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Strategic Orientation and the Choice of Foreign Market Entry Mode

An Empirical Examination

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Abstract

  • Drawing on the transaction costs, strategic capability and the strategic cognition perspectives, our study seeks to examine whether and how firms’ strategic orientations at the business level influence the entry mode choices that firms make in accessing foreign markets.

  • The study uses a sample of 332 foreign market entries made by 62 U.S. based firms over a period of 6 years to test hypotheses linking firm business level strategy to the choice of foreign entry modes.

  • Findings indicate that Prospectors are more likely to choose equity-based foreign market entry modes than Defenders. In addition, Prospectors favor full-ownership entry modes, namely, greenfield investments and full acquisitions, over shared-ownership modes such as joint ventures and partial acquisitions.

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Notes

  1. Thomas et al. (1991), for example, identified firms as Prospectors if their average R&D Intensity (R&D Expenses/Sales) and advertising intensity (advertising expenditure/ sales) ranked above the 75th percentile of the industry’s averages on the two variables. Defenders, on the other hand, were firms that scored below the 25th percentile of the industry average on both dimensions.

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Acknowledgements

An earlier version of the paper was presented at the 2005 Academy of Management Annual Meetings, Honolulu, Hawaii. We would like to thank the editor and two anonymous MIR reviewers for their valuable suggestions and guidance. Thanks are also due to Witold Jerzy Henisz, Abdul Rasheed and Vince Barker for their comments on earlier versions of the paper.

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Authors and Affiliations

  1. College of Business Administration, University of Texas at Arlington, Arlington, Texas, USA

    Deepak K. Datta

  2. School of Business and Economics, University of Minnesota-Duluth, Duluth, Minnesota, USA

    Xin Liang

  3. College of Business Administration, San Diego State University, San Diego, California, USA

    Martina Musteen

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  1. Deepak K. Datta
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Correspondence to Deepak K. Datta.

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Datta, D., Liang, X. & Musteen, M. Strategic Orientation and the Choice of Foreign Market Entry Mode. Manag Int Rev 49, 269–290 (2009). https://doi.org/10.1007/s11575-009-0143-z

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