Sequential expansion in a foreign market

Sequential expansion in a foreign market PurposeA multinational firm’s expansion in a foreign market is a key issue of international business. The purpose of this study is to extend the understanding of essential drivers that will facilitate firm’s assessment of alternative modes of sequential expansion.Design/methodology/approachThe study applies the knowledge-based view and explores a multinational firm’s sequential post-entry expansion in a foreign market. Event histories of Swedish industrial firms’ establishments of wholly owned subsidiaries in Germany, the UK and the USA were explored using Cox regression.FindingsBroad market experiences stemming from corporate strategy and deep experiences from the preceding subsidiary increase the likelihood of a sequential investment. Effects of broad experiences are contingent on the context specified by the geographic scope of the firm and its general subsidiary experience.Research limitations/implicationsThe study contributes to international expansion theory and integrates sources of knowledge originating from strategy theory and internationalization theory. The study shows that the dual approach is needed to understand international expansion.Practical implicationsIn evaluating a further subsidiary investment in a foreign market, the multinational firm is advised to assess whether it possesses enough market experiences to justify the investment. The experiences should be associated with corporate strategy, the previous wholly owned subsidiary and the context specifications identified in the study.Originality/valueThe study is unique, as it addresses the simultaneous impact of broad and deep market experiences. Also, the inclusion of central context specifications makes the study novel. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png European Business Review Emerald Publishing

Sequential expansion in a foreign market

European Business Review, Volume 28 (3): 27 – May 9, 2016

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0955-534X
DOI
10.1108/EBR-01-2016-0017
Publisher site
See Article on Publisher Site

Abstract

PurposeA multinational firm’s expansion in a foreign market is a key issue of international business. The purpose of this study is to extend the understanding of essential drivers that will facilitate firm’s assessment of alternative modes of sequential expansion.Design/methodology/approachThe study applies the knowledge-based view and explores a multinational firm’s sequential post-entry expansion in a foreign market. Event histories of Swedish industrial firms’ establishments of wholly owned subsidiaries in Germany, the UK and the USA were explored using Cox regression.FindingsBroad market experiences stemming from corporate strategy and deep experiences from the preceding subsidiary increase the likelihood of a sequential investment. Effects of broad experiences are contingent on the context specified by the geographic scope of the firm and its general subsidiary experience.Research limitations/implicationsThe study contributes to international expansion theory and integrates sources of knowledge originating from strategy theory and internationalization theory. The study shows that the dual approach is needed to understand international expansion.Practical implicationsIn evaluating a further subsidiary investment in a foreign market, the multinational firm is advised to assess whether it possesses enough market experiences to justify the investment. The experiences should be associated with corporate strategy, the previous wholly owned subsidiary and the context specifications identified in the study.Originality/valueThe study is unique, as it addresses the simultaneous impact of broad and deep market experiences. Also, the inclusion of central context specifications makes the study novel.

Journal

European Business ReviewEmerald Publishing

Published: May 9, 2016

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