GLOBAL STRATEGY AND MULTINATIONALS’ ENTRY MODE CHOICE

GLOBAL STRATEGY AND MULTINATIONALS’ ENTRY MODE CHOICE

FIRST QUARTER 1992 | W. Chan Kim*, INSEAD Peter Hwang**, Baruch College
This article argues for the importance of global strategic considerations in determining the entry mode choice of multinational corporations (MNCs). While existing literature focuses on environmental and transaction-specific factors influencing entry mode decisions, the authors contend that global strategic considerations should also be taken into account. They propose that the strategic relationship a multinational envisions between its operations across borders is a crucial factor in the entry mode decision. The authors tested this hypothesis using data from 96 multinational managers, finding that incorporating global strategic variables into the analysis of entry mode decisions is essential. The paper challenges the traditional view that entry decisions are made in isolation based on efficiency considerations at the subsidiary level. Instead, it emphasizes the importance of a multinational's global strategic posture, which involves the strategic relationship between its operations across borders. This perspective is rooted in the geocentric approach to multinational management, which views subsidiaries as interdependent rather than independent units. The authors also draw on recent literature on global strategy, which emphasizes the importance of interdependencies between subsidiary units and the pursuit of overall corporate success rather than individual subsidiary efficiency. They argue that a multinational's global strategic posture significantly influences its entry mode choice, as actions in one market can have repercussions in others. Therefore, incorporating global strategic variables into the analysis of entry mode decisions is an essential research task.This article argues for the importance of global strategic considerations in determining the entry mode choice of multinational corporations (MNCs). While existing literature focuses on environmental and transaction-specific factors influencing entry mode decisions, the authors contend that global strategic considerations should also be taken into account. They propose that the strategic relationship a multinational envisions between its operations across borders is a crucial factor in the entry mode decision. The authors tested this hypothesis using data from 96 multinational managers, finding that incorporating global strategic variables into the analysis of entry mode decisions is essential. The paper challenges the traditional view that entry decisions are made in isolation based on efficiency considerations at the subsidiary level. Instead, it emphasizes the importance of a multinational's global strategic posture, which involves the strategic relationship between its operations across borders. This perspective is rooted in the geocentric approach to multinational management, which views subsidiaries as interdependent rather than independent units. The authors also draw on recent literature on global strategy, which emphasizes the importance of interdependencies between subsidiary units and the pursuit of overall corporate success rather than individual subsidiary efficiency. They argue that a multinational's global strategic posture significantly influences its entry mode choice, as actions in one market can have repercussions in others. Therefore, incorporating global strategic variables into the analysis of entry mode decisions is an essential research task.
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