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Network and Institutional Effects on SMEs’ Entry Strategies

Author

Listed:
  • Fang-Yi Lo

    (Feng Chia University)

  • Yu-Ching Chiao

    (National Chung Hsing University)

  • Chwo-Ming Joseph Yu

    (National Chengchi University)

Abstract

Building on the network and institutional environment perspectives, this study examines the foreign market entry strategies of 851 small and medium-sized enterprises (SMEs) based in Taiwan, a newly industrialized economy. From the network perspective, our findings show that SMEs prefer to enter new markets in two distinct ways: (1) through wholly-owned subsidiaries when they are following their customers into a host country, or when the operations in a host country have more internal network linkages; and (2) through joint ventures when they have stronger supplier relationships. From the institutional environment perspective, SMEs set up wholly-owned subsidiaries when they perceive differences in the macro-economic and industrial-policy environment in a host country; however, they will choose to enter into joint ventures if they perceive a significant degree of socio-cultural difference in a host country. As SMEs decide on entry strategies, they must carefully consider not only the different types of network resource, but also the influence of institutional factors in host countries.

Suggested Citation

  • Fang-Yi Lo & Yu-Ching Chiao & Chwo-Ming Joseph Yu, 2016. "Network and Institutional Effects on SMEs’ Entry Strategies," Management International Review, Springer, vol. 56(4), pages 531-563, August.
    • Handle: RePEc:spr:manint:v:56:y:2016:i:4:d:10.1007_s11575-016-0289-4
    DOI: 10.1007/s11575-016-0289-4
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