Chapter 7: Foreign Market Entry Modes: A Sequentially Embedded Decision Approach
F. Esra Gençtürk INTRODUCTION Mode of entry into a foreign market has consistently been singled out as a frontier issue in international business research with signiﬁcant consequences for ﬁrms and policy makers (Davidson 1982; Erramilli and Rao 1993; Hill et al. 1990; Root 1987; Wind and Perlmutter 1977). For ﬁrms, entry mode choice is an important strategic decision with far-reaching consequences for competitive advantage and performance. Furthermore, since each mode of foreign market entry involves diﬀerent resource deployment patterns, levels of control, and risk/return tradeoﬀ, ﬁrms’ choice of a particular mode in serving a given host market is diﬃcult to change without considerable loss of time and money (Root 1987). At the macro regulatory level, entry mode of foreign ﬁrms is critical as it determines the degree of foreign involvement in host economies, level of foreign control of local operations, and their level of impact on the local economy. Not surprisingly, there has been considerable research into the patterns, determinants, and consequences of foreign market entry modes. Some researchers have focused on the ownership and control issues implied by various entry modes (e.g. Agarwal and Ramaswami 1992; Anderson and Gatignon 1986; Contractor 1990; Davidson and McFetridge 1984, 1985; Erramilli 1991; Gomes-Casseres 1989; Hennart 1982, 1991; Hennart and Park 1993; Hennart and Reddy 1997). Others have examined the eﬀect of cultural distance and host-country characteristics on the mode of entry (e.g. Cho and Radmanabhan 1995; Davidson and McFetridge 1984, 1985; Gatignon and Anderson 1988; Kogut...
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