Mode of Entry into Foreign Markets : a Study of Antecedents and Performance Associations

Export is an important strategy for firms to grow, yet researchers tend to ignore how firms can exploit and develop their resource-based capabilities to improve export performance. Building on the Organizational Capability (OC) perspective, this study develops a novel approach on ways to improve export performance. Cross-sectional empirical data regarding Swedish firms were collected and analyzed in a number of ways, including application of multi-variate techniques. The study identifies associations between mode of entering a foreign market and the firm’s level of market orientation (MO) capabilities and entrepreneurial orientation (EO) capabilities. Entry modes include wholly-owned subsidiaries and collaborations with other firms. Also, the study shows that the associations are contingent on the institutional distance between the home market and the host market. Problems due to endogeneity are avoided as an association is established between a mode that is aligned with the capabilities and performance. The study found that firms possessing extensive MO and EO capabilities select a wholly-owned subsidiary. The analysis also shows that the institutional distance between Sweden and the export market moderates this association; greater distance favors collaboration with local partners. Moreover, aligning the selection of entry mode with firm-level MO and EO capabilities and institutional distance yields higher post-entry performance