Entry Mode Strategies Research Articles

The Entry Mode Strategy in the Steel Industry : The Cases of POSCO and ArcelorMittal

The Entry Mode Strategy in the Steel Industry : The Cases of POSCO and ArcelorMittal

The Impact of Corporate Reputation on Firm Entry Mode Strategy

Choosing the optimal entry strategy is critical to firms’ global success and survival. Traditional organizational economic approaches predict a firm’s entry mode from the degree of opportunistic behavior expected based on transaction-level attributes. These approaches acknowledge that firms can, and often do, engage in forbearance: choosing not to act opportunistically even when the ability to do so is present. Yet, the assumption that one cannot know ex ante which firms will act opportunistically and which will forbear suggests that all firms must be presumed to be potentially opportunistic. This results in a bias toward a greater degree of vertical integration than may actually be necessary or cost-effective. To address this limitation, we integrate organizational economics and the resource based view to develop theory on how a key attribute of transacting firms—corporate reputation—acts as a credible signal of trustworthiness and increases the perceived likelihood of forbearance. This results in reputa...

Foreign Market Entry Strategies in the North-Adriatic Area

The consolidation of economic and political relations in the North-Adriatic area and their formalization encouraged by the new institutional structures of Euro-regions are phenomena of central relevance to the actual European economic environment. These conditions have a significant influence on the strategic choices of local firms. In spite of the geographical proximity between Italy, Austria, Slovenia, and Croatia, cultural differences still act as important determinants in leading foreign investment strategies. The current study aims at analyzing the role played by cultural distance between the examined countries in affecting entry mode strategies followed by companies of the Italian region of Friuli-Venezia Giulia. In particular, the analysis suggests that a larger cultural distance, together with specific market characteristics, may force companies to choose entry forms with a lower degree of control, while specific firm characteristics may have an opposite impact on the internationalization strategies.

Entry modes of European firms in Vietnam

Purpose: The purpose of the paper is to explore the entry modes of EU firms setting up operations in Vietnam. Design/methodology/approach: we use a case study approach on Haymarket, Cadbury, Creative Education, Fairchild, Aventis and Artemisinin and Farming International using interviews from managerial professionals in Vietnam. Findings: Despite the fact that Vietnam has been opening up for more than 20 years, licensing is the preferred entry mode because of the risks involved in venturing with local firms; that preference signals a low level commitment and a high perception of risk and state interference. In line with Vietnam transition to state - rather than private market - capitalism, a foreign company opting for a joint-venture will do so with a state-owned rather than privately-owned company. The choice of a subsidiary can be explained by the lack of trust in partners and institutions, not by improvement in the socio-political environment.Limitations: In determining the entry mode strategy, the paper focuses on the Uppsala school’s “psychic distance” (e.g. cultural distance, lack of trust) rather than on firm-specific advantages (Rugman, 1980; 2006).Key-words: international entry mode; emerging markets; subsidiary; joint-venture; India; Vietnam

How Does BIT Design Impact FDI and International Joint Ventures in Politically Risky Countries?

We investigate the dynamic impact of legal legitimacy on MNE international strategy by studying how the stringency of bilateral investment treaty (BIT) provisions between national governments impacts FDI and entry mode strategy over time. Drawing primarily on institutional and transaction cost theory, we argue that the level of FDI inflows and the number of international joint ventures (IJVs) in a country should not only increase in absolute terms with the ratification of BITs involving that country, but also as a result of the stringency in the design of those BITs. Based on an analysis of datasets of investments made over three decades, we demonstrate that the number of IJVs and the total FDI inflows increase as legal legitimacy (expressed as both BIT presence and BIT stringency) improves, but only in developing countries with high political risks. We contribute to research on the relationship between international strategy and international legal institutions by showing how the stringency of BIT design...

The impact of the institution of patent protection and enforcement on entry mode strategy: A panel data investigation of U.S. firms

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement has engendered a harmonisation of patent laws across countries but the extent of enforcement of these laws continues to vary. This study investigates the degree to which de jure book law protection of patents and de facto enforcement of these laws influences the propensity of firms to exploit their patented technology in foreign markets with company-owned operations or unrelated concerns using licensing agreements. Analyzing data on royalty and fee receipts of U.S. parent companies from affiliates and non-affiliated parties abroad from 1998 to 2007, and using separate measures for de jure and de facto patent protection and enforcement, we find that strengthening de jure protection induces greater affiliate licensing while strengthening de facto enforcement induces non-affiliate licensing. We conclude by observing that greater account should be taken of de facto enforcement measures when investigating the role of institutions on the international activities of firms.

Examining market entry mode strategies via resource-based and institutional influences: Empirical evidence from a region-within-country economy context

This research has two major purposes. The first is to develop and test a framework for market entry mode choice drawing on the resource-based theory and institutional theory in the context of region-within-country from marketing perspective. On this issue resource-based influences and environment influences are key drivers of entry mode strategies. Specifically, the central proposition is that a firm selects market entry strategies that its resources (firm characteristics, product characteristics, and firm size) can support and this selection also depends on the firms’ perception of two environments (home market characteristics and host market characteristics). The second is to test the theoretical framework within the special situation of Hong Kong firms’ entry modes into Mainland China as a specific economic region-within-country context. A mail survey was used to gather data from 208 senior executives of Hong Kong firms undertaken. The results show that firm characteristics, product characteristics, home market characteristics, and host market characteristics (but not firm size) significantly influence the choice of equity mode entry mode strategies for firms from Hong Kong entering other economic zones within Mainland China.

Chinese ODI in Italy: an empirical investigation at the firm-level

This paper provides original evidence about Chinese Outward Direct Investments in Italy. Data have been collected at the micro level, through a multiple-choice questionnaire, designed by the author and submitted to the whole population of Dragon multinationals. With a response rate of 86%, we draw a detailed profile of Chinese parent companies and document their pull, push factors, and entry mode strategies. Empirical findings are consistent with the theoretical literature.

Dutch MNE Foreign Expansion into Developed and Developing Economies

We investigate the differences in entry mode strategy for MNEs from a highly developed country (The Netherlands) when expanding abroad into locations in developed and developing economies. Our analysis is based on 544 foreign expansion decisions by MNEs listed on the Amsterdam Exchange Index (AEX) over the five-year period 2004-2008 inclusive. We find that when expanding into other developed countries, cultural distance plays a key role in MNE location strategy; institutional quality of the location is not relevant. When expanding into less developed economies, however, cultural distance becomes irrelevant and the effects of institutional quality become stronger.

Global Entry Mode Strategy for Pure Mobility ‘Producer of Norway Buddy Electric Car’

To date, Manager faces a big challenge in a marketing new product in the International Market. This challenge chooses proper Entry Mode for International product as a part of International Marketing. Anderson and Coughlan (1987) asked directly “Should the new product be distributed via company distribution channel, or is it more efficient to contract distribution to and independent organization?” Each of this choice will bring advantages and disadvantages. One example is to choose own distribution channel, where a beneficial aspect is the high control of the product. But on the other side, the company has to pay more money in aim to establish it. This paper attempts to propose a new suggestion in the Global Entry Mode Strategy for Pure Mobility, Norwegian Electric Car Company. Pure Mobility has a new innovative product which is called Buddy. Buddy is an ingenious electric car from Norway with three seated and generated 72 V DC motor and 13 kW battery. This paper chooses Pure Mobility Buddy, instead of others brand of electric car, as this car has a big potential market, but only exported in one country, namely United Kingdom. Target of Global Entry Strategy for the paper is France, especially college students in particular country. Some aspects, which related with this topic, and will be used as a theoretical framework are International Entry Mode, customer cultural differences, a new product diffusion, and international network and strategic. As a limitation, we will ignore either hold constant a vast variety of influences on organizational form.

Determinants of Goan SME Firms Going Global: Theoretical and Empirical Approach

Choice of entry mode has been widely recognized as one of the critical decisions in a firm's internationalization. However, most of the research primarily focuses upon Western multinational enterprises rather than Indian state small-medium sized enterprises (SMEs). In the past, several major theories have been proposed but none of them is able to explain the choice from the complete set of entry modes. The purpose of this research is to understand the various entry modes, improve the selection decision, and explain the entry mode strategies of Goan SME firms in the international markets. A firm can deploy a variety of arrangements (entry modes) like wholly-owned subsidiaries, joint ventures, contracts, and export modes to implement its product market strategies in foreign countries. Each of these arrangements entails decisions about the location of production facilities and⁄or marketing operations, and the type of ownership of these operations. This study examines the internationalization behaviour of 200 randomly selected Goan SME firms. It examines the factors associated with each theory and seeks to integrate them to gain a better understanding of how SME businesses succeed in the international marketplace. The determinants under examination are also substantiated with the identification of several international SME entry mode models. The nine groups of determinants are: International planning experience, firm size, R&D intensity, competitive advantage, degree of standardization, demand intensity, economic development, regulation, and political risk. The proposed framework is an effort to fill the gap between theory and practice of entry mode choice. The framework is broader in scope than the extant theories because it transcends across industries and nationalities of firms. The primary objectives of the study are: (a) to identify the descriptive determinants that have been strongly associated with SME internationalization entry behaviour; and (b) to determine if the propensity of Goan SME firms will be significantly predicted using specific empirical analysis. Data for the study were obtained through a questionnaire used in numerous previous theories. The study used multivariate logistic regression analysis. The results from the hypothetical foreign market entry situation strongly support the propositions that firm-specific resources and host country factors, viewed as a source of sustainable competitive advantage, encourage involvement in foreign markets. One broad implication for managers is the importance of both analysing the characteristics of the chosen product market and critically examining the firm's capabilities in order to focus on what it does best, build upon it and, where necessary, complement this through collaboration with others.

Multinational enterprises' Entry Mode Strategies and Uncertainty: A Review and Extension

The issue of uncertainty has been one of the most important topics in the research on multinational enterprises' foreign market entry modes. This paper provides a conceptual review of the literature on the role of uncertainty in entry-mode strategies. It is found that transaction cost theory has focused primarily on entry modes as a way of minimizing behavioural uncertainty, while research using the more recent real options approach has distinguished between endogenous and exogenous types of uncertainty and provided evidence that managing uncertainty through appropriate entry modes may lead to competitive advantage. By synthesizing the relevant literature, this paper provides some new perspectives and avenues for future research on uncertainty and entry-mode choices by considering the impact of firm learning, prior experience and host market attractiveness.

Choosing between wholly‐owned subsidiaries and joint ventures of MNCs from an emerging market

PurposeThe purpose of this paper is to examine the impact that three sets of variables – derived from transaction cost theory (TCT), the resource‐based view (RBV), and institutional environment – have on choice of entry strategies of multinational corporations (MNCs) from an emerging market.Design/methodology/approachThe sample consisted of 819 Taiwanese firms which were investigated using a national survey, and logistic regression analysis was used for testing the hypotheses.FindingsThe empirical findings confirm that the following factors affect this decision: firm‐specific assets, international experience, whether a firm is investing abroad in pursuit of a particular customer, whether a firm seeks complementary assets abroad, and the perceived institutional differences (PEDs) between a firm's home country and the host country. The findings also suggest that PEDs have a moderating effect on foreign market entry.Research limitations/implicationsAs MNCs from emerging markets make the decision of entry mode strategies, they must carefully consider not only the related variables in terms of TCT and the RBV, but also the influence of institutional factors in host countries.Originality/valueThis paper explores the modes of entry chosen by Taiwanese firms investing in China on the basis of TCT, institutional environment, and the RBV.

International Market Entry Strategies of Emerging Market MNEs: A Case Study of Qatar Telecom

ABSTRACT Drawing on existing theoretical perspectives and previous research, this study essentially investigated the strategic motives, location choice, and international entry mode strategies of emerging market multinational enterprises based on a case study of a telecom company, Qatar Telecom (Qtel) from the Gulf Cooperation Council. Using empirical findings from the semi-structured interviews, this study has clearly indicated that the main strategic motivation behind Qtel's internationalization was essentially opportunity seeking in terms of enabling market development and generating higher return on investment. Although Qtel used different entry strategies depending on the characteristics of host country markets, the company is more in favor of mergers and acquisitions than greenfield investments.

Multi-Market Industrial Organizational Economic Models for the Internationalization Process by Small and Medium Enterprise Construction Design Service Firms

Small and medium enterprises (SMEs) are critical to strategic initiatives in an economy; however, their contribution to foreign trade is not as significant. SMEs are one of the principal driving forces in economic development. One of the greatest challenges is the internationalization process for longevity rather than seeing the process as initial market entry. The internationalization process research has typically involved four key constructs: market selection, decision to enter, entry modes and factors affecting entry modes. Past research has focused on large manufacturing firms. The export of architectural, engineering and construction (AEC) firms has undergone growth, yet there is still significant opportunity for further growth. The majority of AEC firms are SMEs. Notwithstanding assistance provided through international trade missions, organized export firm support networks and information packages by a burgeoning number of government agencies, there are still perceived barriers to market entry and long-term economic sustainability for SMEs. There are a number of problems faced by SMEs acting in foreign trade. This investigation explores the successful initial internationalization process constructs and identifies unique project-oriented sector characteristics. The study identified similarities and differences between two firms that have been exporting to various localities, including Eastern Europe, Africa, Middle East, UK, Asia and South America, for more than two decades. The similarities and differences were identified within eight major constructs: purpose, firm type, market image and design philosophy, entry mode strategy, institutional arrangement, factors affecting mode of entry, market selection and firm strategy in relation to project selection. The primary reasons for internationalization were associated with the firms' motivations related to growth and financial viability. This article discusses the various internationalization processes and strategies intrinsic to each case study and establishes a detailed set of empirical observations from which to develop further a grounded theoretical model of reflexive capability for the internationalization process. This study contributes to the body of knowledge around the SME AEC design service firm's internationalization process, as a dynamic, evolving and continuously adaptable construct for project-based sectors.

Explaining the Internationalization Process of Malaysian Service Firms

International business literature has paid special attention to the study of internationalisation and entry mode strategies of firms from the manufacturing sector. Very few studies have been conducted that examine the international expansion of firms from the service industry. Today, the increasing involvement of service industries in the development of business activities has attracted significant attention. The rapid growth of the international presence of service firms in the international arena has created a new area of interest for scholars to investigate the issue in greater detail. This paper reflects an initial investigation of the pattern of internationalisation, motivating factors, and the choice of entry strategy made by Malaysian service firms. As a successful developing country with a fast growing economy, the Malaysian government has facilitated and encouraged the presence of its firms in international markets. This research utilizes a case study approach through in-depth interviews with key managers/executives in the selected Malaysian service firms to explain the internationalization pattern and behaviour of these firms. Suggestions for further research are discussed.

Foreign market entry mode behavior as a gateway to further entries: The NAFTA experience

Trade liberalization policies have created a vibrant economy in Mexico by successfully increasing the flow of trade and foreign direct investments. This study investigates whether involvement in Mexico is considered attractive as a market in and of itself, or whether it is also attractive because Mexico can also serve as a gateway to other Latin American markets. We call this latter idea “The Gateway Proposition” and present it against the backdrop of NAFTA. The Gateway Proposition suggests that the ability of firms to expand their markets further into Latin American countries in the future could be an additional incentive to invest in Mexico. Accordingly, we analyze entry mode strategy for U.S. and Canadian firms in Mexico as well as their involvement level, equity participation, resource commitment, risk tolerance, and control. The findings of these analyses support The Gateway Proposition, suggesting that a firm's future involvement level is motivated not only by the Mexican market potential, but also by Mexico's ability to serve as a gateway to other Latin American markets. Evidence also suggests that large multinational firms with past experience in Mexico are inclined to respond to emerging Latin American market opportunities by becoming more involved in Mexico.

Entry mode strategy in global marketing

Entry mode strategy in global marketing

Entry Mode Strategies and Performance of Japanese MNCs in Australia and New Zealand: the Role of Japanese Employees

This study investigates different entry modes and staffing practices, and their influence on performance in Japanese subsidiaries in Australia and New Zealand. Data from 275 Japanese subsidiaries were derived from the Toyo Keizai data bank of Japanese overseas investments (Kaigai Shinshutsu Kigyou Souran) for the period from 2003 to 2008. The major assumption of this paper is that Japanese multinational corporations (MNCs) use their staffing policies as a means of exerting more influence on performance combined with other factors such as experience, industry, and the type of ownership. The study reveals that within the sample Japanese subsidiaries in Australia have a higher percentage of high performance companies than in New Zealand. The existence of Japanese employees, ownership and industry are shown as predictors of performance.

Equity-based entry modes of emerging country multinationals: Lessons from Turkey

Based on a sample of 522 foreign affiliates of Turkish multinational enterprises (MNEs) with varying levels of Turkish equity ownership, this study provides an empirical analysis of the determinants of equity-based entry mode strategies in host country markets. A number of hypotheses are developed to examine the impact of institutional, transaction specific and firm level variables on Turkish MNEs’ choice of equity ownership mode in their foreign affiliates. The results reveal that institutional variables are important in explaining the equity composition of foreign affiliates of Turkish MNEs. Particularly important in determining equity ownership mode were found to be political constraints, linguistic distance, knowledge infrastructure and the extent of parent diversity. Results concerning the influences of the size of the affiliate are contrary to expectations and contradict the findings of previous research. No support was found for the impact of cultural distance on the equity ownership mode of Turkish MNEs in their foreign affiliates. Apart from political constraints, equity ownership choice and its underlying determinants do not vary between emerging and developed host country markets.