The choice of entry mode into a foreign market has a maior impacton the success of a firm's international operations. Thus firms must choose the most viable entry mode when entering foreign markets. To do so, managers must understand beforehand the main determinants affecting the entry mode choice,
This study presents an exploratory research on the choice of foreign market entry mode, analyzing qualitative data and information about 25 foreign market entry cases undertaken by large system integration firms in Korea. The objective of this study is to find out how the three main characteristics - service characteristics, firm characteristics, and the environment characteristics - affect the decision of foreign market entry mode as far as the Korean large system integration firms are concerned. The research framework draws upon the literature of choice of entry mode and foreign direct investment.
The framework includes five specific determinants (independent variables) - inseparability, asset specificity, entering situation, entering motivation, and cultural distance - and three main entry modes (dependent variables) - export mode, contractual mode, and investment mode. In addition, we take into account the degree of control, resource commitment, and risk as control variables.
The analysis of 25 cases has led us to conclude the following:
(1) When inseparability is high, firms are more likely to use an entry mode with high degree of control.
(2) When asset specificity is high, firms are more likely to use an entry mode with high degree of control.
(3) Compared to Client Following (CF) entry, there is a greater tendency for Market Seeking (MS) entry to be associated with an entry mode that involves the participation of entities external to the firm .
(4) Compared to other motivation, firms with strategic-oriented motivation are likely to be associated with higher level of resource commitment.
Based on the analysis, we also suggest several implications for the Korean system integration firms. First, to select an appropriate entry mode, it is necessary to understand entry mode theories.
Second, research on the entry mode should be performed with considering an integrative analysis at the firm level.
Finally, a dynamic perspective is needed. Because all relevant conditions always are not the same, an effective entry mode analysis must be evaluated repeatedly.
