| With the rapid globalization of business activities, increasing numbers of firms have developed strategies to expand their operations into foreign markets. This study investigated the factors that comprise multinational companies' (MNCs) decisions to operate in foreign markets in one of four entry modes---exporting, licensing/franchising, joint ventures, and wholly owned subsidiaries---with a view toward predicting performance. Based on previous literature, this study utilized the transaction cost approach (TCE) and synthesized a non-transaction cost approach as a conceptual basis for development of a theoretical framework to investigate the effects of several governance structures on multinational companies' choice of foreign market entry modes.; Under this extended TCE model, three groups of variables were examined. These were firm-specific (asset specificity, international experience, and firm size), country-specific (country risk, government restrictions, cultural distance), and market-specific (market potential demand uncertainty, competition intensity) variables. Three dimensions of mode performance were also examined---financial, strategic, and mode satisfaction.; A cross-sectional descriptive survey research design was used, and a survey was developed to test 10 hypotheses. The survey was mailed to 770 CEOs and presidents of small, mid-sized, and large U.S.-based MNCs, with 229 usable surveys returned. Statistical procedures included descriptive methods, Spearman's correlations, ANOVA, MANOVA, and multiple discriminant analysis.; The results showed that the effects of all extended TCE variables were significant predictors of entry mode choice decisions and that the degree of control entry mode had significant influence on mode performance. However, the findings also showed that performance of firms whose entry mode choice was based on the extended TCE model was not significantly better than performance of firms whose entry mode choice was not based on the extended TCE model.; Recommendations for further research included replication of this study with larger samples from individual industries and consideration of CEOs' and presidents' experience and leadership style. This study should fill a gap in the literature on the interrelationships among the determinant variables that influence a firm's entry mode choice and performance. The findings should aid multinationals' managers to understand and apply this knowledge to their strategic decisions for successful entry into foreign markets. |
