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Network and Institutional Effects on SMEs’ Entry Strategies

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Abstract

Building on the network and institutional environment perspectives, this study examines the foreign market entry strategies of 851 small and medium-sized enterprises (SMEs) based in Taiwan, a newly industrialized economy. From the network perspective, our findings show that SMEs prefer to enter new markets in two distinct ways: (1) through wholly-owned subsidiaries when they are following their customers into a host country, or when the operations in a host country have more internal network linkages; and (2) through joint ventures when they have stronger supplier relationships. From the institutional environment perspective, SMEs set up wholly-owned subsidiaries when they perceive differences in the macro-economic and industrial-policy environment in a host country; however, they will choose to enter into joint ventures if they perceive a significant degree of socio-cultural difference in a host country. As SMEs decide on entry strategies, they must carefully consider not only the different types of network resource, but also the influence of institutional factors in host countries.

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Authors and Affiliations

  1. Department of International Business, Feng Chia University, Taichung, Taiwan

    Fang-Yi Lo

  2. Department of Business Administration, National Chung Hsing University, Taichung, Taiwan

    Yu-Ching Chiao

  3. Department of Business Administration, National Chengchi University, Taipei, Taiwan

    Chwo-Ming Joseph Yu

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  1. Fang-Yi Lo
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Lo, FY., Chiao, YC. & Yu, CM.J. Network and Institutional Effects on SMEs’ Entry Strategies. Manag Int Rev 56, 531–563 (2016). https://doi.org/10.1007/s11575-016-0289-4

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