Abstract
A “frontier issue” in international marketing is the appropriate choice of entry mode in foreign markets. The objective of this paper is to offer a transaction cost framework for investigating the entry mode decision. This framework provides 1) a theoretical basis for systematically interrelating the literature into propositions, 2) propositions about interactions which resolve the apparently contradictory arguments advanced to date. Specifically, the paper:
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Illustrates the feasibility of clustering 17 entry modes into the degree of control the mode provides the entrant;
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Proposes that the most appropriate (i.e., most efficient) entry mode is a function of the tradeoff between control and the cost of resource commitment
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advances testable propositions delimiting the circumstances under which each mode maximizes long-term efficiency.
The entry mode literature is reviewed in the context of these propositions, and guidelines are derived for choosing the appropriate mode of entry, given certain characteristics of the firm, the product, and the environment.
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*Erin Anderson is Assistant Professor of Marketing at the Wharton School, University of Pennsylvania, which she joined in 1981. She received the Ph.D. from the UCLA Graduate School of Management. She has published in the Rand Journal of Economics, Marketing Science, and the Sloan Management Review.
**Hubert A. Gatignon has been an Assistant Professor of Marketing at the Wharton School, University of Pennsylvania since 1981. He obtained an MBA from UCLA in 1975 and a Ph.D. in Management from UCLA in 1981. Professor Gatignon has published in Marketing Science, the Journal of Marketing Research, the Journal of Consumer Research, and the Journal of Marketing.
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Anderson, E., Gatignon, H. Modes of Foreign Entry: A Transaction Cost Analysis and Propositions. J Int Bus Stud 17, 1–26 (1986). https://doi.org/10.1057/palgrave.jibs.8490432
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DOI: https://doi.org/10.1057/palgrave.jibs.8490432