Entry Mode

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Choice of Foreign Market Entry Mode
Cognitions from Empirical and Theoretical Studies
Xuemin Zhao and Reinhold Decker

Dr. Reinhold Decker is Professor of Marketing at the Department of Economics and Business Administration of the University of Bielefeld P. O. Box 10 01 31 D-33501 Bielefeld Germany Phone: +49-(0)521-106-6913 / 3936 Fax: +49-(0)521-106-6456 E-Mail: rdecker@wiwi.uni-bielefeld.de Xuemin Zhao is Ph.D. student of the Graduate School for Economics and Management at the University of Bielefeld (BiGSEM) P.O. Box 10 01 31 D-33501 Bielefeld Germany Phone: +49-(0)521-106-4863 Email: xzhao@wiwi.uni-bielefeld.de

Acknowledgement: We would like thank our colleagues Prof. Dr. Herbert Dawid and Prof. Dr. Stefan Wielenberg,
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Klein et al. (1990) extended TCA by integrating production costs and dividing external uncertainty. Erramilli and Rao (1993) modified the TCA framework to adapt it to the service industry. Coviello and Munro (1997) argued that the network relationship developed affects firm’s internationalization and the choice of entry mode. Tse et al. (1997) have analyzed the influence of country specific, industry specific, and operation related factors on entry mode choice. Reuber and Fisher (1997) pointed out that the international experience of a management team is positively related with the development of strategic partners and foreign sales. Pan et al. (1999) examined the impact of order and mode of entry on firm performance in foreign markets. Finally, Brouthers et al. (1999) supported Dunning’s OLI framework by empirically examining German and Dutch firms that had invested in Central East European countries (CEE). 3

In the current decade most of the relevant research is focused on examining the impact of specific factors on the entry mode decision. Among these factors institution attracted greatest attention. Some papers extended the TCA theory by adding institutional factors into the given framework (Brouthers 2002; Lu 2002). Others argued that institution affects the entry mode decision by increasing the cost of uncertainty and transaction (Said and McDonald 2002; Meyer 2000). Further factors which have been examined empirically are: technology transfer (Mattoo

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