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Broadening the foreign market entry mode decision: separating ownership and control

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Abstract

This paper argues that the ownership and control dimensions of foreign market entry mode choice should be separated, and that foreign market entry mode decisions should be expanded to business activities beyond production and distribution. Empirical results from the global hotel industry indicate that the transferability of the entrant's competitive advantages, the local market's absorptive capacity, and the availability of trustworthy local partners differentially affect the ownership and control dimensions of the entry mode decision.

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Notes

  1. We also utilized discriminant analysis to investigate the hypotheses. Overall, this analysis was generally consistent with our logistic regression findings. The authors will provide interested readers with these results upon request.

  2. a Anchored by “1” (no advantage) and “5” (great advantage).

  3. b Deleted from further analysis.

  4. c Anchored by “1” (very low) and “5” (very high).

  5. d Anchored by “1” (very poor) and “5” (very good).

  6. e Construct reliability assumed to be 0.85.

  7. f Anchored by “1” (very small) and “5” (very large).

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Author information

Authors and Affiliations

  1. Department of Marketing, Pamplin College of Business, Virginia Tech, Blacksburg, USA

    J R Brown

  2. School of Hotel Administration, Cornell University, Ithaca, NY, USA

    C S Dev

  3. School of Business, University of Hong Kong, Pokfulam, P.R. China

    Z Zhou

Authors
  1. J R Brown
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  2. C S Dev
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  3. Z Zhou
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Corresponding author

Correspondence to J R Brown.

Additional information

Accepted by Arie Lewin, Editor in Chief, 8th May 2003.

Appendix: Questionnaire items

Appendix: Questionnaire items

Parent company competitive advantageFootnote 2

χ2=205.32, df=62, P=0.00; GFI=0.86, CFI=0.93.

1. Generating customer service (CA_SVC; ρ=0.914)

  1. a)

    Finding good locations (CA1)Footnote 3.

  2. b)

    Creating customer base (CA4) b .

  3. c)

    Creating repeat business (CA5) b .

  4. d)

    Ensuring service quality (CA6).

  5. e)

    Ensuring customer satisfaction (CA8).

  6. f)

    Providing appropriate services (CA13) b .

  7. g)

    Quality of guest-contact staff (CA14).

  8. h)

    Quality of managerial team (CA15).

  9. i)

    Teamwork among employees (CA16).

2. Management and organization (CA_MGT; ρ=0.850) b

  1. a)

    Knowing the right time to enter (CA2) b .

  2. b)

    Creating the brand reputation (CA3) b .

  3. c)

    Establishing a chain operation (CA7) b .

  4. d)

    Company culture (CA17).

  5. e)

    Operating policies and procedures (CA18).

  6. f)

    Implementing employee empowerment (CA19).

  7. g)

    Quality of reservation system (CA20) b .

  8. h)

    Information technology systems (CA21).

3. Physical facility (CA_FAC; ρ=0.932)

  1. a)

    Quality of physical facilities (CA9).

  2. b)

    Décor/design of properties (CA10).

  3. c)

    Ambience/atmosphere of properties (CA11).

  4. d)

    Comfort of physical facilities (CA12).

Local business conditions facing hotel's parent company

χ2=126.49, df=53, P=0.00; GFI=0.91, CFI=0.93.

1. Resource availability (RESOURCE; ρ=0.829)

  1. a)

    Availability of qualified service employees (OC1)Footnote 4.

  2. b)

    Availability of qualified managerial staff (OC2)Footnote 5.

  3. c)

    Availability of reliable suppliers (OC3) d .

  4. d)

    Quality of supplies for your hotel (BC4) b , d

2. Training costs (TNG_COST; ρ=0.876)

  1. a)

    Cost of training service employees (OC4) c .

  2. b)

    Cost of training managerial staff (OC5) c .

3. Availability of local investment partners (INVESTOR; ρ=0.810)

  1. a)

    Availability of qualified local investment partners to your parent company for establishing new hotels (OC7) c .

  2. b)

    Availability of trustworthy local investment partners to your parent company for establishing new hotels (OC8) c .

4. Market potential (MKT_POT; ρ=0.850) Footnote 6

  1. a)

    Size of the hotel market (MC1)Footnote 7

  2. b)

    Potential for growth in the hotel market (MC2) b , f .

5. Local market's general business conditions (BSNSCOND; ρ=0.821)

  1. a)

    Political relations between the host and home country (BC1) b , d .

  2. b)

    Government restrictions on operations of foreign hotels (BC2) b , d .

  3. c)

    Reputation of your hotel's brand (BC3) b , d .

  4. d)

    Quality of infrastructure (phones, roads, etc.) (BC5) c .

  5. e)

    General business conditions (BC6) d .

  6. f)

    Political stability (BC7) d .

  7. g)

    Aggressiveness of competitors (OC6) b , c

  8. h)

    Number of new competitors expected to enter your market in the next 5 years (MC3) b , c

6. Sociocultural distance (DISTANCE; ρ=0.883)

  1. a)

    Differences in business practices between this country and the parent's home country (MC4) f .

  2. b)

    Differences in culture between this country and the parent's home country (MC5) f .

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Brown, J., Dev, C. & Zhou, Z. Broadening the foreign market entry mode decision: separating ownership and control. J Int Bus Stud 34, 473–488 (2003). https://doi.org/10.1057/palgrave.jibs.8400050

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  • DOI: https://doi.org/10.1057/palgrave.jibs.8400050

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