Market Entry Behavior Research Articles

Long-run growth of ambulatory surgery centers 1990-2015 and Medicare payment policy.

To examine long-run growth in the ambulatory surgery center (ASC) industry and potential factors influencing its trajectory. National data for all Medicare-certified ASCs (1990-2015) and outpatient discharge records from the state of Florida in 2007. We documented the number of ASCs in the United States over time and decomposed the trend into underlying ASC market entry and exit behavior. We then examined the plausibility of 2008 Medicare payment reforms to influence the trend changes. Data on ASC openings and closures are obtained from the Centers for Medicare and Medicaid Services Provider of Service files. Secondary data on ASC volume in Florida are obtained from the Florida Agency for Health Care Administration. The number of ASCs in the United States grew 5%-10% annually between 1990 and 2007 but by 1% or less beginning in 2008. This change coincided with substantive reductions in Medicare payments for key ASC services. The annual number of new ASCs was as much as 50% lower following the payment change. ASCs are an important competitor for outpatient services, but growth has slowed dramatically. Sharp changes in new ASC entry align with less generous Medicare fees.

Emerging market entry and institutional change – three Swedish manufacturing firms in China between 1980 and 2010

Firms enter emerging markets to capture untapped opportunity and pursue high growth potential. Yet emerging markets are also characterized by unstable institutions that may affect firms' market entry behavior. Although most existing studies have taken a rather short-term and static perspective to addressing foreign market entry, we specifically draw on the Uppsala internationalization process model and use a long-term approach to examine the China market entry of three Swedish firms in terms of their market knowledge and market commitment. We argue that the relation between institutional change in the host market and the market entry behavior of a particular firm evolves over time. The findings also show that the type of institutional change, as well as the accumulated market knowledge and commitments firms have made, can influence the relation between them.

Why Do Firms Enter a New Product Market? A Two‐Dimensional Framework for Market Entry Motivation and Behavior

What are the energetic forces that induce established firms to enter new product markets? While most previous research has explained the economic profits expected from a new product market as firms' distinctive motivation for market entry, some recent studies also emphasize interfirm competition and benchmarking activities as another important factor that motivates firms' new market entry. To explain the established firms' diverse new product market entry behaviors, this study presents a two‐dimensional scheme of entry motivation in terms of the degrees oftarget market profit focusandcompetitor focus. The first dimension captures the economic motivation of firms' new market entry that ranges from focusing on the direct expected profits from the target market to considering more strategic/indirect benefit incentives. The second dimension captures the degree of firms' external motivation for entry affected by competitors that ranges from independent entry decisions to fully competitor‐oriented entry decisions.Using multiple‐industry survey data, the current study empirically verifies that these two entry motivation dimensions explain a great portion of actual firms' new product market entry behaviors and that they are independent of each other. Subsequently, this study validates that firms' operational size and their environmental factors like perceived technological uncertainty and competitive intensity upon new market entry affect the degrees of the two dimensions of firms' new product market entry motivation. More specifically, large firms less emphasize target‐market profits than small firms, and when perceived technological uncertainty is high, potential market entrants become less target market profit focused but more competitor focused. Under a highly competitive new market condition, firms focus on both target‐market profits and competitors.Based on the analysis of new market entry motivation dimensions, the current study proposes a new typology of established firms' market entry behaviors. The suggested typology represents the four different types of new product market entrants and examines specific characteristics and entry strategies for each type of potential entrants. This entry‐motivation framework should provide a deeper understanding of the backgrounds of entry behaviors and assist firms in developing appropriate entry strategies and in advantageously responding to rival firms' actions with regard to entry.

Heterogenous Firms and Credit Frictions: A General Equilibrium Analysis of Market Entry Decisions

This thesis consists of three independent papers, ordered chronologically with respect to when they were initiated. Empirical research has established that there are large and persistent productivity differences among firms in narrowly defined industries (Bartelsman and Doms, 2000). Other studies, in particular Bernard and Jensen (1999), have shown the existence of a causal link running from ex-ante firm productivity to export decisions. Furthermore, exposure to trade has been found to enhance growth opportunities only for some firms, reallocating market shares and resources toward the more productive ones and contributing thus to aggregate productivity growth (Clerides, Lach and Tybout, 1998; Bernard and Jensen, 2004). These findings have led to the development of new theoretical models emphasizing the interaction between firm heterogeneity and fixed market entry costs in generating international trade and inducing aggregate productivity growth. The first and third chapters of this thesis extend the framework developed by Melitz (2003) to analyze the implications of firm heterogeneity for old and new issues in international trade. The first paper studies the effect of trade liberalization between countries that differ in their relative endowment of skilled workers when growth-promoting R&D activities are skill intensive with respect to goods production. In particular, the analysis focuses on the changes that falling trade costs induce on consumer welfare and on the number of firms active in the different markets. The third paper uses the heterogeneous firm framework to study the interaction between financial constraints and the market entry behavior of firms. It also analyzes whether the impact of trade liberalization on average firm productivity and on individual welfare is affected by the presence of credit frictions. The second chapter presents an empirical work that contributes to the recent but fast growing literature that studies how different institutions and their level of development affect countries comparative advantage. The analysis presented in this paper focuses on the role of legal and financial institution in driving the specialization in contract-intensive goods and on how the degree of institutional development interacts with the propensity of firms to vertical integrate with their suppliers.

Curvilinear relationship between cultural distance and equity participation: An empirical analysis of cross-border acquisitions

We examine the relationship between national cultural distance and equity participation using an analysis of a sample of more than 100,000 cross-border acquisitions from 1976 to 2008. We find that cultural distance has a curvilinear (U shaped) relationship with equity participation: Acquiring firms make large equity acquisitions at both low and high cultural distances and small equity acquisitions at moderate cultural distances. In addition, we find that industry relatedness of acquisitions positively moderates the relationship between cultural distance and equity participation: Acquiring firms take a higher equity stake for a given cultural distance if the acquisitions are in a related industry. Our findings offer important insights into firms' market entry behavior and provide guidelines for managers about entry strategies.

Institution-Driven Comparative Advantage, Complex Goods and Organizational Choice

This thesis consists of three independent papers, ordered chronologically with respect to when they were initiated. Empirical research has established that there are large and persistent productivity differences among firms in narrowly defined industries (Bartelsman and Doms, 2000). Other studies, in particular Bernard and Jensen (1999), have shown the existence of a causal link running from ex-ante firm productivity to export decisions. Furthermore, exposure to trade has been found to enhance growth opportunities only for some firms, reallocating market shares and resources toward the more productive ones and contributing thus to aggregate productivity growth (Clerides, Lach and Tybout, 1998; Bernard and Jensen, 2004). These findings have led to the development of new theoretical models emphasizing the interaction between firm heterogeneity and fixed market entry costs in generating international trade and inducing aggregate productivity growth. The first and third chapters of this thesis extend the framework developed by Melitz (2003) to analyze the implications of firm heterogeneity for old and new issues in international trade. The first paper studies the effect of trade liberalization between countries that differ in their relative endowment of skilled workers when growth-promoting R&D activities are skill intensive with respect to goods production. In particular, the analysis focuses on the changes that falling trade costs induce on consumer welfare and on the number of firms active in the different markets. The third paper uses the heterogeneous firm framework to study the interaction between financial constraints and the market entry behavior of firms. It also analyzes whether the impact of trade liberalization on average firm productivity and on individual welfare is affected by the presence of credit frictions. The second chapter presents an empirical work that contributes to the recent but fast growing literature that studies how different institutions and their level of development affect countries comparative advantage. The analysis presented in this paper focuses on the role of legal and financial institution in driving the specialization in contract-intensive goods and on how the degree of institutional development interacts with the propensity of firms to vertical integrate with their suppliers.

The role of reference groups in international investment decisions by firms from emerging economies

Abstract Investments in China by firms from emerging economies were studied to determine how various reference groups affect their foreign market entry behavior. Imitation was shown to be an important factor, but the mechanism seems to vary depending on the institutional environments in the host and the home market. Firms from emerging economies seem to rely on copying the entry decisions of peers from their home country, especially in locations where the risk of government meddling is greatest. The example of firms from developed economies was found to be less influential.

Distance factors and target market selection: the moderating effect of market potential

PurposeThe paper is in the domain of marketing strategies of multinational firms. Specifically, it aims to focus on target market selection of multinational firms.Design/methodology/approachUsing the cultural, administrative, geographic, and economic distance framework proposed by Ghemawat, the authors offer empirical support for the role of different distance factors on firms' foreign market acquisition behavior. In addition, they examine the moderating role of market potential of a target country on the relationship between distance factors and target market selection. The context of the paper is multinational firms from developing countries. The sample consists of cross‐border acquisitions (CBAs) completed by firms from 18 emerging countries between 1990 and 2006. The authors use ordinary least squares and moderated regression analysis to determine the main effect of distance factors and the interaction effect of market potential.FindingsThe authors find that while cultural and geographic distance factors have a significant, negative impact on the number of CBAs, administrative and economic distances have a significant, positive effect. They also find that the market potential of target countries significantly moderates the relation between the distance factors and the number of CBAs.Research limitations/implicationsThe results show that the market potential of countries compensates and sometimes even overrides the role of distance. Future studies should expand this research to include industry‐specific factors.Originality/valueThe paper provides an empirical illustration of Ghemawat's distance framework. In addition, the paper highlights several boundary conditions of the impact of distance factors on firms' internationalization processes. Finally, the study enhances knowledge on foreign market entry behavior of firms from developing countries.

Market Entry and Consumer Behavior: An Investigation of a Wal-Mart Supercenter

This paper provides an empirical study of entry by a Wal-Mart supercenter into a local market. Using a unique frequent-shopper database that records transactions for over 10,000 customers, we study the impact of Wal-Mart’s entry on consumer purchase behavior. We develop a joint model of interpurchase time and basket size to study the impact of competitor entry on two key household decisions: store visits and in-store expenditures. The model also allows for consumer heterogeneity due to observed and unobserved factors. Results show that the incumbent supermarket lost 17% volume—amounting to a quarter million dollars in monthly revenue—following Wal-Mart’s entry. Decomposing the lost sales into components attributed to store visits and in-store expenditures, we find that the majority of these losses were due to fewer store visits with a much smaller impact attributed to basket size. We also find that Wal-Mart lures some of the incumbent’s best customers, and that retention of a small number of households can significantly reduce losses at the focal store. Finally, certain observed household characteristics such as distance to store, shopping behavior, and product purchase behavior are found to be useful in profiling the defectors to Wal-Mart. Implications and strategies for supermarket managers to compete with Wal-Mart are discussed.

A game-theoretic analysis of competition in a deregulated bus market

Abstract A game theoretical approach is applied to model the strategic interactions between the operators in a deregulated bus market, taking into consideration price competition as well as competition over service frequency. The conditions for market entry and predatory behavior are determined. The impact of deregulation of the bus market is then assessed in terms of profits and social cost to the society. A hypothetical case is constructed to test the model. Numerical results indicate that deterrence is a dominant strategy in most market situations, which leads to lower fare and higher service frequency, and consequently brings benefits to the society.

Multiunit organization and multimarket strategy: the dynamics of market entry and commitment

Recent work on multiunit–multimarket (MUMM) firms has shown that the market entry behavior of these firms is influenced by learning processes and by opportunities for reduced competition with firms that have a high degree of multimarket contact. There is still uncertainty as to the prominence of these motives in guiding entry behavior, and the important implications for market competition and antitrust enforcement calls for further research on this theme. We review work on the way MUMM firms determine market entry and product innovation, and present some results on the patenting behavior of large Japanese shipbuilding firms. The findings suggest that firms are more likely to take out patents if their multimarket overlap with other firms in the market is high.

COMPETITIVE REACTION, IMITATION AND BUNCHING IN FOREIGN ENTRY DECISIONS.

The study describes how competitive and institutional influences interact to influence the timing of establishment of foreign subsidiaries. In doing so, it examines how a firm's decision about the timing of its FDI, relative to its rivals' entry decisions, is influenced by competitors' market entry behavior, its organizational resources, and host country conditions. Our focal construct for this research is bunching behavior, which we define as a market entry that occurs immediately after a rival has entered a host country. Our analysis of the timing of 590 foreign direct investment decisions of the five major Japanese automotive assemblers and the five major Japanese electronics manufacturers shows that bunching behavior in FDI is most prevalent when a large number of competitors has entered a host country in a short time period. The number of competitive entrants leads at first to an increase in the likelihood of bunching behavior, but then to a decrease. Meanwhile, the time from the initial foreign entr...

Venturing into Foreign Markets: The Case of the Small Service Firm

The study contrasts foreign market entry behavior of small and large service firms. The sample consisted of 141 firms of which 54 were small firms and 87 were larger firms. The study provides empirical evidence that the behavior of small firms differs from that of larger firms mainly in service industries characterized by higher capital intensity. It also suggests that at lower levels of capital intensity, small firm behavior may resemble that of larger firms. More specifically, In industries characterized by lower levels of capital Intensity, small service firms are as likely as their larger counterparts to enter culturally distant markets and to choose foreign direct Investment (FDI) modes of entry. But, at higher levels of capital Intensity, small service forms are less likely than larger ones to enter culturally distant markets, and to choose FDI modes of entry.

The Experience Factor in Foreign Market Entry Behavior of Service Firms

The paper examines the effect of international experience on service firms' selection of foreign markets and entry modes. The investigation utilizes survey date from 151 United States-based service firms. Results on market selection suggest that, as their experience increases and becomes geographically more diversified, service firms tend to choose markets that are culturally less similar to their home country. On entry mode choice, the paper departs from traditional linear conceptualizations and hypothesizes a U-shaped relationship between experience and propensity for integrated entry modes. Results generally support the hypothesis. The paper explains these findings and describes how service firms resemble and differ from manufacturing firms in their foreign market entry behavior.