Entry Mode Strategies Research Articles

Independence or interdependence: The role of artificial intelligence in corporate entry mode for overseas energy investments

Artificial intelligence (AI) technology has significantly transformed corporate behavior in the energy sector by enhancing the capacity and efficiency of information transmission and big data analysis. However, there is still a limited understanding of how AI influences new market entry mode strategies in overseas energy investments. Drawing on information processing theory, we propose that firms with advanced AI technology exhibit superior data processing capabilities, which can help energy companies mitigate the uncertainties associated with entering a foreign market and encourage them to choose a wholly-owned entry mode. We further hypothesize that the state ownership of firms, the political affinity between home and host countries, and the risk preferences of firm executives serve as moderating factors. Using a sample of Chinese-listed multinational firms in the energy sector from 2010 to 2021, our empirical results strongly support these predictions. These findings contribute to the emerging and crucial literature on the impact of AI technology on firms’ overseas investment behavior, particularly in the energy sector.

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.

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.

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?

Multilatinas’ foreign divestment and host country institutional uncertainty: is there a best entry strategy?

PurposeThis paper aims to investigate the divestment behavior of emerging market multinationals from Latin America – multilatinas – by examining how their foreign market entry decision impacts the likelihood of subsidiary divestment.Design/methodology/approachThe hypotheses are tested using Cox’s proportional hazard rate model in a longitudinal database of Brazilian multinational companies established in 43 countries.FindingsResults indicate that these subsidiaries can thrive in environments that bear similarities to their home country, being less likely to divest in institutionally weak countries. Contrary to developed country multinationals, these firms benefit from foreign entry decisions that entail handling partnerships abroad; thus, wholly-owned greenfield (WOGF) investments have a higher likelihood of being divested.Originality/valueTo the best of the authors’ knowledge, this paper is the first to analyze foreign divestment from multilatinas, accounting for how entry mode strategy and host country institutions may impact these firms’ de-internationalization.

The digital economy, entry mode strategies, and the profitability of foreign subsidiaries: A global view

The digital economy, entry mode strategies, and the profitability of foreign subsidiaries: A global view

Political risk effects and entry mode strategies of multinational corporations (MNCS) in Nigeria

Research on the political risk and entry mode of multinational companies (MNCs) has been one of the major subjects of interest in international business terrain, and the political risk factor has constitute a major basis for explaining whether exporting, licensing, franchising, or joint venture agreement (JVA) and Foreign direct investment seems to be appropriate. As such, the study examined the effect of political risk as it affects the entry mode strategies of selected multinational corporations in Nigeria as the economy of most developing economies has been characterized as being exposed to political instability and risk. The research adopted the survey technique with inference to the expo facto method and adopted questionnaire as an instrument through content and test re-test appraisal before data were analyzed through the IBM Statistical Package for the Social Sciences. The results from the analysis indicated that franchising remains a viable option of multinationals in Nigeria and the second hypothesis indicated that licensing significantly reduces the risk exposure of multinational corporations as the licensor have lesser liability in an unstable political economy of the licensee. Based on these findings companies are recommended to adopt appropriate entry strategies in line with governmental policies and economic situation before entering foreign markets.
 JEL CODES: M1, M10

Rethinking the trajectory of economic development: a study of firm entry mode under reverse directionality

PurposeMost of the research studies on entry mode have been done through the lens of manufacturing firms from mature economic countries entering the Global South countries, and most of the related frameworks and theories have been developed to explain this perspective. This paper presents an understanding of entry mode strategies of services firms from the Global South countries entering into countries with mature economies by considering six software services firms in India entering the US market. The study develops a framework that incorporates multiple theories – both from an emerging economy perspective as well as a services perspective.Design/methodology/approachThis study is exploratory in nature and focuses on the how and why aspects of strategic decisions. Qualitative research has traditionally been chosen when the main research objective is to improve understanding of a phenomenon. A multiple case study approach was used in this research. One of the key aspects of this study is the impact of different theories (institutional, network and other theories) on enterprises of different sizes. Therefore six cases – two each on small, medium and large enterprises – were selected.FindingsResults identify addressable market size, cultural aspects, firm size, resource and service characteristics as dominating factors that influenced choice of entry modes. From a theoretical perspective, the author finds that theories such as transaction cost theory, eclectic paradigm and other popular theories associated with entry mode do not successfully explain the entry mode strategies for firms from the Global South. Strategic theory, such as resource-based view, motivation of a firm, have some application but do not explain, in isolation, all aspects of the entry mode choices.Research limitations/implicationsThe study is an exploratory study and needs more data to validate the themes expressed in its conclusions. The study also focused on one industry and one country. Different industries within the same country may have different characteristics and may not follow the observations found in this study. Similarly, firms from other countries with similar economic characteristics may exhibit very different behavior. As a result, the themes that were expressed for software companies in India may not be generalizable across other industries and countries.Originality/valueThis study is significant for both academics and managers. For academics, the study addresses a significant gap in the literature. For managers, this study provides a framework for managers to evaluate and select the entry mode strategy that would be most effective in a successful expansion into foreign countries.

Market entry strategies in the Middle East: unveiling the sponsorship strategy

The international entry mode strategies literature presents limited findings for the Middle East, particularly for Arab countries and the Gulf Cooperating Council Countries. Using a qualitative approach to understand the market entry strategies of multinational corporations, it is evident that the traditional entry modes are not the only form of entry strategy for MNCs in the Middle East. Semi-structured interviews were used to analyze data primary data collected from senior managers in Kingdom of Saudi Arabia and United Arab Emirates. Findings show that in addition to traditional entry modes, Multinational companies have developed an extra approach to entering Middle Eastern markets by forming joint ventures with individuals rather than with corporations. We label this entry mode as ‘sponsorship’ strategy. Implications for research and practice are offered.

Entry Mode Strategy and Firm Performance in Emerging Economy: Moderating Role of Organisational Structure and Environmental Turbulence

Research question: This study assessed the combined moderating effect of organizational structure and environmental turbulence on entry mode strategy - performance link focusing on baby care industry in Lagos State, Nigeria. Motivation: The manufacturers of baby care products in Nigeria have struggled to understand the complexities of entry mode strategy and how to use firm-specific capabilities to contain the threats from new entrants given the idiosyncrasies of the business environment in Nigeria. Also, considering the fast changing business environment and the need for firms to align internal organisational structure to manage the external environmental challenges, this study via the supposition of Hage (1965) axiomatic theory of organisations examined the joint moderating effect of organisational structure and environmental turbulence on entry mode strategy - performance linkage focusing on the baby care industry in Lagos State, Nigeria. Idea: Empirical submissions on the combined moderating effect of organizational structure and environmental turbulence on the interactions of entry mode strategy and organizational performance are sparse. Hence, this study addressed this gap in literature. Data: The survey research design and a sample of 518 employees engaged in FMCG manufacturers in Lagos State, Nigeria were adopted for this study. Tools: A validated structured questionnaire was the instrument of data collection for this study and the hierarchical regression analysis was adopted to test the hypotheses formulated. Findings: The results showed that the interaction between entry mode strategy and firm performance was positive and significant. Further analysis revealed that the interaction term of organizational structure and environmental turbulence accounted for the rise in firm performance to suggest that organizational structure and environmental turbulence are joint significant moderators. This suggests that entry mode strategy appropriateness is key to firm performance and that the fit between organisational structure and the macro-environment is a precondition to higher performance. Contribution: This study adds to recent empirical literature on the link between entry mode strategy, organizational structure, environmental turbulence, and firm performance within emerging economy context, and it provides additional support for the assumptions of the eclectic theory and Hage’s axiomatic theory of organization.

Shopping Center Industry Internationalization with a Focus on Key Resources and Direct Investment: The Case of a Chilean Company in Mexico

Abstract The shopping center sector has been growing steadily over the last years in Latin America. Many countries such as Chile, Mexico, and Brazil lead the industry in the region, with so many projects still under development and different companies with international expansion perspectives in their portfolio. The purpose of this paper is to identify which are the most recommendable entry mode strategies for Latin American countries and which are the essential resources and capabilities that a shopping center company needs to develop to increase the likelihood of success in the sector. Thus, different factors, such as political, economic, and social factors, which impact the industry operation, are analyzed to create a high-level overview of this industry’s most important subjects. For this purpose, primary and secondary data are used, based on a literature review and an empirical qualitative study, giving information of the Chilean Commercial Real Estate company, and interviewing its top managers. Thereby, the results lead to an entry strategy proposal into the Mexican market, identifying the most important shopping centers in the country, the main actors, and the best opportunities to enter.

Ownership-Based Entry Mode Strategies and Limiting Factors of Foreign Direct Investment Undertaken by Polish Enterprises

The limiting factors of foreign direct investment (FDI) are of considerable significance to managers, governments, and scholars, as these factors directly influence the profitability of a foreign subsidiary and its parent multinational company. The aim of the paper is to present the results of research studies on the identification of FDI-limiting factors of the host country in relation to the firms’ ownership equity-based mode. It illustrates the results of a field survey involving direct interviews conducted with Polish companies as the direct investors. The research results confirmed that joint ventures might be used by Polish companies to reduce the difficulties related to the availability of resources. However, there was no strong conclusive evidence of the expected link between the higher barriers on running a business and the ownership equity-based mode.

Entry Mode Strategy, Firm-Level Capability, Environmental Turbulence, and Organisational Performance: A Moderated Analysis

This study examined the effect of entry mode strategy and firm-level capability on organisational performance of selected Fast-Moving Consumer Goods (FMCG) manufacturer in Lagos State, Nigeria; more so, it investigated the moderating effect of environmental turbulence on the interaction between entry mode strategy and firm-level capability, and organisational performance. The cross-sectional survey research design was adopted with a sample of 452 employees of twelve selected FMCGs manufacturers in Lagos State, Nigeria. A hierarchical regression analysis was conducted to substantiate the moderation-effect hypotheses formulated. Findings showed that entry mode strategy and firm-level capability have a positive and significant effect on organisational performance. Further analysis showed that the interaction term of environmental turbulence, firm-level capability, and entry mode strategy explained the increase in organisational performance with the introduction of environmental turbulence as a moderator. Beyond the performance-effect of entry mode strategy and firm-level capability, management needs to keep abreast of issues happening in the external environment and proactively position their organisation to take advantage of the environment's opportunities while reducing exposure to negative consequences.

A reputation transfer perspective on the internationalization of emerging market firms

The rapidly growing literature on the internationalization strategies of emerging market firms (EMFs) has not paid adequate attention to the role that reputation may play in an EMF’s internationalization. This is an important limitation, as reputation’s tacitness and embeddedness mean that EMFs will likely face significant challenges in transferring it overseas. Using the literature on location-bound advantages and resource transfer, we argue that whether an EMF is known more for its capabilities or its character will likely affect the firm’s location choice, and whether it has a greater desire to exploit or to augment its reputation will likely affect its entry mode strategy. Finally, we offer a typology of EMF internationalization patterns based on the interaction of the different reputation types and motives held by these firms. Thus, we shed light on how the nuances of EMFs’ reputation influence their internationalization strategies.

ANALYSIS OF THE INVESTMENT ACTIVITY IN SOUTH AND CENTRAL EASTERN EUROPE. A COMPARATIVE ANALYSIS OF THE CORPORATE GROWTH MODEL

With the opening up of the South and Central Eastern European markets in the early 1990s, foreign firms grabbed the opportunity to exploit their ownership advantages and expand abroad. Within this context, the primary aim of this study is to test the impact of ownership and location advantages in determining the internalisation decisions by foreign investors. The theoretical part will present a framework for explaining the strategic aspects of the internationalisation process, by integrating the resource based theoretical approach, which examines inter- alia ownership resource requirements, and the transaction costs approach, which involves examining variables relating to internalisation control and resources costs. The framework is then applied to the empirical examination of various aspects of the internationalisation process of foreign companies in the region. These break down into three main areas: the internationalisation decision itself; the entry mode strategies; and the implications for performance in terms of profitability.

중국은행의 국제화: 입지 및 진입모드 선택

In response to the lack of research on Chinese banks in the context of multinational banks (MNB), this study may be the first empirical study of the factors influencing a Chinese bank’s location and entry mode strategies in the process of globalization from the strategic behavior perspective. This study uses two binary logistic regression models to investigate the impacts of the determinants on the width and depth of foreign expansion activities. The results provide significant evidence that Chinese banks follow their existing customers and global industry leaders when they expand abroad rather than seek local market opportunities, though the two distance factors representing the cost result from cross-border investment and post transaction integration influence the country-level decision to involve in an acquisition. In terms of the follow-the-customer hypothesis, the sign on FDI is both positive and significant. The follow-the-leader variable related to strategic interactions is defined at the global industry level. Chinese banks are more likely to enter a host country in which one of the host country’s banks already established a branch in China, as an “exchange-of-threat.” In terms of the follow-the-customer hypothesis related to the location of entry through acquisition, the coefficient on the FDI and overseas chinese variables are both positive and significant. In terms of entry mode strategy, the coefficients on geographic and cultural distance variable are both significant, but with different signs. It is reflects the fact that Chinese banks are active in acquisitions in less developed countries with higher cultural approximation. At the bank level, the influence of their past acquisition experience is also significant. The study provides further support to the argument that the eclectic paradigm and strategic reaction perspectives can offer complementary explanations of FDI by foreign banks from developing countries.

Entry mode strategy, customer engagement, and firm performance

Purpose: This study assessed the effect of entry mode strategy on firm performance of selected manufacturers of baby-care product in Lagos State, Nigeria, more so, it examined the moderating effect of customer engagement on the relationship between entry mode strategy and firm performance. Methodology: This study employed a cross-sectional survey design and a sample of 452 employees of twelve manufacturers of baby-products in Lagos State, Nigeria. A moderated regression analysis to test two-way interaction hypotheses was conducted. Findings: The results showed that entry mode strategy has a positive and significant effect on firm performance (R2 =0.042, F(2,449) = 9.865, p <0.000). Further analysis showed that customer engagement explained the increase in firm performance (ΔR2 =0.543, ΔF(1,448) = 587.305 p <0.000) with the introduction of customer engagement as a moderator. Implications: Beyond the performance of entry mode strategy for firms, manager’s needs to deploy customer engagement capability because it’s offers high performance opportunities for the firms who can deploy it. Hence, firm needs to invest in setting up platforms to engage their customers after gaining access to a new international market.

The dynamics of entry mode choice in challenging business environments: an exploratory study of medium sized exporters' entry into Africa

This article studies the entry modes adopted by medium-sized enterprises (MEs) seeking market access to challenging business environments in Africa. Based on a review of the extant literature on entry mode choice and organisational learning in internationalisation, we develop a dynamic model for analysing entry mode choice of exporting MEs. Via a longitudinal study of 14 Danish MEs' attempted entry into the Kenyan market, we found that gaining better knowledge of own resources in relation to the Kenyan business environment did not make the MEs adjust their entry mode. The only behavioural adjustments in lieu of better knowledge were that several MEs, rather than changing their preferred entry mode, decided to abandon entry altogether. We ascribe this lack of adaptation of entry mode strategy to organisational inertia. In conclusion, we argue that our findings have important implications for the theory of organisational learning in internationalisation.

A Framework to Analyze International Competitiveness: The Case of Construction Firms of China

With the rapid development of the Chinese construction industry, increasing support from the government, and China’s internationalization, Chinese construction firms have gained great opportunities in venturing abroad. Though Chinese construction firms played an important role in the international market, Chinese contractors’ share of the international market is still smaller in comparison with their competitors. As an important participant in the international market, Chinese construction firms are confronted with the tasks of keeping themselves competitive. The paper stated the development stages of Chinese construction firms, analyzed the current situation and challenges of Chinese construction firms in the international construction market. Drawing on the resource-based view and industry organization approach, this research builds a conceptual model to investigate the relationship among core capability, competitive strategy and market entry mode strategy within Chinese construction firms, and focuses on strategic analysis in affecting Chinese construction firms’ international performance. The conceptual model presented herein was a generic framework that allowed industry practitioners and academic researchers to understand, sustain and extend the international competitiveness of Chinese construction firms. To help construction firms maintain and improve their competitiveness, the conceptual model implied that Chinese construction firms’ international competitiveness depends upon the identification of appropriate strategy and industry structure as well as developing and creating core capability in order to exploit opportunities and neutralize the threats presented by competition.

Chief executive officers' dispositional optimism, host country's rule of law, and foreign market equity mode choice of Ghanaian small and medium‐sized enterprises

AbstractDespite a growing interest in the influence of managerial characteristics on firms' strategic decision‐making process, scholarly knowledge is limited with regard to how and when psychological attributes of executives affect firms' foreign entry mode decision. Building on behavioral decision‐making theory, we address this gap by investigating the effect of chief executive officers' (CEOs') optimism on firms' foreign market equity mode choice. In addition, we examine the moderating influence of the host country's rule of law on this relationship. Using primary data from 227 small and medium‐sized enterprises (SMEs) in Ghana, we found that increases in the levels of CEOs' optimism are related to the increases in preference for equity entry mode. This relationship is amplified when CEOs perceive the host country to have stronger rule of law. The findings have theoretical, managerial, and policy implications for SMEs' foreign market entry mode strategy.