A foreign market entry decision model: A comparison of theoretical constructs and the actual practices of Multinational Enterprises

This study examined Country Risk, organizational differences based on size and current approaches to foreign market entry. Country Risk is the particular level of risk inherent in a given foreign market for a given project. Small and midsized organizations are now a major factor in the growth of international trade. These emerging Multinational Enterprises have limited resources and are hypothesized to be significantly different from the traditional large Multinational Enterprises. The traditional foreign market entry approach of overcoming Country Risk through an adaptive learning process as a company enters a foreign market sequentially, has come under increasing critical scrutiny. Many organizations have been driven by competitive pressures to pursue the rationalization of operations and no longer have the time to learn slowly through a sequential entry process.; A survey was conducted of large, midsized and small organizations that currently have foreign subsidiaries to compare actual practices with those posited in the literature. Linear regressions and tests of the equality of means were used to accept or reject the Hypotheses. Factor analysis and ANOVA were used to examine other relationships between the Country Risk categories and issues.; The first hypothesized relationship was that the analysis of Country Risk factors would lead to greater satisfaction with the market entry decisions. The results supported the Country Risk categories included in the survey as valid constructs. However, the data did not support any relationship between Country Risk and the organizational satisfaction or success variables included in the instrument.; It was also hypothesized that large organizations would be more satisfied and more structured in the market entry decision process than small and midsized organizations. No support for either of these relationships was found. Additionally, the extant body of literature suggests that a sequential entry mode will result in more satisfaction with market entry decisions. Again, the data did not support this position.; In summary, the results validated the Country Risk constructs created. A convergence of capabilities between large and small and midsized organizations is strongly suggested. Additionally, tentative support for the dynamic approach to foreign market entry can be found in the data.