Summary Foreign Market Entry Strategies
Year: 2023 – 2024
W1: Course outline and Introduction to Foreign entry strategies
◦ Anderson, E., & Gatignon, H. 1986. Modes of foreign entry: A transaction cost analysis and
propositions. Journal of International Business Studies, 17(3), 1–26.
◦ Hennart, J.-F.2009 Down with MNE-centric theories! Market entry and expansion as the
bundling of MNE and local assets. Journal of International Business Studies, 40(9), 1432–1454.
W2: Traditional and not traditional entry modes
◦ 1. Brouthers, K. D., Chen, L., Li, S., & Shaheer, N. (2022). Charting new courses to enter foreign
markets: Conceptualization, theoretical framework, and research directions on non-traditional
entry modes. Journal of International Business Studies, 53(9), 2088-2115.
◦ 2. Dikova, D., & Van Witteloostuijn, A. (2007). Foreign direct investment mode choice: entry
and establishment modes in transition economies. Journal of International Business Studies,
38(6), 1013–1033
◦ 3. Chen, S.-F. S. (2008). The motives for international acquisitions: Capability procurements,
strategic considerations, and the role of ownership structures. Journal of International Business
Studies, 39(3), 454–471.
W3: Corporate governance: Shareholders type
◦ 1. Yamanoi, J., & Asaba, S. (2018). The impact of family ownership on establishment and
ownership modes in foreign direct investment: The moderating role of corruption in host
countries. Global Strategy Journal, 8(1): 106–135.
◦ 2. Grøgaard, B., Rygh, A., & Benito, G. R. (2019). Bringing corporate governance into
internalization theory: State ownership and foreign entry strategies. Journal of International
Business Studies, 50, 1310-1337.
W4: International alliance portfolios
◦ 1. Lavie, D., & Miller, S. R. (2008). Alliance portfolio internationalization and firm performance.
Organisation science, 19(4), 623-646.
◦ 2. Bos, B., Faems, D., & Noseleit, F. (2017). Alliance Concentration in Multinational Companies:
Examining Alliance Portfolios, Firm Structure, and Firm Performance. Strategic Management
Journal, 38(11), 2298-2309.
W5: International Joint Ventures: performance, stability and evolution
◦ 1. Luo, Y., & Park, S. H. (2004). Multiparty cooperation and performance in international equity
joint ventures. Journal of International Business Studies, 35(2), 142–160.
◦ 2. Yan, A. (1998). Structural stability and reconfiguration of international joint ventures. Journal
of International Business Studies, 29(4), 773– 796.
W6: Post-entry strategies – Re-entry strategies
◦ 1. Chang, S.-J., Chung, J., & Moon, J. J. (2013). When do wholly-owned subsidiaries perform
better than joint ventures? Strategic Management Journal, 34(3), 317–337.
◦ 2. Surdu, I., Mellahi, K., & Glaister, K. W. (2019). Once bitten, not necessarily shy? Determinants
of foreign market re-entry commitment strategies. Journal of International Business Studies,
50(3), 393–422.
◦ 3. Brouthers, K. D. (2002). Institutional, cultural and transaction cost influences on entry mode
choice and performance. Journal of International Business Studies, 33(2), 203-221.
,W1: Course outline and Introduction to Foreign entry strategies
Anderson, E., & Gatignon, H. 1986. Modes of foreign entry: A transaction cost analysis and propositions.
Journal of International Business Studies, 17(3), 1–26.
Abstract
A "frontier issue" in international marketing is the appropriate choice of entry mode in foreign markets.
The objective of this paper is to offer a transaction cost framework for investigating the entry mode
decision. This framework provides: 1) a theoretical basis for systematically interrelating the literature
into propositions; 2) propositions about interactions which resolve the apparently contradictory
arguments advanced to date. Specifically, the paper:
• illustrates the feasibility of clustering 17 entry modes into the degree of control the
mode provides the entrant;
• proposes that the most appropriate (i.e., most efficient) entry- mode is a function of
the tradeoff between control & the cost of resource commitment.
• advances testable propositions delimiting the circumstances under which each mode
maximizes long-term efficiency.
The entry mode literature is reviewed in the context of these propositions, and guidelines are derived
for choosing the appropriate mode of entry, given certain characteristics of the firm, the product, and
the environment.
‘Mode of entry’ (order from high control to low control):
- Wholly owned subsidiary (WOS)
- Joint venture (JVs). Entrant is:
o Majority-;
o Equal-;
o Or minority partner.
- Nonequity arrangement, such as licensing or a contractual JV.
Control (= ability to influence systems, methods, and decisions) has a critical impact on the future of a
foreign enterprise:
- High-control modes can increase return and risk.
- Low-control modes (e.g., licenses and other contractual agreements) minimize resource
commitment (hence risk) but often at the expense of returns.
→ Tradeoff between control & cost of resource commitments, often under conditions of considerable
risk and uncertainty (versus maintaining flexibility).
→ Commitment of resources includes high overhead which in turn creates switching costs, reducing
the firm's ability to change its institutional arrangement should its choice turn out to be suboptimal.
In certain nonequity modes, moderate control comes from daily involvement in the operation and from
expertise. These modes include:
- Contract management
- Contractual joint ventures
- Restrictive exclusive contracts
- Franchising (form of licensing in which the use of a business system is granted)
- Contracts that are exclusive but nonrestrictive or nonexclusive but restrictive
Figure 1 is a progression from complete non-integration (classical marketing contracting between two
parties) to complete integration (one entity "contracts" internally to perform a function), passing
through intermediate points.
, The efficiency of an entry mode depends on 4 constructs that determine the optimal degree of control,
following a transaction-cost analysis:
1. Transaction-specific assets: investments (physical & human) that are specialized to one or a
few users or uses;
2. External uncertainty: the unpredictability of the entrant's external environment;
3. Internal uncertainty: the entrant's inability to determine its agents' performance by observing
output measures;
4. Free-riding potential: agents' ability to receive benefits without bearing the associated costs.
Transaction-specific assets
Transaction cost analysis approaches the entry mode question with the following promise: a low level
of ownership is preferable until proven otherwise (= default hypothesis).
Integration (or direct investment) is justified when the market mechanism no longer encourages
performance, i.e., when competitive pressure is low.
Degeneration into lock in occurs when "transaction-specific assets" of considerable value accumulate.
These are investments (physical & human) that are valuable only in a narrow range of transactions, that
is, specialized to one or a few users or uses.
Transaction-specific assets:
Proposition 1: “Modes of entry offering greater control are more efficient for highly proprietary
products or processes.”
Proprietary knowledge, a type of specialized asset, is subject to hazards of transmission and valuation.
It is often ill-codified and difficult to transmit across organizational boundaries. Firms with proprietary
knowledge tend to exert more control to avoid risks associated with licensing out this knowledge.
Proposition 2: “Entry modes offering higher degrees of control are more efficient for unstructured,
poorly-understood products and processes.”
For products and processes that are ill-structured or poorly understood, high-control entry modes are
preferable. This is because the development of a common code of understanding, which is critical for
such functions, is better preserved and extended in high-control modes.
Year: 2023 – 2024
W1: Course outline and Introduction to Foreign entry strategies
◦ Anderson, E., & Gatignon, H. 1986. Modes of foreign entry: A transaction cost analysis and
propositions. Journal of International Business Studies, 17(3), 1–26.
◦ Hennart, J.-F.2009 Down with MNE-centric theories! Market entry and expansion as the
bundling of MNE and local assets. Journal of International Business Studies, 40(9), 1432–1454.
W2: Traditional and not traditional entry modes
◦ 1. Brouthers, K. D., Chen, L., Li, S., & Shaheer, N. (2022). Charting new courses to enter foreign
markets: Conceptualization, theoretical framework, and research directions on non-traditional
entry modes. Journal of International Business Studies, 53(9), 2088-2115.
◦ 2. Dikova, D., & Van Witteloostuijn, A. (2007). Foreign direct investment mode choice: entry
and establishment modes in transition economies. Journal of International Business Studies,
38(6), 1013–1033
◦ 3. Chen, S.-F. S. (2008). The motives for international acquisitions: Capability procurements,
strategic considerations, and the role of ownership structures. Journal of International Business
Studies, 39(3), 454–471.
W3: Corporate governance: Shareholders type
◦ 1. Yamanoi, J., & Asaba, S. (2018). The impact of family ownership on establishment and
ownership modes in foreign direct investment: The moderating role of corruption in host
countries. Global Strategy Journal, 8(1): 106–135.
◦ 2. Grøgaard, B., Rygh, A., & Benito, G. R. (2019). Bringing corporate governance into
internalization theory: State ownership and foreign entry strategies. Journal of International
Business Studies, 50, 1310-1337.
W4: International alliance portfolios
◦ 1. Lavie, D., & Miller, S. R. (2008). Alliance portfolio internationalization and firm performance.
Organisation science, 19(4), 623-646.
◦ 2. Bos, B., Faems, D., & Noseleit, F. (2017). Alliance Concentration in Multinational Companies:
Examining Alliance Portfolios, Firm Structure, and Firm Performance. Strategic Management
Journal, 38(11), 2298-2309.
W5: International Joint Ventures: performance, stability and evolution
◦ 1. Luo, Y., & Park, S. H. (2004). Multiparty cooperation and performance in international equity
joint ventures. Journal of International Business Studies, 35(2), 142–160.
◦ 2. Yan, A. (1998). Structural stability and reconfiguration of international joint ventures. Journal
of International Business Studies, 29(4), 773– 796.
W6: Post-entry strategies – Re-entry strategies
◦ 1. Chang, S.-J., Chung, J., & Moon, J. J. (2013). When do wholly-owned subsidiaries perform
better than joint ventures? Strategic Management Journal, 34(3), 317–337.
◦ 2. Surdu, I., Mellahi, K., & Glaister, K. W. (2019). Once bitten, not necessarily shy? Determinants
of foreign market re-entry commitment strategies. Journal of International Business Studies,
50(3), 393–422.
◦ 3. Brouthers, K. D. (2002). Institutional, cultural and transaction cost influences on entry mode
choice and performance. Journal of International Business Studies, 33(2), 203-221.
,W1: Course outline and Introduction to Foreign entry strategies
Anderson, E., & Gatignon, H. 1986. Modes of foreign entry: A transaction cost analysis and propositions.
Journal of International Business Studies, 17(3), 1–26.
Abstract
A "frontier issue" in international marketing is the appropriate choice of entry mode in foreign markets.
The objective of this paper is to offer a transaction cost framework for investigating the entry mode
decision. This framework provides: 1) a theoretical basis for systematically interrelating the literature
into propositions; 2) propositions about interactions which resolve the apparently contradictory
arguments advanced to date. Specifically, the paper:
• illustrates the feasibility of clustering 17 entry modes into the degree of control the
mode provides the entrant;
• proposes that the most appropriate (i.e., most efficient) entry- mode is a function of
the tradeoff between control & the cost of resource commitment.
• advances testable propositions delimiting the circumstances under which each mode
maximizes long-term efficiency.
The entry mode literature is reviewed in the context of these propositions, and guidelines are derived
for choosing the appropriate mode of entry, given certain characteristics of the firm, the product, and
the environment.
‘Mode of entry’ (order from high control to low control):
- Wholly owned subsidiary (WOS)
- Joint venture (JVs). Entrant is:
o Majority-;
o Equal-;
o Or minority partner.
- Nonequity arrangement, such as licensing or a contractual JV.
Control (= ability to influence systems, methods, and decisions) has a critical impact on the future of a
foreign enterprise:
- High-control modes can increase return and risk.
- Low-control modes (e.g., licenses and other contractual agreements) minimize resource
commitment (hence risk) but often at the expense of returns.
→ Tradeoff between control & cost of resource commitments, often under conditions of considerable
risk and uncertainty (versus maintaining flexibility).
→ Commitment of resources includes high overhead which in turn creates switching costs, reducing
the firm's ability to change its institutional arrangement should its choice turn out to be suboptimal.
In certain nonequity modes, moderate control comes from daily involvement in the operation and from
expertise. These modes include:
- Contract management
- Contractual joint ventures
- Restrictive exclusive contracts
- Franchising (form of licensing in which the use of a business system is granted)
- Contracts that are exclusive but nonrestrictive or nonexclusive but restrictive
Figure 1 is a progression from complete non-integration (classical marketing contracting between two
parties) to complete integration (one entity "contracts" internally to perform a function), passing
through intermediate points.
, The efficiency of an entry mode depends on 4 constructs that determine the optimal degree of control,
following a transaction-cost analysis:
1. Transaction-specific assets: investments (physical & human) that are specialized to one or a
few users or uses;
2. External uncertainty: the unpredictability of the entrant's external environment;
3. Internal uncertainty: the entrant's inability to determine its agents' performance by observing
output measures;
4. Free-riding potential: agents' ability to receive benefits without bearing the associated costs.
Transaction-specific assets
Transaction cost analysis approaches the entry mode question with the following promise: a low level
of ownership is preferable until proven otherwise (= default hypothesis).
Integration (or direct investment) is justified when the market mechanism no longer encourages
performance, i.e., when competitive pressure is low.
Degeneration into lock in occurs when "transaction-specific assets" of considerable value accumulate.
These are investments (physical & human) that are valuable only in a narrow range of transactions, that
is, specialized to one or a few users or uses.
Transaction-specific assets:
Proposition 1: “Modes of entry offering greater control are more efficient for highly proprietary
products or processes.”
Proprietary knowledge, a type of specialized asset, is subject to hazards of transmission and valuation.
It is often ill-codified and difficult to transmit across organizational boundaries. Firms with proprietary
knowledge tend to exert more control to avoid risks associated with licensing out this knowledge.
Proposition 2: “Entry modes offering higher degrees of control are more efficient for unstructured,
poorly-understood products and processes.”
For products and processes that are ill-structured or poorly understood, high-control entry modes are
preferable. This is because the development of a common code of understanding, which is critical for
such functions, is better preserved and extended in high-control modes.
