Globalstrategy and Multinationals' Entry Mode Choice

GLOBAL STRATEGYAND MULTINATIONALS' ENTRY MODE CHOICE W. Chan Kim* INSEAD Peter Hwang** Baruch College Abstract. This paper makes a case directed towards establishing the importance of global strategic considerations in choosing multinationals'entry mode. Specifically,it is our contention that beyond the environmental and transaction-specificfactors well established in the literature to affect the entry mode decision, we should also consider the strategicrelationshipa multinational envisages between its operations across borders in reaching this decision. After incorporating various global strategic variables into an eclecticframeworkof the factorsinfluencing entrymode the choice, this paper tests both the validityof the overall framework and the importance of each entry mode determinant in differentiating among entry modes. This is done based on ninety-six multinational managers' responses to a survey questionnaire concerning their entry mode decision experiences. The results suggest that an express incorporationof global strategicvariables into an analysis of the entry mode decision is warranted.
This paper is concerned with the critical decision of multinationals' foreign entry mode choice. While existing studies have already identified a diversity of variables that influence this decision, in our view these variables can or essentiallybe collapsedinto one of two categories:environmental ftansactionspecific factors. Common to existing studies identifying these factors is their underlying assumption that each entry decision is made in isolation and is driven essentially by efficiency considerations at the level of the individual entrant or subsidiary unit. Recent works by Anderson and Gatignon [1986]

*W. ChanKim is associateprofessorof strategyand international at management INSEAD.His researchandpublications focus on strategydesign for multinational and corporations economicandorganizational analysisof multinational enterprises. **PeterHwangis