Strategic Orientation and the Choice of Foreign Market Entry Mode an Empirical Examination

Zusammenfassung

---

Drawing on the transaction costs, strategic capability and the strategic cognition perspectives, this study seeks to examine whether and how firms' strategic orientations at the business level influence the entry mode choices that firms make in accessing foreign markets. The study uses a sample of 332 foreign market entries made by 62 US based firms over a period of 6 years to test hypotheses linking firm business level strategy to the choice of foreign entry modes. Findings indicate that Prospectors are more likely to choose equity-based foreign market entry modes than Defenders. In addition, Prospectors favor full-ownership entry modes, namely, greenfield investments and full acquisitions, over shared-ownership modes such as joint ventures and partial acquisitions. In this study, the authors relied exclusively on archival data to identify firm strategy orientation. While their measure of business strategy considers the consistency in firms' investment behaviors over multiple years (Zahra/Pearce 1990), it does not adequately address the cognitive dimension underlying strategies (Snow/Hambrick 1980).

Siehe den Gesamtinhalt dieses Dokumentes

Auszug

---

Strategic Orientation and the Choice of Foreign Market Entry Mode an Empirical Examination

Introduction

In a competitive landscape characterized by increased globalization, the choice of entry mode represents a key strategic decision facing firms seeking expansion into international markets. Several foreign market entry options exist. They include exporting, contractual entry (licensing and franchising), joint ventures, greenfield investments and acquisitions with each entailing different levels of resource requirements, organizational control, expected future returns and risk exposure (Anderson/Gatignon 1986, Buckley/Casson 1998). Entry mode choice is also viewed as a "frontier issue" in international business research (Anderson/Gatignon 1986, Madhok 1997) and a "very important, if not critical, strategic decision" (Agarwal/Ramaswami 1992; p. 2). Not surprisingly, there has been a proliferation of research on entry mode choice over the past three decades (see Datta/ Herrmann/Rasheed 2002 for a review), much of it focusing on the antecedents of such choice, especially those related to entrant firm characteristics and host country conditions. In addition, a few studies (e.g., Hennart 1991, Stopford/Wells 1972, Wilson 1980) have examined how firms' corporate strategy (e.g., the degree of corporate diversification) influence decisions pertaining to entry mode choice. However, to the best our knowledge, no study, to date, has examined the influence of firms' business strategy on such choices. As a result, we currently have a limited understanding of how business strategy orientations of firms influence the selection of entry mode strategies.

Our study seeks to address this important gap. Strategic management scholars have long argued that firms with different business strategy orientations exhibit different behaviors as reflected in their willingness to take risks, resource allocation priorities, and preferences for specific organizing and controlling mechanisms (Miller/Droge 1986, Miles/Snow 1978, Porter 1980). We believe that such differences are also likely to be reflected in the strategic choices firms make in entering foreign markets. In the context entry modes, Pan and Tse (2000) argue that decisions related to foreign market entry are typically made in two stages. The first involves choosing between equity (i.e., joint ventures, wholly owned subsidiaries and acquisitions) and non-equity (i.e., exports and licensing) modes. The choice of an equity mod...

Siehe den Gesamtinhalt dieses Dokumentes

---