Institutional, cultural and transaction cost influences on entry mode choice and performance

• Published in: Journal of international business studies Vol. 44; no. 1; pp. 1 - 13
• Main Author: Brouthers, Keith D
• Format: Journal Article
• Language: English
• Published: London Palgrave Macmillan 01-01-2013; Palgrave Macmillan UK
• Subjects: 2012 DECADE AWARD WINNING ARTICLE; Alliances; Business and Management; Business Strategy/Leadership; Business structures; Correlation analysis; Cost efficiency; Cost of entry; Costs; Cultural institutions; Diversification; European Union; Financial performance; Foreign business; Foreign markets; Host country; Hypotheses; Influence; International Business; Investment risk; Joint ventures; Management; Market entry; Market potential; Marketing; Modeling; Multinational enterprises; Organization; Questionnaires; Startups; Studies; Transaction costs; Western Europe; Europe
• ISSN: 0047-2506; 1478-6990
• DOI: 10.1057/jibs.2012.22

In this study, we examine foreign market entry mode choice and firm performance for a sample of European Union firms. Examining both financial and non-financial performance measures, we attempt to determine if firms that select their entry mode based on transaction cost, institutional context, and cultural context variables perform better than firms that make other mode choices. We found that mode choice did matter. Firms whose mode choice could be predicted by the extended transaction cost model performed significantly better, on both financial and non-financial measures, than did firms whose mode choice could not be predicted by the extended transaction cost model. Implications for future research are discussed.