Entry Modes for Manufacturers' International After-Sales Service: Analysis of Transaction-Specific, Firm-Specific and Country-Specific Determinants

Zusammenfassung

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This paper investigates which criteria influence a company's entry mode choice for its after-sales service in a foreign country. With a focus on the decision between integrative and cooperative entry modes, an empirical study of 80 foreign entry mode decisions by German manufacturing companies identified determinants of particular importance for after-sales service. Country-specific variables exert a dominant influence on entry mode choice. Country risk, fluctuations in demand, and the availability of suitable service partners increase the probability of choosing a cooperative entry mode. Cultural distance from the host country leads to integrative modes. As transaction-specific variables, a difficult service quality evaluation is shown to increase the likelihood of establishing wholly-owned subsidiaries, as are high resource requirements. Service as competitive advantage also leads to the internalization of the service-function. The companies surveyed are highly satisfied with the entry mode chosen for their after-sales service in foreign markets, which implies that managerial implications can be drawn from the results.

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Auszug

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Entry Modes for Manufacturers' International After-Sales Service: Analysis of Transaction-Specific, Firm-Specific and Country-Specific Determinants

Introduction

A company planning to conduct any business activities in a foreign market must choose an appropriate entry mode. Each task can be performed by vertically integrated organizational units (wholly-owned subsidiaries), by external organizational units, or jointly ("cooperative arrangements") (Kaynak/Demirbag/Tatoglu 2007, Luo 2007). Since a firm generally performs multiple tasks, it can use distinct entry modes for each of those different tasks (Bello et al. 1997, Wilson 1999).

The present study focuses on the business function of after-sales service (AS). It investigates which criteria determine a firm's choice between wholly-owned subsidiaries and cooperative arrangements for the provision of its AS in a foreign country. While the growing importance of such services is widely acknowledged (Dunning 1989, Asugman et al. 1997, Loomba 1998), there is relatively little published academic research on this topic in an international context (Parasuraman 1998, Nordin 2005).

The international management literature offers numerous investigations into entry modes for foreign market operations. However, previous investigations have focused predominantly on the manufacturing operations of industrial companies, as McLaughlin/Fitzsimmons' (1996) and Knight's (1999) reviews reveal, or the studies analyze, to a lesser extent, international entry modes of service companies (Boddewyn/Halbrich/Perry 1986, Dunning 1989, Vandermerwe/Chadwick 1989, Erramilli 1990, Erramilli/Rao 1993, Erramilli/D'Souza 1995). Far less research has been conducted on the internationalization of customer services, that is, services provided as a supplement to a manufacturing company's core offering. This business function is perceived by manufacturers more and more as an important competitive advantage (Asugman et al. 1997, Parasumaran 1998, Loomba 1998, Wilson 1999, Nordin 2005) and thus, investigations into the entry mode decision for this business function seem thoroughly worthwhile.

In how far the results of the research into manufacturing operations can be applied to service activities is not evident without further research. It seems clear that the decision on an appropriate entry mode needs to be considered on the basis of each specific value-added function, since the integration decision is made at the functional level (Dibbern et al. 2001).

Consequently, our study focuses on international after-sales service (AS) and we investigate the entry mode decision. The study concentrates on entry modes with a permanent presence in a specific foreign market, and in particular, on the decision of a company to fully internalize the service activities or to cooperate with other c...

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