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Decades of research on market entry modes: What do we really know about external antecedents of entry mode choice?

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  • Morschett, Dirk
  • Schramm-Klein, Hanna
  • Swoboda, Bernhard
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    Abstract

    The choice of a mode of market entry is a critical component of the internationalization strategy, and numerous empirical studies have focused on this topic. Prior research, however, has provided mixed empirical evidence and thus, is difficult to interpret and review. This study examines the external antecedents of the choice of entry mode by meta-analyzing data from 72 independent primary studies. We focus on the decision between wholly owned subsidiaries and cooperative entry modes. For each variable, hypotheses about the theoretically expected direction of effect are posited and tested. We find a strong positive relationship between power distance as a cultural trait of the firm's home country and the propensity to establish a wholly owned subsidiary. On the other hand, we find a negative association between country risk, legal restrictions, market growth, and market size and the preference for wholly owned subsidiaries. We extensively discuss the implications of the meta-analytical results and investigate moderating effects of industry type and the time of the study. The relationship between income level of the host country and entry mode depends, to some degree, on the industry type. Service companies exhibit a negative relationship between income level and wholly owned subsidiaries, while manufacturing companies show a positive relationship.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Management.

    Volume (Year): 16 (2010)
    Issue (Month): 1 (March)
    Pages: 60-77

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    Handle: RePEc:eee:intman:v:16:y:2010:i:1:p:60-77

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    Related research

    Keywords: Entry mode Market entry strategy Cooperative entry mode Wholly owned subsidiary Meta-analysis;

    References

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    Cited by:
    1. Sandberg, Susanne, 2014. "Experiential knowledge antecedents of the SME network node configuration in emerging market business networks," International Business Review, Elsevier, vol. 23(1), pages 20-29.
    2. Karhunen, Päivi & Ledyaeva, Svetlana, 2012. "Corruption Distance, Anti-corruption Laws and International Ownership Strategies in Russia," Journal of International Management, Elsevier, vol. 18(2), pages 196-208.
    3. Jell-Ojobor, Maria & Windsperger, Josef, 2014. "The Choice of Governance Modes of International Franchise Firms — Development of an Integrative Model," Journal of International Management, Elsevier, vol. 20(2), pages 153-187.
    4. Malhotra, Shavin & Sivakumar, K. & Zhu, PengCheng, 2011. "Curvilinear relationship between cultural distance and equity participation: An empirical analysis of cross-border acquisitions," Journal of International Management, Elsevier, vol. 17(4), pages 316-332.
    5. Duanmu, Jing-Lin, 2011. "The effect of corruption distance and market orientation on the ownership choice of MNEs: Evidence from China," Journal of International Management, Elsevier, vol. 17(2), pages 162-174, June.
    6. De Beule, Filip & Elia, Stefano & Piscitello, Lucia, 2014. "Entry and access to competencies abroad: Emerging market firms versus advanced market firms," Journal of International Management, Elsevier, vol. 20(2), pages 137-152.
    7. Heinz Hollenstein & Martin Berger, 2012. "Determinants of Equity-based and Co-operative Foreign R&D and Impact on the Parent Firm’s Performance," KOF Working papers 12-305, KOF Swiss Economic Institute, ETH Zurich.
    8. Lai, Jung-Ho & Chen, Li-Yu & Chang, Shao-Chi, 2012. "The board mechanism and entry mode choice," Journal of International Management, Elsevier, vol. 18(4), pages 379-392.
    9. Diego Quer & Enrique Claver & Laura Rienda, 2012. "Political risk, cultural distance, and outward foreign direct investment: Empirical evidence from large Chinese firms," Asia Pacific Journal of Management, Springer, vol. 29(4), pages 1089-1104, December.

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