Foreign Entry Mode Choice Research Articles

Determinants of equity-based entry mode choice in the forest sector: the case of China

The focus of foreign direct investment (FDI) in the global forest sector has shifted from developed to developing economies (currently accounting 73% of total) during the past two decades. China has been the main global driver with its annual FDI soaring from USD 130 million in 2002 to USD 550 million in 2010. In light of international economic and business theories, choice of foreign entry mode is considered the most critical issue in corporate expansion strategy, which, however, has not been empirically studied in the forest sector. To fill this gap, our paper focuses on modeling two equity-based entry mode choices (i.e. wholly owned subsidiary or joint ventures) of foreign investment projects in China based on data from 109 activities of the Top 100 forest, paper, and packaging industry companies. By using logistic modeling, the main determinants of corporate entry mode choice are found to be cultural and geographical distance between the corporate home country and China, duration of corporate presence in China, and spatial concentration of local-level forest industry. Instead, investment project size and local resource availability are found to have no significant impact on corporate entry mode choice in China.

Consumer Animosity, Country of Origin, and Foreign Entry-Mode Choice: A Cross-Country Investigation

Drawing on the perspective of country of origin, this study provides evidence regarding how entry-mode choice and postentry branding strategy affect foreign product purchase intentions in an animosity context. The authors conduct two studies in two host country markets, one with high animosity (China) and the other with low animosity (Taiwan) toward a target country (Japan). The results of Study 1 reveal that in a high-animosity host country, consumers prefer the foreign products launched through an acquisition joint venture to those that are imports or the derivatives of full acquisition. The findings of Study 2 indicate that in a high-animosity host country, consumers prefer the foreign products launched through an acquisition joint venture mode that adopts a local brand or a local-foreign cobrand to one that adopts a foreign-local cobrand. In contrast, in a low-animosity host country, entry modes and postentry branding strategies have no effect on foreign product purchase intentions.

Choice of entry mode into a foreign market

Purpose – The purpose of this paper is to examine the factors that play a decisive role in determining growth strategies implemented by the hotel chains of the Balearic Islands in the Caribbean and Gulf of Mexico.Design/methodology/approach – In line with most research on the choice of entry mode, the dependent variable is a categorical one. Given the nature of the dependent variable, logistic regression (or logit) models were used to verify the hypotheses. Since there were more than two categories involved, a multinomial logit model was applied.Findings – The main findings show that the choice of foreign market entry mode cannot rely solely on host‐specific factors. Moreover, this study facilitates a comparison of the results of this paper and the results of other similar studies of the international hotel industry.Originality/value – This paper offers several contributions. First, it is a new contribution to the understanding of the factors that determine the behavior of hotel chains in their internatio...

Bilateral FDI entry mode choice and its firm, market and country-institutional determinants: a case of financial services and electronic manufacturing sectors in the UK and Taiwan

There is a sufficient lack of empirical research that examines foreign direct investment bilaterally, and even less research that examines the determinants of foreign investment entry mode choice between developed and developing nations. The importance of country-institutional factors in determining entry mode selection has stirred interest in recent years, and this paper aims to add institutional factors and expand on that research. Using data collected from the financial services and electronic manufacturing industries, this paper concludes that the addition of country-institutional factors enhances the role of other firm- and market-specific factors that contribute to entry mode choice.

Solving theoretical and empirical conundrums in international strategy research: Linking foreign entry mode choices and performance

Several theoretical and empirical developments in the literature on foreign entry mode and performance, and on (international) strategy more generally, were influenced or prefigured by Brouthers’ (2002) JIBS Decade Award winning paper. Regarding theory, Brouthers is an archetype of the integration of transaction cost and institutional perspectives. I argue that it is also relevant to the growing literature that aims at synthesizing these and other perspectives. Methodologically, Brouthers (2002) contributed several uniquely direct and rich measures. Furthermore, it not only displayed awareness of endogeneity (specifically self-selection) issues, but also was among the pioneers in the comparative analysis of governance choices for a given firm or transaction. I elaborate on the promising if challenging use of such “what if” imputation to identify the impact of more or less well-aligned choices. Overall, I argue that such methodological advances cannot be decoupled from the conceptual advances that enable them, and which they reinforce.

Financial Performance of Entry Mode Decisions: Effects of Control in an Internationalization Context

Based on a survey of 170 Danish SMEs the paper examines influences on entry mode choices and the financialoutcome of these decisions. The main research objectives are divided into two steps: Step 1: To determine thefactors influencing the choice of foreign entry modes by Danish companies. Step 2: To determine the relationshipbetween the choice of entry mode and export performance, measured in terms of financial outcome. Drawingfrom transaction cost theory the authors develop and test a model where different factors affect the level ofcontrol chosen by the parent company. This study contributes to the existing entry mode theory by integratingboth steps into a theoretical framework that offers substantive explanation of the connection betweenindependent entry mode variables, the choice of entry mode and the resulting export performance. Personalnetworks and interruption of international activities were the most significant factors for the choice ofintermediate modes. The results also show that high control modes can positively affect the bottom line profitthrough higher market investments and better implementation of cross border strategies. Finally, further researchsuggestions and implications are provided for companies willing to invest more into foreign markets in order toachieve a higher degree of control and better financial results.

Understanding the motives for SMEs entry choice of international entry mode

PurposeWhat drives small to medium‐sized enterprises’ (SMEs’) internationalisation strategy remains a significant issue in international business research, despite the huge research efforts on this subject over the past three decades. The purpose of this paper is to investigate and compare the motives behind the equity modes of foreign market entry in Norway.Design/methodology/approachEmploying a cross sectional survey, a sample of 146 firms consisting of 42 international equity joint ventures (IJVs), 53 cross‐border mergers & acquisitions (CBM&As) and 51 wholly owned subsidiaries (FWOS) from Norway was collected and analysed.FindingsIt was found that whereas market development and power influence the choice of IJVs and CBM&As, the need to access resources and control resources appear to be the most important motives behind FWOS as an entry mode choice. Moreover, the regression results indicate that market development and power, technology development, location advantage and synergistic gains appear to have a significant bearing on different entry mode choice in Norway.Research limitations/implicationsThe paper examines the motivation for the choice of foreign entry mode from the point of view of senior managers in Norway. Future research should accommodate multiple perspectives simultaneously from the parent companies and subsidiaries in a single paper to significantly advance the field.Practical implicationsThe paper discovers that the motives behind the choice of cooperative modes of entry tend to be more linked with market development, technological development while FWOS are motivated by the need to control proprietary resources. The implication for the Norwegian government is that its financial incentives do not affect the mode choice of entry.Original/valueThe paper finds that different motives and theories influence the choice of foreign market entry by SMEs in Norway and provides insights for senior managers on the factors taken into account in making choice decisions in Norway.

Master Franchising as Foreign Entry Mode: Evidences from the Spanish Franchise System

The present study examines how a number of market conditions may constrain entry mode choice into Middle East nations. Specifically, this paper focuses on master franchising and analyzes the determining factors in this entry mode decision. A quantitative approach was applied to a sample of Spanish franchisors operating through 96 franchisee outlets across 6 Middle East countries in January 2010. They are Bahrain, Cyprus, Israel, Jordan, Saudi Arabia, and United Arab Emirates. Findings show the importance of a number of host country’s features (economic development, corruption, and efficiency of contract enforcement). The scant theoretical or empirical attention given to the topic of foreign entry mode choice via franchising has usually been examined from a U.S. base and focused on developed markets. To fill this gap, the present study analyzes the international spread of the Spanish franchise system—ranked fifth worldwide both in terms of the number of franchisors (1,019) and the quantity of franchisee outlets (65,026)—into the Middle East.

Modes of foreign entry for professional service firms in multi-partner projects

Choice of foreign entry modes is especially crucial for professional service firms because extensive knowledge-sharing with partners and clients is necessary. This is particularly pertinent for firms involved in multi-partner projects. The objective of this paper is to review the literature from this specific viewpoint and to develop propositions which may provide possible courses of action for future research. The article argues that high control entry modes will be preferred when the amount of tacit knowledge shared is high, when the service is customized and involves co-production, when external uncertainty is high, when projects are of a more temporary nature, and when partners are unfamiliar and/or large in number.

The influence of international experience on entry mode choice: Difference between family and non-family firms

Summary International experience plays a crucial role in the choice of foreign entry mode, but its influence may vary across firms. This study investigates the difference of such an influence between family and non-family firms. The TCE perspective sees the foreign entry mode choice of a joint venture (JV) or a wholly owned subsidiary (WOS) as a trade-off between administrative costs of managing an organization and costs of safeguarding against partner’s potential opportunism. From the TCE perspective, we hypothesize that inexperienced firms would rather relinquish control of foreign subsidiaries in exchange for local partners’ help and thus will tend to choose a JV vs. a WOS. Family firms, however, have unique concerns regarding the preservation of socioemotional wealth and tend toward nepotism. Thus they often suffer from relatively scant management capabilities, relying more on partners’ help to manage foreign subsidiaries jointly. We then hypothesize that inexperienced family firms, compared with inexperienced non-family firms, are more likely to choose JVs rather than WOSs. As firms accumulate international experience, they rely less and less on partners’ help. We further hypothesize that ceding control to partners eventually will no longer be worthwhile, making the WOSs choice more favorable. Family firms, due to their socioemotional wealth concerns, have a higher desire to control their affiliates and tend to maintain higher ownership levels than do non-family firms. We thus hypothesize that experienced family firms are more likely to choose WOSs, compared with experienced non-family firms. We used a sample of publicly listed computer and electronic companies in Taiwan entering the China market to test our hypotheses. The empirical results support our hypotheses. The heterogeneity in the influence of international experience has profound implications for both family business research and international business studies.

Erin Anderson and the Path Breaking Work of TCE in New Areas of Business Research: Transaction Costs in Action

This review article synthesizes Erin Anderson's academic contribution, with an emphasis on two path breaking aspects of her work, namely the operationalization of TCA in different contexts and the refinement of the theory. We review the measures that she developed to reflect key TCE constructs, and identify five contexts in which Erin Anderson's application of TCE concepts broke new paths. These are employee or representative salesforces, choice of foreign entry mode, new market entry and innovation, countertrade, and ethics. We highlight a number of ways in which her research integrates other theories to transaction cost economics, thereby deepening our understanding of key issues involving make or buy decisions. Finally, we draw attention to directions for future research identified through her work.

The role of top management team international orientation in international strategic decision-making: The choice of foreign entry mode

By applying the upper echelons perspective to international strategic decision-making, we examine the impact of managerial characteristics on the choice of foreign entry mode. We distinguish between top management team (TMT) international experience and nationality diversity and propose the latter as a central yet understudied aspect of TMT composition that influences international decision-making with regard to choice of entry mode in a unique way. Our results show that while TMTs with international experience are more likely to choose full-control entry modes over shared-control entry modes, nationally diverse TMTs are more inclined to opt for shared-control over full-control entry modes when entering foreign markets. This highlights the need to treat TMT nationality diversity and international experience as two distinct characteristics influencing international strategic decision-making.

La internalización de la franquicia española y sus formas de penetración de mercados

Foreign entry mode choice is one of the most important decisions global companies should take, given that such a decision constrain the degree of control and risk of the new venture. Regarding the specific characteristics of the franchising system, it is worth mentioning that franchisor companies can enter new markets through four different ways: i) direct franchising, ii) master franchisor; iii) joint venture; and finally, direct investment. This paper aims analyzing the factors that constrain the entry mode decision. Empirical evidences show the important role of some franchisor characteristics (franchising experience, international experience, brand awareness and type of activity — product versus service-), as well as different features of the host country (political stability, degree of corruption, cultural distance, and geographical distance).

Determining the Choice of Entry Mode of Multinationals: My 6 Million Regressions

Motivated by the findings of Ramada-Sarasola (2009) and the lack of robustness of the previous literature’s results on foreign entry mode choice to model specification in this paper I perform an Extreme Bounds Analysis to determine which of almost 60 explanatory variables used in the literature are robust to different model specifications. I do so by following the methodology introduced in Sala-i-Martin (1997b) in a multinomial logit framework, based on 640 entries into foreign countries done by the largest 22 financial MNCs in the last 15 years. I suggest additional hypothesis to capture host-country level determinants and I improve the operationalization of industry level variables in a multi home-country and host-country setting. Amongst other results I find that an MNC’s size and its international experience increase the likelihood of greenfields as opposed to M&A or any type of entry mode involving a partner, and that more cultural distance between home and host country, a better developed local financial sector (or local credit market), a more regulated environment for obtaining licenses and more macroeconomic sustainability increase the chances of GI, while a worse local infrastructure, higher ITC costs and more difficulties in registering property and employing workers decrease its odds.

Strategic Orientation and the Choice of Foreign Market Entry Mode

Drawing on the transaction costs, strategic capability and the strategic cognition perspectives, our study seeks to examine whether and how firms’ strategic orientations at the business level influence the entry mode choices that firms make in accessing foreign markets. The study uses a sample of 332 foreign market entries made by 62 U.S. based firms over a period of 6 years to test hypotheses linking firm business level strategy to the choice of foreign entry modes. Findings indicate that Prospectors are more likely to choose equity-based foreign market entry modes than Defenders. In addition, Prospectors favor full-ownership entry modes, namely, greenfield investments and full acquisitions, over shared-ownership modes such as joint ventures and partial acquisitions.

Determinants in the Choice of Entry Mode for MNCs Going Offshore - The Hard Task of Getting Meaningful Results

This paper reviews and criticizes in depth the empirical literature on foreign entry mode choice providing a motivation to perform a robustness analysis. Through a review of the theoretical approaches behind each study, as well as by comparing the way theoretical constructs are operationalized, this paper is able to pool the different studies that are part of empirical literature in the field of foreign entry mode decisions into different classes, allowing for a comparison of their results. The literature’s main results are then compared within those groups finding inconsistencies in the significance and sign found by different studies for almost every explanatory variable studied in the context of entry mode decisions. An explanation on the reasons behind those inconsistencies is also provided, yielding a strong motivation for pursuing model misspecification checks and robustness analysis. It extends previous reviews on the topic in that it also includes and compares studies focusing on multichotomous foreign entry mode decisions.

An Exploratory Study of InternationalCommitment by Nascent and Existing Firms

This exploratory study addresses two research questions: What factors are related to firms’ decision to internationalize, and after they internationalize, What factors relate to firms’ choice of high-risk versus low-risk foreign entry modes? We contribute to the literature by examining these questions with two separate sets of entrepreneurial firms: nascent (in the process of being set up but not yet operational) and existing (operational)firms. Accordingly, we draw on different streams of research, including the theory of planned behaviour and the new venture theory of internationalization, to study firm involvement in foreign markets. Among nascent firms, growth orientation and innovation level relate positively to the plan to internationalize; however, we find no discriminating factors for whether nascent firms plan to choose high- versus low-risk entry modes. For existing firms, growth orientation and team size are positively associated with internationalization. Finally, existing firms that have chosen high-risk (versus low-risk) entry modes are more growth oriented and differ in their individual-level factors.

Challenging the uppsala internationalization model: a contingent approach to the internationalization of services

Some authors have questioned whether the well-known Uppsala internationalization model would be generalizable to services. We take one of the model's assumptions - that firms will follow a gradually increasing resource commitment path in each country - and challenge whether it would hold up under specific service characteristics or particular combinations of environmental variables and service characteristics. We review the literature in search of more appropriate dimensions for the classification of services that would allow for the test of the Uppsala model's assumption. Based on purely conceptual reasoning, supported by previous empirical studies, we propose some hypotheses about how service firms would be expected to behave - in terms of their choice of foreign entry mode - under certain circumstances and what the performance implications would be expected to be. These hypotheses are contrary to the Uppsala model's predictions. This paper is solely conceptual, so the key constructs (environment and service-specific variables) would still require operationalization before the hypotheses can be empirically tested.

The role of service embeddedness in the internationalisation process of manufacturing firms

Over the last decade the growth of service firms, and their internationalisation, has attracted considerable attention from researchers, with a special focus on characteristics that distinguish services from goods. However, as the composition of a firm's product can contain both good and service elements, this paper argues that it is somewhat misleading to categorise a product simply as either a ‘good’ or a ‘service’. Manufactured goods often contain client-related services embedded in them. Further, the nature of these embedded services may vary with respect to their degree of separability of production and consumption. Based on several case studies of Australian manufacturing subsidiaries in the UK, this paper examines the impact of inseparable embedded services on a firm's entry-mode choice. It reveals that the extent and nature of embedded services have a considerable impact on a firm's choice of foreign entry mode. The research findings are likely to contribute to the existing marketing and internationalisation literature.

Born Globals' foreign market channel strategies

Foreign entry mode choices are decisions of paramount importance for the long-term survival and growth of companies that are in a process of rapid international expansion. In this paper we seek to understand the foreign market channel strategies of Born Globals. We examine whether these companies develop a similar strategy regarding foreign entry mode choices and whether their market channel strategies differ from contemporary theories treating this problem. A comparative case study conducted on four companies meeting the criteria of Born Globals suggests that they do not show a common foreign entry mode. Instead, the companies seem to have very different market channel strategies even if they all have internationalised very rapidly. These findings are discussed against the current range of theoretical models that seek to explain the companies' foreign entry mode choice. We conclude the paper with some implications and suggestions for future research.