FOREIGN MARKET ENTRY FORMS: AN INFORMATION-PROCESSING - TRANSACTIONS COST APPROACH

This study uses concepts from the areas of Institutional and Industrial Economics to analyze the firm's strategic choice of the organizational or contractual mode at the foreign market entry.;We examine different organizational and contractual entry modes in terms of how capable they are in disbursing different types of information to the customers, and how vulnerable the modes are to different types of transactions costs. We also introduce the notion of firm's information assets. These assets--internationally experienced and mobile personnel, and internationally known brand-name--help the firm to hurdle the entry barriers.;We set up the main hypothesis based on the previous discussion: The foreign market entry mode can be explained by specific product and firm characteristics, which are derived from the information disbursal and transactions cost theory. Each product sets specific information disbursal requirements. Each firm has specific information assets at hand, which lowers the information entry barriers. And as each entry mode has specific capacity to disburse information to the customers, we can find a fit or match between the foreign market entry mode and the firm and product characteristics.;Empirical testing uses field research data of Finnish firms' entries into U.S. during 1978 and 1984. The data is analyzed by using ordered probit regression models and multivariate discriminant models.;It examines different elements of market-related (firm-customer) information disbursal requirements, especially at the entry stage. It discusses how the amount and nature of these requirements may vary among products. In addition to the conventional information disbursal devices such as brand-name marketing and sales assistance, we introduce so called signalling devices. These originate from the transactions cost theory, where non-salvagable investments are suggested to have informative role: They signal strong commitment to the market. All the information disbursal requirements form the firm's information entry barriers, which we hypothesize to vary among specific product characteristics.;The main hypothesis withstands the empirical testing. The discriminant model proves that the choice of foreign market entry mode systematically varies among products and firms, with characteristics derived from information processing/transactions cost framework. (Abstract shortened with permission of author.).