Market Entry Mode Research Articles

Institutional knowledge

PurposeRarely have studies on the acquisition of knowledge in internationalisation focused on institutional knowledge. The purpose of this paper is, therefore, to investigate the acquisition of this knowledge, and its assimilation and exploitation processes in internationalisation.Design/methodology/approachThe paper utilises ten longitudinal revelatory case studies built from multiple semi-structured interviews conducted with three different firm types of small- and medium-sized enterprise (SMEs) in the pharmaceutical industry and secondary documents to which the researchers obtained proprietary access.FindingsThe study enhances the conceptual understanding of the institutional learning process in internationalisation by, for the first time, developing a framework to characterise this process. The study explores and identifies multiple types of institutional knowledge required, the sequencing of their acquisition, sources and learning methods utilised. It also discusses transferability of this learning across foreign markets and firms’ absorptive capacity for that knowledge. Regulatory-specific product knowledge, found to be the most important type required, appeared to affect significantly both market selection and mode of entry, and when acquired insufficiently, prevented internationalisation.Research limitations/implicationsWhile the sample size is relatively small, and sector-specific, the findings were consistent across all the SME firms and firm types. They may also be generalisable to other sectors, firm sizes such as MNEs and types, particularly those which are knowledge-based or highly regulated, given that similar institutional knowledge and processes of acquisition are necessary for firms of all sizes in internationalisation.Practical implicationsInternational marketing managers will gain valuable insights, based on a framework proven to propel firms to successful internationalisation, upon how to plan, organise, manage and match their institutional knowledge-seeking and learning activities with their firms’ internal capabilities, staffing and other resources in an effective and timely manner.Originality/valueThis study contributes to the conceptual understanding of the institutional knowledge learning process in the internationalisation.

The dilemma down under

Synopsis The dilemma down under is a two-party distributive negotiation with integrative potential. A large airline, Transpacific Airlines (TPA), created an internal tour operator brand named Transpacific Vacations as a separate profit center. After licensing its brand to Global Tour Services and establishing operations in the UK, negotiations to take over the internal tour operations of TPA-Australia are about to begin. The case involves the negotiation between Mr Edwards, representative of GTS, and Ms Bentley, representative of TPA-Australia. Research methodology The dilemma down under is based on a real negotiation with altered names and facts. All names of companies have been changed. All names of protagonists have been changed. The year of the case has also been altered. The case was created after an extensive interview with an individual engaged in the actual negotiation. Relevant courses and levels Students in courses related to negotiation and/or decision making. The case also works in international management/strategy courses where students are asked to apply market entry mode decisions along with the accompanying negotiations. The case is most appropriate for undergraduate courses, but can be used for graduate courses. The case can easily be used with common negotiation textbooks, such as Negotiation, 7th edition by Lewicki et al. (2014). Theoretical bases The exercise will be able to reinforce basic distributive negotiation concepts, including identifying issues, positions, interests, alternatives to a negotiated agreement, reservation (resistance) points, target (aspiration) points and opening bids, while at the same time challenge students to look for integrative potential among and across the issues. The case also provides an opportunity to explore the connection between negotiation and international market entry choice.

The knowledge of entry mode decision for small and medium enterprises

A suitable organizational structure is necessary for companies to effectively manage foreign activities. Firms can choose from among several modes of foreign market entry, including exporting, contractual agreements, joint venturing, acquiring an existing company, and establishing a wholly owned greenfield investment from scratch. However, the majority of literature on foreign market entry mode choices has focused on large multinational enterprises. Small and medium enterprises (SMEs) with limited financial and personnel resources are likely to base their foreign market entry mode choice on the resources available. Building on a literature review, this study analyzes the determinants of SMEs’ foreign market entry mode. The findings suggest that innovation, product characteristics, advertising intensity, export intensity, and industry have positive effects on the high-level resource commitment choice in foreign markets.

Build-operate-transfer projects as a hybrid mode of market entry: The case of Yavuz Sultan Selim Bridge in Istanbul

BOT (Build- Operate-Transfer) projects are well known to sponsors and contractors of mega infrastructure projects around the world. The massive scale and long-term time frame of these construction projects require non-traditional business relationships among the sponsors, prime contractors, sub-contractors, and a host of other vendors. The BOT model is typically sought by local and national governments that cannot independently finance complex mega projects.A BOT deal refers to a large-scale project where the sponsor (typically a governmental agency) contracts with a prime contractor, that assumes the responsibility for completing the construction and operating it for a predetermined period, before turning ownership back over to the sponsor. During this predetermined period, the contractor can recoup its investment through its operations and/or through a guaranteed rate of return from the sponsor.This paper reports on such a project – the case of Yavuz Sultan Selim Bridge, the third bridge linking Asia and Europe in Istanbul, a sprawling metropolis of roughly 15 million people. The bid also called for the construction of the connecting highways. It was initiated in 2012 and was completed in 2016. Named after a celebrated Ottoman Sultan, the bridge is widely acknowledged to address a much-needed infrastructure project for Istanbul.We detail BOT projects – rarely discussed in the IB literature – as a hybrid mode of international market entry, with unique features, benefits, and risks. The insights offered in this manuscript were gathered from a series of unstructured interviews with senior executives of the prime contractors.

Market Entry Strategies and Performance of Chinese Firms in Germany: The Moderating Effect of Home Government Support

This study uses data at the firm level to examine the relationship between the market entry strategies of 556 Chinese MNEs and their performance in Germany. Based on the revisited Uppsala internationalization process model, we develop six hypotheses on the impact of different market entry modes on performance, and on the moderating effect of home government support on this relationship. The findings show significant effects of location choice, activity mode and establishment mode, as well as duration of market presence on performance. Furthermore, strong interaction effects of home government support on these relationships reveal that the advantages of different market entry strategies are amplified by home government support. We conclude with theoretical and managerial implications, as well as a reflection of limitations and directions for future research. We conclude with theoretical and managerial implications as well as a reflection of limitations and directions of future research. The study contributes to international management research by integrating performance effects and the facilitating role of home government support into the internationalization process model.

Internationalisation behaviour of small and medium-sized enterprises from emerging markets: implications for sustainability

This study examines the internationalisation behaviour of small and medium-sized enterprises from Paraguay exploring their internationalisation activities using the Uppsala model as the theoretical framework. The research methodology is a comparative multiple-case study research design. The sample consists of 28 typical Paraguayan firms from different industries. The findings of this study show how and why the firms of the case study select new foreign markets as well as market entry and market growth modes, then compares the results with the set theoretical framework and offers explanations for the ones that differ. The study provides a guideline for internationalisation to international managers shows the implications of internationalisation on sustainability and offers insights to the literature on the Uppsala model.

Internationalization Strategies, Entry Modes and Cultural Dimensions of Chinese Way of Doing Business in Europe

Abstract This paper presents the process of Chinese outward direct investment in Europe. A remarkable feature of the Chinese cross-border business expansion is the essential role of government in the internationalization of Chinese MNCs which was supported by official policy instruments, including the famous “go global” strategy that encouraged thousands of Chinese firms to invest abroad. It argues that the driving motive of Chinese firms to go abroad aimed at acquiring new skills, advanced technology, brands and supply chains that would enhance their competitive advantage in international as well as domestic markets. To this end, the Chinese investment in Europe has generally targeted few but major economies, namely Germany, UK and France. Merger and acquisitions has been the leading market entry mode resulting in huge takeovers characterizing Chinese investment in Europe. It is also apparent that the internationalization process of Chinese business companies did not follow the traditional Uppsala model as psychic distance and experiential knowledge didn’t play a role. Nevertheless, it is evident that the path-dependency of Chinese expatriates in European countries has made it difficult to learn and adapt to the local work environment that exhibits diverging and contrasting cultural values. This huge cross-cultural gap, often portrayed in the literature as “culture conflict”, constitutes the biggest challenge that Chinese companies face, in their international operations in general, and could undermine their effectiveness in doing business in European countries in particular.

The Effect of Types of Market Entry Modes on Organizational Design in Hotels in Tehran Province

Nowadays, due to competition among organizations and companies in order earn more benefits; it has become particularly significant to dominate the existing resources. One of the strategic decisions in the market is market entry mode. Choosing a suitable competitive strategy depends on the company's decision to enter the market before or after its rivals. The present study was carried out in order to examine the relationship among the variables of market entry modes and organizational design in hospitability industry. Regarding its objectives, the present research was an applied study, and in terms of collecting the required data, it was descriptive. The statistical population included all of the 127 hotels located in Tehran Province. Krejcie and Morgan Decision Making Model were utilized in order to determine the sample size as 96 individuals. The results of the present study indicated that all market entry modes (ownership, contract, and franchising) had a positive significant effect on organizational design. In fact, survival and growth of the company depends on successful entry of hotel to the market.

Chinese hotel firm internationalisation: Jin Jiang’s joint venture acquisition

PurposeThe purpose of this study was to examine the characteristics of mainland Chinese hotel firm internationalisation relative to traditional Western internationalisation theory through an analysis of the Shanghai Jin Jiang International Hotels Group’s joint venture with the Thayer Lodging Group to acquire Interstate Hotels & Resorts.Design/methodology/approachThe case study method was used to examine the three firms involved in the joint venture acquisition. The technique of elite interviews was used to collect primary data. Semi-structured personal interviews were conducted with senior corporate executives who were engaged as principals with the conception, execution and administration of the joint venture. Content analysis was performed with the interview data, seeking themes and patterns consistent with the study purpose.FindingsThe findings demonstrated specific characteristics that distinguish the internationalisation that Jin Jiang has pursued. The five distinctive characteristics were as follows: a “leap” market entry mode, a pattern of “a small fish eats a big fish”, a preference for purchasing hotels in the West, capital sourcing from Chinese banks and strategic rather than operational control of the acquired firm.Research limitations/implicationsThe findings indicate both similarities and differences between the China context of hotel firm internationalisation and that of Western firms. Theoretical implications are examined through an analysis of Dunning’s OLI (ownership, location, internalisation) framework. Generalisability of empirical findings may be limited by the China context and the unique combination of three firms.Practical implicationsThe findings advance our understanding of the relationship between Chinese and Western practices, particularly in the approaches that firms take in internationalisation.Originality/valueThe story reported in this paper is about the first firm internationalisation endeavour in the mainland Chinese hotel industry. This is a landmark event for the international hospitality industry that will have historical significance, and represents the leading edge of mainland Chinese hotel firm cross-border expansion. This study contributes an early analysis of how the Chinese hotel sector may approach internationalisation.

The international business incubator as a foreign market entry mode

Foreign market entry for the firm is often a more complex process than suggested by theoretical models, which can often benefit from re-contextualising and extension in order to retain their explanatory power. In this article, case study research shows how an international business incubator in China, operated by a British export promotion organisation is able to facilitate the foreign market entry of firms. The findings provide an opportunity to highlight a hitherto under-researched method of foreign market entry, explore the synergies between the foreign market entry and business incubation literature and also to extend theory by integrating the role of the business incubator as a method of foreign market entry into existing models and frameworks.

Drivers of emerging market cross border mergers and acquisitions: evidence from the Indian IT industry

The present study examines the drivers of cross border mergers and acquisitions (CBMA) from the Indian information technology sector for the period 2000–2011. It uses a multi-theoretic analysis rooted in the resource-based view and network theory to examine 354 deals from 74 firms. Empirical estimation using a Poisson panel regression model found that a firm’s financial resources, capability, prior international experience and parental network have a significant positive influence on CBMA activity. A unique finding of the paper is the strong presence of the Born Global engaging in CBMA as their mode of foreign market entry. This paper thus adds to the literature on internationalisation of emerging market multinational enterprises and specifically about technology-based Indian firms.

Foreign Market Entry Mode Research: A Review and Research Agenda

ABSTRACTThis article gives a retrospective look at the main determinants of foreign market entry modes and examines the variables and conditions used in empirical studies in this stream of research. We found that there is an “analytical context hazard” in past studies. The findings suggest: first, future research should focus on developing and extending theories with reference to strategy dimension and market/industry environment; second, the interrelationship between the main entry mode determinants should be figured out; third, attention has to be paid to the entry modes of firms from non-developed economies in research.

Perceptions of justice and organisational commitment in international mergers and acquisitions

PurposeAlthough there is substantial and accumulating evidence on the link between market entry modes and performance, evidence regarding their impact on employee’s perceptions and thereby their commitment is scarce. This is more so in mergers and acquisitions (M&As) where employee’s commitment has a significant impact on post-entry performance. The purpose of this paper is to examine the association between perceptions of justice and organisational commitment in cross-border M&As.Design/methodology/approachThe authors draw on market entry and M&As’ literature and studies on the link between perception of justice and commitment to develop the hypotheses. The authors test the hypotheses with survey data from a merger of two culturally different partners – British and Japanese. A total of 128 responses were received, out of a sample of 151 non-managerial employees within the firm.FindingsThe results show a strong association between employees’ perceptions of justice during the merger and commitment to the new organisation. Surprisingly, the results do not support the widely reported interaction effects between different organisational justices and employees’ commitment.Research limitations/implicationsObtaining data from a single M&A is a potential limitation of this study.Practical implicationsThe study underscores the importance of post-market entry. The results suggest that particular attention needs to be paid to the way employees of the acquired firm are treated during their interactions with their counterparts.Originality/valueThe link between market entry and performance is well documented. However, little progress has been made in understanding the antecedents/factors that influence commitment in foreign market entry and in particular cross-border M&As. This study helps close this gap.

Institutional and resource configurations associated with different SME foreign market entry modes

This study explores the different configurations of internal and externally sourced resources utilized by SMEs, as well as host and home country institutional influences (hereafter abbreviated to ‘internal and external resources’, and ‘host and home country institutions’, respectively) across different foreign market entry modes in a B2B setting. Specifically, this research illustrates the different relative representations of internal vs external resources and host vs home institutions associated with different entry modes, including non-investment/contractual and early-stage investment modes. The different configurations resulting from our study are tentatively explained in the context of prevailing theoretical perspectives, namely, the resource-based view, institutional theory, and SME internationalization. Our research extends the existing literature on SME internationalization by identifying that different resource-institutional configurations are associated with different foreign market entry modes.

National Innovation Systems & Investment Mode Choices - Evidence from Indian Firms

In this paper, we develop a contextual model of host country determinants to explain the impact of National Innovation Systems (NIS) variables on FDI-based entry mode choices of emerging market firms (EMFs). Particularly, we consider the effects of three NIS variables at the host country level - the volume of foreign capital inflow, the technological capability of the country and the availability of human talent – in explaining an EMF’s choice of FDI-based market entry modes. We test our hypotheses on a sample of 5865 Indian FDI-based entries between 2007 and 2014. We find that Indian firms emphasize WOS entry modes when entering host countries with high levels of inward capital flows and high market potential. The R&D investments made by the host country and the availability of human (R&D) talent in the host country also influences the choice of WOS entry modes over JVs. We discuss the implications of our findings and describe avenues for future research towards the end of the paper.

Business Relationship Strategy for Foreign-Invested Enterprises in China: The Moderating Role of Competitive Structure and Entry Type

Although the role of Guanxi in China as a form of relationship marketing (RM) has received increasing attention in recent years, few empirical studies have indicated that Guanxi has more impact on performance than RM in the Chinese market. Foreign-invested enterprises (FIEs) may have some difficulty in fully practicing RM in China without considering the influence of Guanxi. In this regard, this study is guided by the following research question: “In China, which factors influence the differences in the impacts created by RM and Guanxi?” In this study, we first provide an overview of previous research on Guanxi, focusing on the fundamental differences between Guanxi and RM. We then provide an empirical analysis of the differential effects of Guanxi and RM on firm performance by investigating 297 FIEs in China. The results suggest that Guanxi and RM are not trade-off options in today’s Chinese market. Guanxi and RM have synergetic effects on firm performance, that is, they have differential effects based on the mode of market entry and the competitive structure. Guanxi is more likely to influence firm performance for collaboration-based entry firms rather than entry without collaboration firms, whereas RM is more likely to influence firm performance when FIEs’ main competitors are foreign firms than when they are local firms.

“Monica and Friends”: the challenge to internationalize

Subject area International business or International marketing. Study level/applicability The case is recommended for undergraduate and graduate courses in the fields of international business and international marketing. The aim is to show students the problems that a family business in the animation industry faces while growing and internationalizing. Specifically, the case discusses the entry mode selection and market selection challenges faced by an emerging market company in the comic book and animation industry to operate overseas and compete with entertainment giants such as Disney and DC Comics. The case enables the instructor to discuss international market selection theories and evaluate entry modes. For graduate students, the international market selection can be further developed by using more robust concepts such as psychic and cultural distance. Case overview This case examines the trajectory of a pioneering company in the comic book and animation industries, and in the licensing of trademarks in Brazil. Mauricio de Sousa Productions was founded in 1959 and is considered to be one of the most successful cultural producers in the country. According to a leading Brazilian public opinion research agency, 97 per cent of Brazilian children and 96 per cent of their parents are familiar with the Monica and Friends characters. As one of the main players in the publishing market, with 86 per cent of market share, Mauricio de Sousa Productions has a product portfolio that goes beyond Monica and Friends comic strips: the company’s show on the Cartoon Network ranks third in audience viewing in the country and the company has produced animated movies, books, shows and games. However, despite its experience in publishing comic books in several countries, Mauricio de Sousa Productions (MSP)’s worldwide operations have not been as profitable and sustainable as expected. Aiming at expanding its global presence, MSP’s top management decided in 2014 to review the company’s internationalization strategy and operations to enhance the firm’s performance. Expected learning outcomes The case highlights the key factors facing firms when expanding from an emerging markets. Students are expected to discuss and evaluate options, thus developing their knowledge and decision processes related to family-owned business challenges and opportunities, international market selection theories and international market entry mode. Developing strategies to face challenges as those presented by competitors such as Disney should bring opportunities to students to think outside models and weigh risks. Finally, the case gives students opportunity to base their decision processes and evaluations on logistics problems as well as psychic and cultural distances. It also compels the students to appreciate the various challenges involved in exploiting international market with animation content and intellectual properties as a service. Supplementary materials Company presentation to use in the discussion introduction can be found in: www.monicaandfriends.com/content/video.php Subject code CSS 5: International business.

International market entry mode – a systematic literature review

This wholly conceptual paper examines the breadth of literature on Market Entry Modes, a fundamentally important and strategic issue for managers in growing organisations of all sizes in all sectors. Key concepts and terms are defined and then a set of key Internationalisation Theories are systematically and critically reviewed, these being: the Transaction Cost Approach, Institutional Theory, the Eclectic Paradigm, the Uppsala Internationalisation Model and the Resource Based View. The final portion of the paper is integrative and highlights three key literature gaps as signposts for future work.

Innovation for elderly with dementia – localization technology transfer

PurposeThe purpose of this paper is to contribute to the discussion of transferring modern technology from industries such as logistics to the life of elderly in a way that they can understand, accept and make use of it.Design/methodology/approachThis is a conceptual discussion based on findings from a series of projects in healthcare, IT development and consultancy. The key methodologies considered include technology assessment, scenario development, listening to people with dementia and their caregivers and non-participant observation, as well as reviews of good practice, policy and literature.FindingsThe transfer considerations showed unreasonable price differences of similar hardware used for localization between the logistics and the elderly market. Bluetooth low energy (BLE) was identified as a promising localization technique. A gap in the marketing of technology for the elderly was identified, virtually fencing the elderly market.Practical implicationsA lack of transparency fosters market skimming, resulting in deadweight loss for society and technology being restrained from less-solvent consumers. Corrective actions like entrepreneurship facilitation and consumer education should be considered to overcome this market failure. To persevere in a consequently more competitive market, changes in marketing should be considered.Originality/valueThe work assesses the presence of the innovativeness–needs paradox of Everett Rogers in the field of innovation for the elderly on the basis of an example and identifies the resulting market failure. It suggests a market-entry mode and briefly lays out the marketing modes for market penetration.

Rigidity in SME export commencement decisions

In an increasingly globalised world, firms generally have become more internationalised utilising a range of different modes of operation. In the case of small-medium sized enterprises (SMEs), exporting is the favoured mode of international market entry, at least in the early stages of internationalisation, and many governments have supported SME exports through export promotion policies because of the importance of SMEs in employment creation. However, in spite of this policy focus, in most countries, the proportional involvement of SMEs in exporting remains low, which raises an important question as to what factors are inhibiting firms that are successful domestically from exporting. In addressing this question, much scholarly research has focused on the broad concept of ‘export barriers’. These barriers, for example, tariffs, quotas and administrative obstacles, are seen as a primary source of export reluctance. This paper takes a different approach to previous studies and proposes that a firm's resistance to exporting can be better understood through an analysis of the behavioural decision process of firms in line with the Uppsala internationalisation model. We propose ‘lateral rigidity’, first introduced in the literature in the 1970s, as an important concept in export commencement. By applying factor analysis to a survey of Australian SMEs, we provide a measurement model for lateral rigidity, revealing its important factors and thus strengthening understanding of firms' export commencement decisions. We conclude by drawing implications for internationalisation theory, practice and public policy and suggesting ways to extend this work through future research.