scholarly journals Analysis of the Entry Mode Choice from Both Transaction Costs and Resource Based Theory

2019 ◽  
Vol 6 (1) ◽  
pp. 7-20
Author(s):  
Luis Araya - Castillo ◽  
Nicolás Barrientos Oradini ◽  
Víctor Manuel Yánez - Jara ◽  
Ángel Acevedo Duque
Keyword(s):  
Transaction Costs ◽  
International Business ◽  
International Entrepreneurship ◽  
Mode Choice ◽  
Entry Mode ◽  
International Strategy ◽  
Entry Modes ◽  
Entry Mode Choice ◽  
Strategy Change ◽  
Resource Based Theory

The liberalization of markets opened doors for expansion and increased the level of competition in numerous markets. This explains that firms are increasinglydiversifying across national borders. This phenomenon is related with the international entrepreneurship, since internationalization is an example of a strategy change that can be defined as an entrepreneurial act. In this context, the scholars in international business have given answers to basically three questions: Why, where, and how do companies internationalize. Since the present research deals with entry modes choice, the focus is clearly on “how.” The choice of entry mode constitutes one of the most critical decisions for international strategy success. This research analyzes the entry mode choice from the perspective of both transaction costs and resource based theory, because these perspectives use different assumptions and consider different assumptions. Given this, I propose 4 propositions related with the study of entry mode choice from the transaction costs and resource based theory.

Foreign Business Environments and Entry Mode Choice

2012 ◽  
pp. 165-181
Author(s):  
Maud Oortwijn
Keyword(s):  
Host Country ◽  
Joint Venture ◽  
Mode Choice ◽  
External Environment ◽  
Entry Mode ◽  
Entry Modes ◽  
Host Countries ◽  
Entry Mode Choice ◽  
Business Studies ◽  
Business Environments

The entry mode choice is at the core of International Business studies (Oortwijn, 2011a). IB research concerns the organization of firm activities across country borders and thus across different cultures and business contexts. These host country differences impact the firm’s way of working internally within the organization and in interaction with the external environment in the host country. Companies can consider a broad range of entry modes to organize across country borders, including partnership, trade, joint venture (JV), and wholly owned enterprise (WOE). The entry mode defines what activities are internalized within the firm and how the firm interacts with the external environment in different host countries.

scholarly journals Determinants of EMNEs’ Entry Mode Decision with Environmental Volatility Issues: A Review and Research Agenda

2021 ◽  
Vol 14 (10) ◽  
pp. 500
Author(s):  
Yameng Li ◽  
Ruosu Gao ◽  
Jingyi Wang
Keyword(s):  
Environmental Factors ◽  
Multinational Enterprises ◽  
Joint Venture ◽  
Emerging Market ◽  
Mode Choice ◽  
Entry Mode ◽  
Vital Role ◽  
Entry Modes ◽  
Entry Mode Choice ◽  
Country Level

Emerging market multinational enterprises (EMNEs) play a vital role in global economic development and usually adopt aggressive internationalization strategies. However, the volatile global environment has caused EMNEs to face various risks in their overseas expansion. To maximize the competitive advantages and achieve successful expansion, EMNEs should choose the most suitable foreign entry mode. Therefore, EMNEs need to understand what environmental factors affect their decision-making and how they influence the choice of entry modes, especially in a volatile environment. This review examines 44 selected journal articles from 1996 to June 2021 on the environmental volatility determinants of EMNEs’ entry mode choice. The entry mode choice we examined is mainly wholly-owned subsidiary versus international joint venture. We categorized the environmental volatility determinants investigated in the literature we reviewed into country-level factors (such as cross-national distance) and industry-level factors (such as industry condition). The main contributions are: (1) the review reveals three research gaps in extant studies, which are lack of research on external environmental factors, lack of research on multinationals from less concerning emerging economies, and lack of research on small-to-medium (SMEs) enterprises. (2) Practically, the study highlights the importance of understanding external environmental factors for EMNEs to make the most suitable entry mode decisions.

Service Firms’ International Entry-Mode Choice: A Modified Transaction-Cost Analysis Approach

1993 ◽  
Vol 57 (3) ◽  
pp. 19-38 ◽  
Author(s):  
M. Krishna Erramilli ◽  
C. P. Rao
Keyword(s):  
Cost Analysis ◽  
Transaction Cost ◽  
Mode Choice ◽  
Entry Mode ◽  
Capital Intensity ◽  
Service Firms ◽  
Entry Modes ◽  
Transaction Cost Analysis ◽  
Entry Mode Choice ◽  
Production And Consumption

Some peculiar characteristics of service firms, such as low capital intensity and the inseparability of production and consumption, have necessitated the modification of the traditional transaction-cost framework used to study entry-mode choice. By relaxing some unduly restrictive assumptions of the conventional transaction-cost analysis (TCA) model, the paper argues that firms prefer to start with full-control modes. It postulates that substantial variation in entry-mode choice occurs when firms that are characterized by low asset specificity relinquish control in response to the rising costs of integration or the diminishing ability to integrate. Several hypotheses on the propensity of service firms to employ shared-control entry modes are developed and tested. The results not only provide insights into entry-mode choice by service firms but also indicate how the transaction-cost framework can be broadened to develop a more comprehensive model for understanding entry-mode choice.

Interorganizational network on top management team – entry mode choice relationship

2018 ◽  
Vol 11 (4) ◽  
pp. 301-322
Author(s):  
Subhasree Mukherjee ◽  
Deepak Dhayanithy
Keyword(s):  
Mode Choice ◽  
Top Management Team ◽  
Entry Mode ◽  
Moderating Effect ◽  
Management Team ◽  
Interorganizational Network ◽  
Entry Modes ◽  
Content Type ◽  
Entry Mode Choice ◽  
Full Control

Purpose By applying upper echelons perspective to the choice of full or shared control entry modes, this study aims to explore the moderating effect of interorganizational network on the top management team (TMT) characteristics and entry mode choice relationship. Existing studies on TMT’s demographic characters’ influence on entry mode choice remains inconclusive. The implicit assumption in extant literature is that firms share similar network structural advantages. This study integrates the largely ignored, network structural concept with entry mode to show how firm-level decisions are the outcome of interaction between internal and external environment. Design/methodology/approach The interorganizational network is modeled using board interlock data. The moderating effect of network is modeled on network size, centrality of the firms and density of ties, considering tenure and international experience of the upper echelons. The hypotheses are tested based on a sample of 83 publicly listed Indian firms from 2012 to 2015. Findings The findings indicate that despite a high international experienced TMT’s preference of full control entry mode, the high central position of the firm can influence the decision against full control entry modes. However, the choice of full control entry mode is also enhanced by the density of firm’s network. Similar evidence is also observed with tenure variable as well where the moderating variables showed a trend toward influencing the entry mode choices. Originality/value Thus, this study attempted to reconcile the inconsistencies prevalent in the relationship between TMT variables and choice of entry mode by introducing the contextual factor of interorganizational networks.

scholarly journals The effect of institutions and failure-based learning on entry mode choice

2021 ◽  
Author(s):  
◽  
Naghmeh Kargozar
Keyword(s):  
Host Country ◽  
Joint Venture ◽  
Mode Choice ◽  
Entry Mode ◽  
Organisational Learning ◽  
Influential Factor ◽  
Foreign Firms ◽  
Entry Modes ◽  
Institutional Perspective ◽  
Entry Mode Choice

<p>This study investigates the role of learning from failures and how learning from failure of others shapes the entry mode choice of subsequent entrants – a choice between joint venture (JV) and wholly owned subsidiary (WOS). A review of the entry modes and institutional perspective literature has revealed that research to date has focused on the effect of successes rather than failures. While it recognises the effect of other firms’ entry mode on the entry mode decisions of subsequent entrants, it has overlooked the influence of failures’ on entry mode. It is important to investigate the effect of failure of other firms since it has been recognised by organisational learning scholars as a valuable source of information for firms to improve their performance, decrease their uncertainty and consequently influences their actions.  Therefore, the present research applies institutional and organisational learning perspectives as the underpinning theories to examine how the failure of others determines the entry mode choice of a firm. Further investigation was carried out on how a firm’s entry mode decision in response to regulative and normative institutions might be asymmetric. Additionally, firms’ responses to institutional dimensions were analysed further by investigating how they would change with experience in the host country and in other foreign countries.  This study applied a quantitative approach to answer these questions in the context of China. The data for this study consists of 1021 observations invested by 622 foreign firms from 2003 to 2012. Through a logistic regression analysis, this study found that the failure of prior entrants with JV structure increases a new entrant’s tendency to choose JV over WOS. Moreover, regulative distance negatively influences the choice of JV whereas the effect of normative distance was found to be positive. Regarding the effect of experience, host country experience was found to be an influential factor that mitigates the effect of regulative and normative distance on the entry mode choice.  The findings of the present research contribute to both institutional and entry mode literature by demonstrating that firms make their entry mode decisions based on information inferred from prior entrants’ failures. This research also contributes to organisational learning literature by showing that responses to failures are not merely avoidance-based, but rather based on the firm’s evaluation of the cause of failure.</p>

Augmenting versus exploiting entry modes in soft services

2014 ◽  
Vol 31 (6) ◽  
pp. 621-636 ◽  
Author(s):  
Jose Pla-Barber ◽  
Cristina Villar ◽  
Fidel León-Darder
Keyword(s):  
Cultural Distance ◽  
Mode Choice ◽  
Entry Mode ◽  
Foreign Market ◽  
Foreign Market Entry ◽  
Entry Modes ◽  
Content Type ◽  
Entry Mode Choice ◽  
Knowledge Based ◽  
High Resource

Purpose – The purpose of this paper is to address foreign market entry mode as a way to enhance firm’s knowledge base, providing new insights into traditional explanations of entry mode choice for soft services. The authors offer an alternative knowledge-based approach to assess foreign investment decisions by considering the role of resource-augmenting (direct investment) and resource-exploiting strategies (licenses). In addition, the authors untie the type of experiential knowledge, i.e., host country and mode experience, to analyze its interactions with environmental uncertainties such as cultural distance. Design/methodology/approach – Based on a customized database of the Spanish Global Hotel industry covering practically all foreign entries until 2012, the authors use regression analysis to test the proposal. Findings – The authors demonstrate how in hotel chains (a) cultural distance influences the use of high resource-augmenting modes, due to both the difficulties in transferring the knowledge to third parties but also the imperative need of learning from local markets and (b) how strong brands tend to use resource-augmenting modes in their first steps abroad as a strategy to achieve a minimum level of resource basis to exploit it in a later stage. Originality/value – The findings question the appropriateness of prior assumptions from traditional internationalization process theories for soft services MNE and provide an alternative approach to assess entry mode choice in this context.

Chinese Firms’ Outward FDI Entry Mode Choice: The Role of Ownership and Network

2013 ◽  
Vol 1 (1) ◽  
pp. 108-124 ◽  
Author(s):  
Bai Tao ◽  
Jin Zhanming ◽  
Xiaoguang Qi
Keyword(s):  
Exploratory Study ◽  
Joint Venture ◽  
Mode Choice ◽  
Entry Mode ◽  
Developed Countries ◽  
Outward Fdi ◽  
Entry Modes ◽  
Chinese Firms ◽  
Entry Mode Choice

What determines the Chinese firms’ outward FDI (foreign direct investment) entry mode choice, and do they behave differently from the firms from developed countries? To answer this question, this exploratory study firstly summarizes the attributes of the FDI entry modes, including greenfield investment, acquisition, and joint venture. Further based on the different attributes of these three modes, we analyze how Chinese firms choose the entry mode from the role the ownership and network perspectives, which are the important characteristics of Chinese firms.

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