Access the full text.
Sign up today, get DeepDyve free for 14 days.
Purpose– The purpose of this paper is to examine how firms with multimarket contacts in both product and geographic markets make foreign direct investments (FDI) location choices and to advance the understanding about how managers with cognitive limits cope with opportunities to take the advantage of mutual forbearance in two types of markets. Design/methodology/approach– Drawing upon the literatures on multimarket contact and decision making, the authors develop original hypotheses on how multimarket contacts in two types of markets influence firms’ choice of destination for foreign investments. The authors test the hypotheses using longitudinal archival data on foreign market entries of Japanese auto parts makers. Findings– The authors find that when choosing FDI locations, firms reduce the cognitive burdens of coping with multimarket contacts in the two types of markets by focussing exclusively on what is perceived as relevant to the decision at hand. The authors also find that this propensity is particularly significant for large firms, whereas small firms use different decision rules and avoid entering markets with the greater degree of multimarket contact with prior entrants, whether in product or national market. Practical implications– Although heuristics simplify competitive environments and reduce managers’ cognitive burdens, such a cost-saving orientation could increase the risk associated with international entry that may end in severe counterattacks from prior entrants, wasteful foreign investments, and substantial entry failures. Originality/value– This study contributes to the literature by adopting multimarket contact theory to foreign market entry, jointly analyzing two types of multimarket contacts, testing three alternative hypotheses about how boundedly rational managers cope with multimarket contacts in two markets, and demonstrating that managers focus on multimarket contacts only in one type of markets when making entry decisions.
Management Decision – Emerald Publishing
Published: Mar 16, 2015
Read and print from thousands of top scholarly journals.
Already have an account? Log in
Bookmark this article. You can see your Bookmarks on your DeepDyve Library.
To save an article, log in first, or sign up for a DeepDyve account if you don’t already have one.
Copy and paste the desired citation format or use the link below to download a file formatted for EndNote
Access the full text.
Sign up today, get DeepDyve free for 14 days.
All DeepDyve websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.