evidence from a Demand Shock

Prior literature on market entry suggests that a firm’s related knowledge and capabilities explain entry decisions into new market segments. Yet this literature has generally focused on entry decisions at the firm-level, without explicit consideration of the dynamics of individual divisions within the firm itself. We argue that a focus solely on firm-level factors can obscure division-level mechanisms that can deepen our insight into the link between organization structure and market entry decisions. Given the limited degree of empirical research on division-level market entry outcomes, we conduct an exploratory study to gain insight into patterns of division-level entry over time. We set our analysis in the context of an industry-wide demand shock, the September 11 attacks, which led to the need for firms to reshuffle their product market profiles in order to adapt to new demand conditions. A central finding is that, in contrast with what we might expect from a naïve application of market relatedness logic, a focal division’s entry into a particular market can increase as a result of the market relatedness of its sister division, even when the focal division is less related to the target market than its sister division. We explore the extent to which knowledge sharing among divisions within a firm can explain this finding, focusing on factors such as the presence of a shared customer and the relative knowledge dispersion.

The Influence of Financial Literacy, Financial Behavior, and Income on Investment Decisions (2018 Student Case Study for Management Study Program Universitas Muhammadiyah Sumatera Utara)

An investment decision is to set aside some stages to try to obtain investment returns or profits in the future. One of the factors needed to make an investment is capital or funds. The author's goal is to see the effect of financial literacy, financial behavior, income from decisions on students of the faculty of economics, management study program class of 2018. The number of samples in this study were 84 and using the Slovin formula. The technical analysis in this study uses multiple linear regression analysis, multiple correlation, termination, t test and F test. The results of this study indicate that financial literacy (X1) has a positive and significant effect on entry decisions (Y). Financial behavior (X2) has no effect on successful decisions (Y). Income (X3) has no effect on successful decisions (Y). Financial literacy, financial behavior, income simultaneously have a significant effect on investing decisions (a case study of students of the 2018 class of management study program at the Muhammadiyah University of North Sumatra).

CEO Overconfidence and MNCs’ Foreign Entry

Upper echelon theory (UET) has been a widely researched theory in management research, explaining that a firm’s strategic actions are driven by the psychological traits of its top executives. However, there still have been few studies that link UET to strategic actions of multinational companies (MNCs) in the context of international business (IB). In this paper, we apply UET to IB and examine how CEO overconfidence influences MNCs’ decision to enter a foreign country. We also investigate contextual factors (geographic distance and host country experiences) which affect the relationship between CEO overconfidence and MNCs’ foreign entry. By creating and analyzing the unique longitudinal dataset of Japanese MNCs, we contribute to unpacking theoretical mechanisms of CEOs’ overconfidence in their MNC’s foreign entry decisions. We extend UET to the context of IB and shed new light on explaining MNC strategic actions.

Antecedents and Consequences of Entrepreneurial Careers: Integrate Micro and Macro Perspectives

This symposium focuses on the antecedents and consequences of an entrepreneurial career. Underlying this focus is the view that entrepreneurship is a career step along a career path as opposed to a final destination (Burton et al., 2016). Four studies in this symposium examine key issues relevant to different stages of an entrepreneurial career, including the pre-entry learning processes that shape entrepreneurial entry decisions and the type of venture founded, the impact of entrepreneurial experience on entrepreneurs’ personality and skillsets, and former entrepreneurs’ behaviors (e.g., turnover) and performance implications (e.g., innovation) in post- entrepreneurship wage employment. Implications for theory and practice will be discussed. Following the paper presentations, Scott Seibert and Aleksandra (Olenka) Kacperczyk, two distinguished experts on entrepreneurship and careers representing different theoretical traditions (micro and macro, respectively), will serve as our discussants to offer theoretical and practical suggestions, identify promising research opportunities, and stimulate an interactive group discussion. The Entrepreneurial Pre-Entry Process: Evidence from the Informal Economy Presenter: SHELTER SELORM TEYI; Copenhagen Business School Presenter: Marcus Møller Larsen; Copenhagen Business School Presenter: Vera Rocha; Copenhagen Business School Rethinking the personality-entrepreneurship link: Can entrepreneurship change your personality? Presenter: Leigh Mellish; UNSW Sydney Presenter: Siran Zhan; U. of New South Wales Presenter: Amirali Minbashian; UNSW Business School, Australia Prior entrepreneurial experience and voluntary turnover in subsequent wage employment Presenter: Siran Zhan; U. of New South Wales Presenter: Liwen Zhang; U. of Macau Presenter: Yu Wu; UNSW Sydney Hiring Entrepreneurs for Innovation Presenter: Louise Lindbjerg; PhD Student Presenter: Theodor Lucian Vladasel; U. Pompeu Fabra and Barcelona GSE

Status Heterophily, Market Entry and Market Performance

Drawing on the status and market entry literature, we propose and empirically test hypotheses that dynamic changes in the size of different status groups in the target market influence the focal firm’s market entry decisions and post-entry performance. Our research utilizes operational data at the project level of China’s listed real estate enterprises to explore how the relationships among members of different status groups in the submarket affects the probability of firms’ market entry and subsequent market performance, as well as the moderating effect of the degree of multimarket contact. This study shows that, as the size of the status-heterophilous group in the submarket continuously increases, the consequences of forming ties with incumbents of different status have shifted from more advantages to more disadvantages. There is an inverted U-shaped curve between the status-heterophilous group’s size and the probability of the firm’s market entry and post-entry submarket performance. Moreover, the degree of multimarket contact between status groups weakens the two relationships. Specifically, the greater the degree of multimarket contact between two status groups in the market is, the smaller effect on market entry possibility and submarket performance the status-heterophilous group’s size has.

How Much Internal Agglomeration is Good in a Mediated Expansion?

While strategic management research has put lots of effort into understanding the battle between the positive and the negative implications of geographical agglomerations, it has mostly been focused on the co-location of independent firms – external agglomeration. The implications of internal agglomerations remain underexplored. Even less attention has been paid to contexts, where agglomerations are mediated by independent firms. Platform markets and franchising firms are common examples. In those cases, the platform owner or the franchisor is making the agglomeration decisions, whereas private vendors/franchises are the ones who directly face their consequences. This is a problem since we do not know whether their interests are aligned. Building on the organizational ecology literature, we argue that a conflict of interest exists but mostly applies to the early expansion stages. We also discuss how spacing the entries in time and geography can mitigate it. We analyze our arguments using 5,955 market entry decisions made by an international money transfer platform organized as a franchising network while entering 426 metropolitan areas in 11 countries in 14 years (2001-2015). The implications for theory and practice are discussed.

Cross‐industry interlinkages in employment growth: Evidence from Brazil

Using industry- and establishment-level data from Brazil and employment data by sector and economic area from the United States, we estimate the extent to which rm- and industry-level employment and entry decisions respond to changes in the employment decisions of geographically and economically proximate rms, comparing Brazil’s experience to a developed country benchmark. We instrument for employment changes by following Bartik (1991) and Blanchard and Katz (1992), combining national-level changes in employment by industry with municipalitylevel variation in the initial distribution of rms to predict such changes between 1995 and

Choice and Choice Set in African Elections

Studies of voting behavior usually start with voters, theorizing how voter psychology or preferences shape choice. But what if choice sets predetermine choice? This article argues for a reorientation of how we think about voting behavior, from an exclusive focus on microfoundations to one acknowledging structure. It does so through the lens of African coethnic voting. Using data sets matching vote choice with candidate characteristics in Kenyan, Ghanaian, and Ugandan legislative elections, it shows that around two-thirds of voters in these elections saw ballots with either all coethnics or no coethnics at all. Their decision to vote coethnically (or not) was thus made for these voters long before they set foot in polling stations. Shifting from choice to choice set crystallizes the meeting point of structure and agency, inducing us to theorize factors shaping behavior beyond voters themselves: candidate entry decisions, constituency boundaries, and the geographic distribution of populations.

Entry and exit decisions under public and private information: an experiment

We design an experiment to study how reversible entry decisions are affected by public and private payoff disclosure policies. In our environment, subjects choose between a risky payoff, which evolves according to an autoregressive process, and a constant payoff. The treatments vary the information disclosure rule on the risky payoff, such that in the public information treatment the risky payoff is always observable, while in the private information treatment, the risky payoff is observable only to the participants who enter the market. We find that under private information, market entry is higher, which suggests that subjects engage in exploration and place value on information.

Early bird or early worm? First-mover (dis)advantages and the success of web-based social enterprises

Achieving the optimal market entry time is of immense strategic importance for entrepreneurs, especially in online markets, where web-based social entrepreneurial activity continues to grow. This raises the question of whether first-mover market entry actually pays off or if market entry as a (later) follower might be the better option. First-mover research has so far not adequately answered this question. Our work contributes to closing this gap by transferring first-mover theory to web-based social enterprises. We expand upon first-mover theory by reflecting on the winner-take-all hypothesis to better illuminate the mechanisms of market structure development and entry decisions. Our empirical data was gathered on various types of web-based social enterprise models in a sample of 12 national markets. Our results show that first-mover advantages are available not only to those who are the very first to market but also to early followers. In addition, the speed of market entry matters. Our work also indicates, however, that first-mover advantages should not be overestimated; market structures and network effects may explain varying results. Furthermore, both business models studied exhibited high market concentration at a mature stage, implying that the winner, although perhaps not taking all, does take most.

Brain-wide bidirectional neuropeptide modulation of individual neuron classes regulates a developmental decision

Secreted neuromodulators, like biogenic amines and neuropeptides, can reconfigure circuit functions both locally and at a distance and establish global brain states that alter circuit outputs over prolonged timescales.1-3 Despite their diversity and ubiquitous presence, many studies on neuromodulation tend to focus on dissecting the function and site of action of individual neuropeptides. Here, we take a different approach by conducting a systems-level investigation of neuropeptide receptor signaling function and cell-type-specific distribution in the context of the Caenorhabditis elegans diapause entry developmental decision. C.elegans diapause entry is controlled by sensory perception of external factors and is regulated by neuropeptide signaling.4-8 We performed a comprehensive functional screen of neuropeptide receptor mutants for pheromone-induced diapause entry phenotypes and integrated these results with published C.elegans single-cell RNA-seq data to reveal that almost all neuron classes expressed at least one receptor with a role in diapause entry.9 Our receptor expression analysis also identified four highly modulated neural hubs with no previously reported roles in diapause entry that are distributed throughout the animal's body, possibly as a means of synchronizing the whole-organism transition into the appropriate larval morph. Furthermore, most neuron classes expressed unique neuropeptide receptor repertoires that have opposing effects on the diapause entry decision. We propose that brain-wide antagonistic neuropeptide modulation of individual neuron classes by distinct neuropeptide receptor subsets could serve as a strategy against overmodulation and that this motif might generalize to other decision-making paradigms in other organisms.

Forecasting the probability of commercial wind power development in lagging countries

There is significant under-utilization of wind energy resources, particularly in countries that have high wind potential. From the 67 highest wind potential countries, 39 have installed less than 500 ​MW of wind power capacity, while the remaining countries have an average installed capacity of 20,596 ​MW. In the lagging countries, there is significant potential for sustainable value creation, however large investment gaps need to be closed. Entering a new market for wind power Original Equipment Manufacturers is complex and requires a prediction of the future market size. Quantitative research to promote wind power internationalization is scarce. The objective of this paper is therefore to estimate the market size by predicting the probability of commercial wind development in the lagging countries. The purpose is to help the Original Equipment Manufacturers in their market entry decisions. The second purpose is to provide an example how to reduce risk required to close the Sustainable Development Goals financing gap. Using a binary logistic regression model based on technological path creation theory, the probability for the 39 lagging countries to enter the wind power commercialization stage was predicted. Results show that 12 of the lagging countries have a high probability to commercialize wind energy. A new simulation-based approach was presented to stimulate wind power market entry. The prediction of adoption probability proves useful to reduce risk required to close the financing gap to achieve the Sustainable Development Goals. • 58% of highest wind potential countries did not reach commercial wind exploitation. • Novel method to estimate probability to enter commercialization stage is presented. • 4 different wind industry market entry and development strategies are proposed. • The developed method de-risks wind power market entry, reduces SDG financing gap. • Simulation-based approach to stimulate wind industry market entry is presented.

Examining the Determinants of Location Attributes and their Effect on Hotel Pricing in the Period of the Covid-19 Pandemic in an Emerging Market

The emergence of COVID-19 and the consequent travel restrictions have led to a decrease in the patronage of hotel services in nearly all economies in the world. In this circumstance, location attributes have become even more important in hotel pricing and investment decision-making. It is even more interesting to see how this plays out in emerging economies such as Ghana. The study assesses the effect of location attributes on hotel pricing during the COVID-19 pandemic period in Tamale. A sequential mixed research design including Mixed Spatial Hedonic Price Approach, Exploratory Factor Analysis and key informant interviews was employed. A sample of 815 tourists and 163 hotels was used. Hotel class, road accessibility, age of building, and hotel rate are the key determinants of hotel pricing. Among these, the hotel class showed more significance in influencing pricing decisions in the COVID-19 period. The models show that the hotel class with positive coefficients are located outside the city centre of Tamale. This has resulted in increased Yield To Maturity because the hotels located outside the city centre received more clients, with grade one hotels showing a huge net income and good post-COVID-19 investment drive. The results show that potential hotel investors should consider hotel class as a major entry decision factor during and after periods of the pandemic.