Essays in Honor of John Dunning
Edited by H. Peter Gray
Chapter 11: Understanding the Entry Strategies of International Franchisers with Dunning’s Envelope OLI Paradigm
11. Understanding the entry strategies of international franchisers with Dunning’s envelope OLI paradigm Yong Suhk Pak and Sam Beldona INTRODUCTION Mainstream scholars of international business (IB) have tended to neglect the question of the determinants of the choice of entry modes to distribute and sell their products in foreign markets, indeed, it could be said that, with certain exceptions such as of Root (1994) and Buckley and Casson (1998), the questions of foreign marketing and distribution have not been given the importance that these issues merit. One possible reason for this neglect is the relatively small amount of capital required for a sales organization compared with that required by production units (although this reason could be less convincing when deﬁned in terms of value-added): this explanation would suggest that the question of which entry mode is adopted for local sales by foreign multinational corporations (MNCs) is of little consequence. The activities of US ﬁrms using the franchising approach for foreign sales have grown steadily (McIntyre and Huszagh, 1995) so the problem of identifying the determinants of choice of entry mode deserves more attention. This chapter provides an empirical analysis of the choice of entry mode of MNCs, which rely on some version of a franchising mode, and addresses the determinants of the choice of mode in terms of the latest ‘envelope’ version of Dunning’s eclectic paradigm (2000b). Because ﬁrms that adopt a franchise system abroad will provide a special kind of goods and services which lend themselves to this...
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