Stakeholder Influences on the Choice and Performance of FDI-based Market Entry Modes

This article accounts for stakeholder influences on the performance of emerging market firms (EMFs) entering developed markets through foreign direct investment (FDI)-based market entry modes. Stakeholders, such as governments, regulators, customers, competitors, community/environmental interest groups, and industry associations, impose coercive and normative pressures of compliance on internationalizing firms. Firms respond to these pressures from their institutional environment by emulating the entry strategies of other firms in their environment. By conceptualizing stakeholder influences across two bases—one arising from regulatory influences and the other arising from normative influences—we study the effects of these pressures and inducements in driving firms to internationalize through similar market entry modes. We conclude this article by proposing that, although isomorphism negatively affects firm performance in the short run, firms can benefit from high reputation, high social status, and future support for their actions from their stakeholders by adopting strategic behavior legitimated by their institutional environments.