Foreign sequential entry mode choice

Abstract

Purpose-This study aims to use the theoretical perspective of structural inertia as a unique lens to study the foreign sequential entry mode choices of multinational firms. Design/methodology/approach-We adopt a quantitative analysis of a sample of 121Chinese publicly listed firms with 564 foreign entry incidents in the 2001-2012 period to test our hypotheses. Findings-The empirical results show that multinational firms have a tendency to adopt the same mode in the subsequent entry as the number of prior entry mode choices of a given type (joint venture in our study) increases. The results support the theoretical prediction that organizations repeat their past activities due to structural inertia. Moreover, such an inertia effect in foreign sequential entry mode choices becomes stronger for older multinational firms, larger multinational firms and state-owned multinational firms.Research limitations-Consistent with existing research, our study focuses on the entry mode choice between joint ventures and wholly owned subsidiaries. However, it is better to examine the relationship identified in our study for different types of entry mode choices in order to assess result generalizability.Practical implications-It reminds managers of multinational firms that they should be cautious about the influence of structural inertia, which can be a barrier to strategic 2 flexibility, when making entry mode choices.Originality/value-The main contribution of our study resides in introducing a structural inertia perspective to help understand the determinants of foreign sequential entry mode choices of multinational firms.