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Transaction cost‐enhanced entry mode choices and firm performance

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  • Keith D. Brouthers
  • Lance Eliot Brouthers
  • Steve Werner

Abstract

According to transaction cost theory, firms select the international mode of entry that provides the most efficient form of governance. However, previous scholarship largely neglects the impact of transaction cost variables on entry mode choice and firm performance. In this study, we add transaction cost variables to a set of variables previously used to predict firm mode choice and performance. We theorize and find that firms selecting these ‘transaction cost‐enhanced international entry modes’ perform better than firms using other modes of entry. Based on our results, we conclude that ‘enhanced’ transaction cost theory appears to be normative as well as descriptive with respect to international entry mode decisions. Copyright © 2003 John Wiley & Sons, Ltd.

Suggested Citation

  • Keith D. Brouthers & Lance Eliot Brouthers & Steve Werner, 2003. "Transaction cost‐enhanced entry mode choices and firm performance," Strategic Management Journal, Wiley Blackwell, vol. 24(12), pages 1239-1248, December.
    • Handle: RePEc:bla:stratm:v:24:y:2003:i:12:p:1239-1248
    DOI: 10.1002/smj.362
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    Cited by:

    1. Farah, Bassam & Chakravarty, Dwarka & Dau, Luis & Beamish, Paul W., 2022. "Multinational enterprise parent-subsidiary governance and survival," Journal of World Business, Elsevier, vol. 57(2).
    2. Chong Wu & Mengyao Yue & Fang Huang & Songqiao Wu, 2024. "Foreign Ownership and State-Owned Enterprises’ Innovation: The Mediating Role of Host Country’s Innovation Level and the Moderating Effect of Government Innovation Subsidies," Sustainability, MDPI, vol. 16(1), pages 1-16, January.
    3. Juan Manuel Berbel-Pineda & Beatriz Palacios-Florencio & José Manuel Ramírez-Hurtado, 2017. "Determining factors in the internationalization of hotel industry," Tourism Economics, , vol. 23(4), pages 768-787, June.
    4. Anna Marie Dyhr Ulrich & Svend Hollensen & Britta Boyd, 2014. "Entry Mode Strategies into the Brazil, Russia, India and China (BRIC) Markets," Global Business Review, International Management Institute, vol. 15(3), pages 423-445, September.
    5. Mariola Ciszewska-Mlinarič & Piotr Trąpczyński, 2019. "Foreign Market Adaptation and Performance: The Role of Institutional Distance and Organizational Capabilities," Sustainability, MDPI, vol. 11(6), pages 1-19, March.
    6. Bai, Wensong & Kao, Pao & Wu, Jie, 2021. "Returnee entrepreneurs and the performance implications of political and business relationships under institutional uncertainty," Journal of Business Research, Elsevier, vol. 128(C), pages 245-256.
    7. Dekkers, Rob & de Boer, Ronald & Gelsomino, Luca Mattia & de Goeij, Christiaan & Steeman, Michiel & Zhou, Qijun & Sinclair, Scott & Souter, Victoria, 2020. "Evaluating theoretical conceptualisations for supply chain and finance integration: A Scottish focus group," International Journal of Production Economics, Elsevier, vol. 220(C).
    8. Sumon Kumar Bhaumik & Ralitza Dimova, 2014. "Good and bad institutions: is the debate over? Cross-country firm-level evidence from the textile industry," Cambridge Journal of Economics, Oxford University Press, vol. 38(1), pages 109-126.
    9. Um, Ki-Hyun & Kim, Sang-Man, 2019. "The effects of supply chain collaboration on performance and transaction cost advantage: The moderation and nonlinear effects of governance mechanisms," International Journal of Production Economics, Elsevier, vol. 217(C), pages 97-111.
    10. Huashu Wang & Zhenyi Li & H. Holly Wang, 2022. "Does Backward Integration Improve Food Safety of the Tea Industry in China in the Post-COVID-19 Era?," Sustainability, MDPI, vol. 14(4), pages 1-15, February.
    11. Larisa Kovalenko & Alina Sorescu & Mark B. Houston, 2022. "What brand do I use for my new product? The impact of new product branding decisions on firm value," Journal of the Academy of Marketing Science, Springer, vol. 50(2), pages 338-365, March.
    12. Xanthippe Adamoglou & Dimitrios Kyrkilis, 2018. "FDI Entry Strategies as a Function of Distance—The Case of an Emerging Market: Turkey," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(4), pages 1348-1373, December.
    13. Estrin, Saul & Meyer, Klaus E. & Pelletier, Adeline, 2018. "Emerging Economy MNEs: How does home country munificence matter?," Journal of World Business, Elsevier, vol. 53(4), pages 514-528.
    14. Tang, Ryan W. & Buckley, Peter J., 2020. "Host country risk and foreign ownership strategy: Meta-analysis and theory on the moderating role of home country institutions," International Business Review, Elsevier, vol. 29(4).
    15. Thakur-Wernz, Pooja & Bruyaka, Olga & Contractor, Farok, 2020. "Antecedents and relative performance of sourcing choices for new product development projects," Technovation, Elsevier, vol. 90.
    16. Lo, Fang-Yi & Bui, Quang-Tuan & Huarng, Kun-Huang, 2023. "The pace of international expansion for digital multinational enterprises," Technological Forecasting and Social Change, Elsevier, vol. 193(C).
    17. Michael A. Sartor & Paul W. Beamish, 2020. "Private Sector Corruption, Public Sector Corruption and the Organizational Structure of Foreign Subsidiaries," Journal of Business Ethics, Springer, vol. 167(4), pages 725-744, December.
    18. Sea-Jin Chang, 2019. "When to go it alone: Examining post-conversion performance of international joint ventures," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(6), pages 998-1020, August.
    19. Rosario Andreu & Enrique Claver & Diego Quer, 2017. "Firm-specific factors and entry mode choice," Tourism Economics, , vol. 23(4), pages 756-767, June.
    20. Bowman, Gary & Foulser-Piggott, Roxane & Beamish, Paul W, 2023. "Natural disasters and MNE internalization: Reoptimizing subsidiary governance," Journal of World Business, Elsevier, vol. 58(2).
    21. Stephanie A. Fernhaber & Dan Li, 2010. "The Impact of Interorganizational Imitation on New Venture International Entry and Performance," Entrepreneurship Theory and Practice, , vol. 34(1), pages 1-30, January.

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