| This paper examines the entry mode selection decision of Swiss machine tool firms to serve the European Union market. It further investigates the impact of the Single European Act (SEA) introduced at the end of 1992 on the entry mode selection decision of the firm and which factors have lead to their decision.; Switzerland is not a part of the European Union (EU), and consequently cannot take advantage of the four freedoms (free movement of labor, goods, capital and service) and from the potential efficiency gain through economy of scale and scope. A valid alternative for Swiss companies may be to establish a manufacturing facility within the EU to overcome these disadvantages. However, the problems and risks associated with the establishment of a production site within the EU may even be greater than the advantages gained from it. The goal of this research is to investigate the location decision and evaluate the alternatives based on an eclectic paradigm widely accepted in the literature (Dunning's), which was slightly modified to serve this research.; The analysis is based on 87 valid questionnaires. Two main hypotheses and several sub-hypotheses are tested using descriptive analysis and a binomial logistic regression model. Personal interviews with 10 selected companies were also used helping to interpret the results correctly.; It was found that 71.3% of the Swiss companies affected, use exclusively a 100% exporting mode mainly due to small firm size, the financial risk involved, and the associated problems and risks in technology transfer to a partner. Econometric results showed, that Border Control Obstacles, Exchange Rate Cost and Risks, Firm Ownership, and Firm Level of Diversity are significant factors to determine whether a company is using a 100% export entry mode or not.; Twenty percent of companies used an equity entry mode to serve the EU market mainly to follow customers, search for resources, and cost reduction. Results showed, that Border Control Obstacles, Cultural Distance, Firm Size and Firm Level of Diversity are significant factors to determine whether a company uses such an entry mode.; No evidence was found that Switzerland's non-EU membership has led to an increase in equity entries into the EU by Swiss machine tool firms. |
