Foreign Market Entry Strategies Research Articles

Internationalising high–tech SMEs: Advancing a new perspective of open innovation

Choosing a foreign market entry strategy is known to be essential for firm internationalisation yet there is very little focus on the role, purpose, and value of open innovation for internationalising high–tech SMEs. A review of the international business, international entrepreneurship and international marketing literature combined with a bibliometric mapping of 2501 articles on firm internationalisation, suggests that research does not readily associate open innovation and the internationalisation of high–tech SMEs. This is regardless of open innovation's activities that can span over a firm's immediate geographical space. Thus, this study introduces new theoretical explanations and a midrange open innovation theory to advance open innovation as an alternative foreign market entry strategy especially for internationalising high–tech SMEs. This has theoretical and practical implications for academics, international business managers, and practitioners because it introduces an alternative internationalisation strategy for SMEs.

Institutional determinants of ownership stake in cross‐border acquisitions in Africa: The moderating role of geographic distance

AbstractWe look at how emerging markets' institutional features affect ownership stake in cross‐border acquisitions (CBAs) within Africa. Particularly, we show that the presence of shared colonial history between the home and host country and the extent of fractionalization distance and formal institutional distance influence the acquiring firm's decision regarding its ownership stake in the target. Moreover, we show that geographic distance between the home and host country, by augmenting uncertainty faced by acquiring firms, moderates the relationship between these institutional features and ownership stake. We test our hypotheses in a sample of 341 intra‐Africa CBAs from 2001 to 2016. Generally, we find that greater ex ante uncertainty and ex post costs increase ownership stake. Specifically, greater geographic distance strengthens the positive relationship between shared colonial history and ownership stake and reverses the negative relationship between formal institutional distance and ownership stake. As for fractionalization distance, the relationship is more nuanced and needs to be further studied. We contribute to advance research on south–south CBAs in general, particularly within Africa, as well as to extend hostage theory in foreign market entry strategies in and from emerging markets.

Analyzing foreign market entry strategies: the case of Wal-Mart’s entry into Thailand

The paper is devoted to foreign market entry strategies, particularly, studying the case of the entry of the US company Wall-Mart–the world leader in whole sale and retail trade– into the Thailand market. In terms of globalization, many firms are trying to expand their business by entering foreign markets which determines the relevance of the study. That brings many social and economic benefits. However, the process is related with big risks which requires developing proper strategies for business success. In the research it is analyzed the external business environment, and causes why Wall-Mart has decided to enter the Thailand market, taking into account macroeconomic characteristics, growing domestic consumer demand, purchasing trend, as well as positive forecasts of sales growth in the overall retail sector. Moreover, the entry modes of Wal-Mart entering the Thai market are considered. It is performed the risk assessment and risk management strategies developed, accordingly. The importance for international businesses to conduct an in-depth external business environmental and risk analysis is proved before entering into other markets, as it provides insightful information about the features of the host country, its culture, knowledge of the local market and consumer needs, competitive business strategies and etc.

The Effects of Foreign Market Entry Strategies on Financial Performance of Listed Multinational Firms in Kenya

The objective of this study was to establish the effects of foreign market entry strategies on the financial performance of listed multinational firms in Kenya. Internationalization theory was used as the theoretical foundation of the study. Empirical studies reviewed revealed that several studies had been done on the direct relationship between performance of multinational firms and their modes of entry into foreign firms. However, none of these studies focused on the financial performance of listed multinational firms. The study utilised a cross-sectional descriptive design. Secondary data collected from firms’ annual reports and financial statements for a period of four years (2014 to 2017) was used. The firms’ financial indicators of Sales Growth, Return on Equity, Return on Assets and Return on Capital Employed were employed to measure their performance. Franchising, exporting, wholly owned subsidiary and acquisitions were assessed as the entry strategies used by multinational firms. Data was collected from all the 62 listed multinational companies in Kenya and analysed using quantitative methods. This analysis was most preferred for data collected was quantitative in nature. The relationship between the independent and the dependent variable was tested using simple linear regression. The results show that the performance of multinational firms operating through franchises and as wholly owned subsidiaries as well as acquisitions was lower than the performance of multinationals operating as export companies. The study concludes that the mode of entry into foreign markets chosen by a firm significantly affected its financial performance in the said market. It is therefore recommended that multinational firms wishing to expand their operations globally to come up with long term strategies that have gone through rigorous scrutiny for the benefit of the firm. The study gave a contextual understanding of the internationalization theory. The theory managed to emphasize on reasons why multinational firms should expand their operations beyond their national boundaries. Actual ingredients for policy makers to undertake a well thought through policy formulation to fully understand the importance of choosing the right entry strategy was provided for in the results. Recommendations of the study are that a thorough marketing evaluation of the country of interest should be undertaken to ensure that proper measures are put in place for the selection of an entry strategy that will address the goals and objectives of a firm. The study also recommends that employees of a firm who are at the forefront in the internationalization process should be well informed and trained ahead of the firm’s plans. Policy makers and advisories in countries are advised to streamline the processes of foreign firms’ registration so to attract foreign investors.

Intangible resources and cross-border acquisition decisions: The impact of reputation and the moderating effect of experiential knowledge

Drawing from the resource-based view, signaling theory, and internationalization literatures, we argue that a key intangible resource – reputation – influences the decision to engage in cross-border acquisitions (CBAs). Reputation facilitates foreign market entry by reducing the risks and costs inherent in such strategic moves, while acting to curb potentially risky decisions. Based on a longitudinal sample of 869 acquisitions conducted by European and US firms, our study confirms the inverted U-shaped relationship between a firm’s reputation and the likelihood of undertaking CBAs. We also find that international experiential knowledge moderates the relationship between reputation and the likelihood of additional CBAs. Our research contributes to the growing literature on the influence of intangible strategic resources, especially that of reputation, on foreign market entry strategies.

Foreign Market Entry Strategies and Competitive Advantage of Fintech Companies in Kenya

Foreign Market Entry Strategies and Competitive Advantage of Fintech Companies in Kenya

SME Internationalization in Emerging Markets: Formal Institutions and Foreign Market Entry Strategy

Extant research pertaining to the relationship between formal institutions and the governance of equity-based subsidiary investments (wholly-owned subsidiary, or joint venture (JV) partnership) established by small-to-medium sized enterprises (SMEs) in foreign markets has generated equivocal results. To reconcile these disparate findings, we propose a more fine-grained conceptualization of the formal institutions construct. To do so, we employ an uncertainty-grounded lens to categorize formal institutions in terms of the distinct varieties of uncertainty (environmental versus behavioral) and transaction costs (information costs versus monitoring and enforcement costs) that they foster. More specifically, we theorize that formal institutions can be unbundled into environmentally-oriented formal institutions (EOFI) and behaviorally-oriented formal institutions (BOFI). We detail the distinct transaction cost-reduction mechanisms through which these two different types of formal institutions impact upon the equity-based governance choices of foreign-investing entrepreneurial firms in emerging markets. In brief, we propose that weaker BOFI foster both greater behavioral uncertainty and heightened monitoring and enforcement costs for these firms which will precipitate a preference for full ownership. Conversely, weaker EOFI induce greater environmental uncertainty and more pronounced information costs which will motivate these investors to engage in a JV with a local partner. The results of our tests of these hypotheses provide empirical support for the main effects of EOFI and BOFI, but only partial support for our hypothesis pertaining to the interaction effect between these two categories of formal institutions.

The Influence of Firm Characteristics on the Relationship between Foreign Market Entry Strategies and Financial Performance of Listed Multinational Firms in Kenya

The main objective of this study was to establish the influence of firm characteristics on the relationship between foreign market entry strategies and the financial performance of multinational firms in Kenya. The study was hinged on Resource-Based View as a theoretical foundation. The literature revealed that numerous studies had been conducted on the influencing factors of firm characteristics such as Size and Age on the financial performance of multinational firms. However, these studies did not put into consideration of other possible factors such as firm characteristics and indicators such as liquidity and leverage. More so, the studies did not consider firm characteristics as a possible influencer of the direct relationship between choice of entry strategies and financial performance of multinational firms. The study utilized a cross-sectional study design which adopted both analytical and descriptive type of studies. Secondary data was used to obtain the desired information from the multinational firms’ annual reports for the financial years 2017, 2016, 2015, and 2014. The study focused on only the publicly listed multinational firms in the Nairobi Security Exchange. Data were obtained from all the 62 listed firms. The study used Sales Growth, ROA, ROE, and ROCE to measure financial performance. Age, Liquidity, and Leverage were used as indicators of firm characteristics with leverage and liquidity further measured as Debt-Equity ratio and Current Assets Ratio respectively. Foreign market entry strategies were measured using Franchising, wholly-owned subsidiaries, Acquisition, and Joint Ventures. The results of the study showed that an interaction between firm characteristics and foreign market entry strategy significantly affected the direct relationship between foreign market entry strategies and the financial performance of multinational firms. The study concludes that firm characteristics have a positive effect on the financial performance of multinational firms through the influence of their choice of entry into foreign markets. It is recommended that multinational firms with desires to expand globally should use their global footprint to maximize on their international operations through leverage activities. In addition, policies governing the liquidity of companies to be revised in order to increase financial performance if previously they affected it. For the study was only limited to the publicly listed multinational institutions, future researchers should consider studying all the multinational firms operating in Kenya. The study provided a contextual understanding of the Resource-Based View. This theory tried to bring in views on choosing the right entry strategy into foreign markets based on the familiarity or unfamiliarity of a foreign market setting given the resources available to a firm. Findings also provided key ingredients for policymakers to embark on an integrated policy formulation in the full understanding of the interplay of a firm’s unique characteristics as far as multinational firms are concerned. And in practice, global business management should be in a better position to identify the right entry strategies into new markets that would yield them great financial profits.

The intellectual core and structure of international business strategies (IBS)

PurposeInternational Business Strategies (IBS) literature deliberated on the strategic planning and strategy implementation of home country firms in foreign markets. IBS had become a very potent growth strategy for firms. IBS as a body of knowledge had become substantial in the last few decades of research. To this end, and as a complex field of study, this paper aims to conceptually map this IBS literature. Hence, the purpose of this paper is to present a visual mapping of intellectual structure in two dimensions and to identify the subfields of IBS through co-citation analysis.Design/methodology/approachAll the citation documents were included in the Web of Knowledge (WoK) database between the years 1993 and 2018. For the multivariate analysis, this study applied a sequence of statistical analyses including factor analysis, multidimensional scaling and cluster analysis. Through these techniques, this research study tried to summarize the condition and status of IBS research by classifying the IBS literature into four categories.FindingsIBS literature has been classified into four categories, namely, evolutionary aspects of IBS; firm strategic objectives and IBS; institutional theory and IBS in emerging economies; and foreign market entry strategies for internationalization.Research limitations/implicationsBased upon the basis of the analysis of extant research in IBS, the current and future extension research topics have been presented. This would help future researchers to understand the white spots for undertaking research in future.Originality/valueThis was one of the very first studies that mapped the International Business Strategy literature and categorized IBS literature.

The Differing Foreign Entry Mode Choices for Sales and Production Subsidiaries of Multinational Corporations in the Manufacturing Industry

Foreign market entry mode research has been a popular area of study. However, a clear agreement between the usage of conventional constructs and their impact on a firm’s entry mode choice has not yet been found. This paper focuses on how, depending on the type of subsidiary that is established, multinational corporations (MNCs) in the manufacturing industry use different foreign market entry strategies. Previous research either treated types of subsidiaries synonymously or investigated them separately. However, due to the changing competitive landscape and disaggregation of value chain activities into separate subsidiaries, I find it necessary to compare how these entry mode choices differ depending on the activity each subsidiary is responsible for. My analysis finds that MNCs in the manufacturing industry are more likely to use joint ventures rather than wholly owned modes of entry for their production subsidiaries in comparison to their sales subsidiaries. I further explore how the international experience of the MNC strengthens this effect. This research utilizes a sample of 201 listed Korean manufacturing firms and 833 foreign market entry mode choices into 49 countries.

Isomorphism and Ownership Choice of Chinese OFDI Firms: Focus on the Types and Targets of Imitation

Purpose - This study aimed to investigate the role of the isomorphism in foreign market entry strategies used by multinational enterprises (MNEs) of developing countries. Design/methodology/approach - This research is exercised on the three variables of liquidity, i.e. the frequency effect, the industry effect and the local effect. This research used a Binomial Logistic Regression to measure the impact of isomorphism for the entry strategy. Findings - The results showed that the frequency effect and the industrial effect influenced the selection of firm’s entry strategy at a significant level. Research implications or Originality - Isomorphism was shown in certain entry methods of leading investment firms for MNEs in developing countries. However, firms with ample available resources, such as state-owned and listed firms, preferred having a wholly owned subsidiary over the entry method of existing firms. The firms chosen for analysis consisted of those in China and the analysis period was from 2000 to 2015. We collected 2,370 pieces of OFDI data by firm from the Zephyr database, the investment country economic indicators of the Chinn-Ito Index and the exchange rate and inflation data of the World Development Indicators.

INTERNATIONALIZATION STRATEGIES OF RUSSIAN NON-ENERGY COMPANIES

The article is devoted to the generalization and descriptive analysis of foreign market entry strategies used by Russian non-energy companies. According to the research results, in most cases, the companies use either the replication strategy of offering a standardized product in all countries, or a strategy of limited adaptation products by local business units to local conditions. In addition, the author assesses the impact of the liability of foreignness effect on internationalization process of Russian non-energy companies.

Foreign market entry through acquisition and firm financial performance

PurposeThe international market entry strategy by acquisition is one of the critical options for success in international business. The decision to acquire a local firm is expected to impact the post-entry financial performance of the local firm as the acquirers come with proprietary advantages to improve the overall performance of the acquired company. The purpose of this paper is to empirically examine the post-acquisition financial performance of acquired foreign subsidiaries and comparable unacquired local firms in Ghana to determine the effect of foreign acquisition on the financial performance of the local subsidiaries.Design/methodology/approachA quantitative approach was adopted in this study. A sample of 100 locally acquired and non-acquired firms were studied using purposive and convenience sampling method. The research adopted the propensity score matching and the differences in difference methodologies to determine the returns on assets (ROA) of non-acquired local firms and acquired foreign subsidiaries are compared one year pre-acquisition t1 to two years post-acquisition t2.FindingsThe results demonstrate a higher post-acquisition financial performance of locally acquired foreign subsidiaries in relation to their local counterparts in Ghana. Firms with pre-acquisition modernized ownership structures performed better than state-owned firms and firms with high pre-acquisition absorptive capacity outperformed firms with lower pre-acquisition absorptive capacity. The results also indicate that ROA for acquired local firms in the year of acquisition drops in relation to the year prior to acquisitionResearch limitations/implicationsA major limitation of this research is that the relative capability of the parent companies and experience in the transfer of knowledge to the acquired local subsidiaries was not considered. The real impact of the various multinationals would have revealed how the capability and competencies of the different parent companies whose subsidiaries this study considered in the paper make a difference in their performance. The study did not also consider the value of parent company participation in the local management of the acquired subsidiaries. Whereas some acquired firms had parent company staff participating in the local management, others did not have same, thus challenging the performance results without any control of this variable. The other limitation of this research is the fact that it did not also consider the experience of the parent company as a factor that can influence the performance of the subsidiary. The more experienced the parent company is in engaging foreign markets, the more likely the support for the subsidiary will result in higher performance as parent company brings previous learnings. Another limitation of this study is that it measures the financials only (ROA) and hence does not provide a 360° assessment of the subsidiary performance, which includes the operational and overall subsidiary effectiveness. This research has not empirically examined all aspects of foreign acquisitions in Ghana and thus has many aspects for future exploration that other researchers may focus on. The paper has not considered the experience and capability of the parent company to transfer technology, innovation and all the advantages of multinationals to the post-acquisition performance of subsidiaries. More experienced multinationals are most likely to transfer knowledge faster to subsidiaries than less experienced ones, thus likely to show better performance post-acquisition than the less experienced ones. The effect of this phenomenon has not been considered in this study. Parent company participation in the local management of the subsidiary can also make a difference in the post-acquisition performance equation but this has not been considered in this research. Some parent companies actively participate in the local subsidiary management as management support for the subsidiary. This might have some effect on the subsidiary post-acquisition performance but this study does consider this. Other researchers may want to look into this factor. Future researchers may also assess the differences in performance of subsidiaries that are wholly owned and partial owned in Ghana. The performance of Greenfield joint ventures and local firm acquisitions can also be studied.Practical implicationsFindings of this research has implications for firms using acquisition as foreign market entry strategy to inform the choice of local partners to select for acquisitions as pre-acquisition ownership structure and absorptive capacity of local Ghanaian firms impact post-acquisitions performance. Ghanaian firms also seeking to attract foreign investments into their businesses will also find the results useful as they organize to meet prospective acquirers’ expectations, for example, building their human capacity and ownership structures, developing export and ensuring debt rations to attract potential acquirers.Originality/valueAcquisitions as an international market entry strategy continue to gain grounds with lots of research in the area. However, there is scanty research on post-acquisition financial performance, especially in the developing country context, and this paper fills that yawning knowledge gap by comparing acquired and non-acquired local firms in Ghana to determine if foreign acquisitions lead to better ROA.

Foreign Market Entry Strategies: The Case of Guaranty Trust Bank to Penetrate the Gambian Market

Foreign Market Entry Strategies: The Case of Guaranty Trust Bank to Penetrate the Gambian Market

SELECTING INTERNATIONAL MARKET ENTRY STRATEGY IN A HOTEL INDUSTRY

The article contains analysis of the process of forming the foreign market entry strategy, the factors that influence its development, and the systematization of strategic alternatives for entry strategy (indirect export, direct exports, licensing, joint ventures, ownership, direct investment). The complex of existing instruments of choosing the best strategic alternative for a particular company was researched. It was found out that the available tools are more suitable for manufacturing companies and do not take into account the specificity of services. In particular, such characteristics of services as intangibility and inability of their storage limit the use of strategic alternatives related to exporting. A possibility of adaptation the matrix for selection the strategy of entering the foreign market for service industries, especially for the hotel industry, was proposed. The application of the matrix for selection the entry strategy for a specific company from the UAE was illustrated.

Firm Productivity and Mode of Foreign Expansion: Evidence from Taiwanese Manufacturing Firms

This paper builds on the recent literature on firm heterogeneity in international trade and foreign direct investment (FDI), and aims to empirically examine how firm productivity affects a firm’s foreign market entry strategy beyond the simple binary choice between exporting and FDI. Utilizing the panel data of Taiwanese manufacturing firms during 2002–2012, we further classify FDI methods by whole ownership or a joint venture to investigate a firm’s foreign expansion decision. By performing Kolmogorov–Smirnov (KS) tests, we find that if a firm is more productive, it is more likely to choose FDI rather than exporting. However, productivity of firms choosing whole ownership is not so different from choosing a joint venture. Furthermore, a more productive firm is more likely to conduct both whole ownership of the foreign subsidiary and a joint venture formation in the case of FDI.

International competitive intelligence

Creating international competitive intelligence is the foundation of an enterprise’s entry and existence in a foreign market. Good preparation for international trade and the exchange of goods and services requires intelligence to be collected and examined. An enterprise needs to determine sources of competitive intelligence as well as set up foreign market entry strategies and activities under the existing conditions. For that, it must know the nature and scope of international competitive intelligence. To understand the factors shaping business activities, it should also study the competition between local and foreign enterprises in a foreign country, commercial organisations and risk in price fluctuations.

Network and Institutional Effects on SMEs’ Entry Strategies

Building on the network and institutional environment perspectives, this study examines the foreign market entry strategies of 851 small and medium-sized enterprises (SMEs) based in Taiwan, a newly industrialized economy. From the network perspective, our findings show that SMEs prefer to enter new markets in two distinct ways: (1) through wholly-owned subsidiaries when they are following their customers into a host country, or when the operations in a host country have more internal network linkages; and (2) through joint ventures when they have stronger supplier relationships. From the institutional environment perspective, SMEs set up wholly-owned subsidiaries when they perceive differences in the macro-economic and industrial-policy environment in a host country; however, they will choose to enter into joint ventures if they perceive a significant degree of socio-cultural difference in a host country. As SMEs decide on entry strategies, they must carefully consider not only the different types of network resource, but also the influence of institutional factors in host countries.

Applying foreign entry market strategies to UK higher education transnational education models

We take a multidisciplinary approach mapping the models used by UK higher education (HE) institutions against established international business foreign market entry strategies. We review the conditions in host markets that facilitate market entry and consider how these will determine foreign market entry strategy. We specifically consider four macro-environmental factors: (a) the existence of a market, (b) the adherence to supranational institutions and the harmonisation of national legislation, (c) the convergence of the home and host cultures as manifested by the appeal of UK degrees with the local population and (d) the penetration of technology. These four factors and the models used for exporting UK HE are mapped against market entry strategies. We conclude by exploring the key areas of emerging interest, the differences in the franchise model, the extent to which Greenfield sites differ and the lack of Brownfield activity within the current environment.

Influence of International Trade Agreements on International Business: A Conceptual Model

The article provides a conceptual model, developed from analyzing over fifty trade agreement related research studies published during the last decade, which allows international business scholars to explore the influence of trade agreements (custom unions, free trade agreements, preferential trade agreements, regional trade agreements) on foreign market entry strategies. This model is an attempt to develop IB theory to address the current research gap in this very narrow but important allied field. Empirical findings generated by interviewing dairy produce exporters in New Zealand reveal a remarkable connection between TAs and IB, with TAs found to influence the regulative environment of participating countries, which may in turn reduce the regulative distance between member nations. The contribution provides a basis for IB researchers to explore this connection in multiple industries/countries.