Mode of foreign market entry : an integrative study

This study investigates the foreign market entry decision of multinational firms from three theoretical perspectives--namely transaction cost/internalization, competitive strategy and organizational capability. It is argued that each perspective primarily focuses on a different level of analysis--the firm or division, the transaction and the organizational unit respectively. The final decision regarding the means of foreign market entry is a choice made after considering these three forces simultaneously. The study contributes by developing an understanding of the role of organizational capability in the mode of entry decision. It further enriches theory through developing some of the interrelationships between the three perspectives.The empirical research was conducted through a field study and a cross-sectional questionnaire survey sent to multinational firms with headquarters in Europe and North America. The results suggest that competitive strategy and organizational capability perspectives are most significant in determining the choice of entry mode. The transaction cost perspective does not appear to be significant.One broad implication for managers is the importance of both analyzing the characteristics of the chosen product-market and critically examining the firm's capabilities in order to focus on what it does best, build upon it and, where necessary, complement this through collaboration with others