Purpose – This paper goes above and beyond the prior research on entry mode by considering the organizational approach and examines entry mode selection between wholly‐owned subsidiaries and joint venture by taking into account the existence of different types of joint ventures. In this way, this paper seeks to investigate whether or not a relationship exists between the first entry strategy decision of a particular firm and the prior foreign market entries made by other firms. Moreover, considering that foreign market entry is not a one‐time decision, this study analyses whether or not prior entry in a particular country has influence on the choice of repeated entries in the same country. Design/methodology/approach – This paper uses data of 1,470 subsidiaries established by Japanese electronics firms in 64 countries. The propositions are tested by applying a statistical t ‐test to compare the mean differences between the analyzed cases. Findings – The findings revealed the legitimacy effect on the entry mode selection. Firms tend to follow the prior entry strategies of its rivals in the case of first time investors, while for subsequent investments, both prior entries made by the parent firm and competitors have great influence on the market access in a particular country. It suggests that the effect of market competition cannot be neglected when examining entry mode selection. Furthermore, there is a need to consider entry strategy as a dynamic rather than a static decision‐making process. Originality/value – The findings from this study are useful for scholars interested in advancing the knowledge on entry mode strategies of multinational companies.
Journal of Asia Business Studies – Emerald Publishing
Published: Dec 20, 2013
Keywords: Internationalization; Legitimacy; Electronic sector; Entry strategy; Japanese firms