El modelo de trabajo: estados léxicos y enunciados estativos

Theories relevant to entry mode selection

Once a foreign market is selected, the subsequent critical decision in internationalisation is entry mode choice, which determines the amount of resources committed to the selected foreign markets (Kraus et al., 2015). A choice of entry mode reflects the level of control a firm has over its international activities and the level of risk that the firm will bear in the selected foreign markets (Hill, Hwang, & Kim, 1990). Extant studies have classified entry mode choice into two categories: equity entry mode and non-equity entry mode (Hollender, Zapkau, & Schwens, 2017). Equity entry mode requires a high level of resource commitment and entails a high level of risk, but allows firms to have tight control over operational and strategic decision-making in a foreign market (Brouthers & Nakos, 2004). In contrast, non-equity entry mode is less resource intensive and provides firms with great flexibility, but firms are not able to closely monitor changes in the foreign market and subsequently become more vulnerable to external challenges (Brouthers & Nakos, 2004). The research attention has predominantly concentrated on MNE entry mode choice. The current knowledge regarding SMEs’ entry mode choice is equivocal (Laufs & Schwens, 2014).

Theories that have been widely applied in the study of entry mode choice are the transaction cost theory, the institutional theory, and the resource-based view. The transaction cost theory is the most widely used theoretical perspective in research on entry mode choice. According to the theory, entry modes that involve a high level of resource commitment will be chosen in the following conditions: (1) when the firm’s competitive advantages are built upon proprietary knowledge and technology; (2) when the firm is unable to predict the behaviour of individuals in a foreign market; (3) and/or when the political and legal risks are low in a foreign market (Brouthers & Nakos,

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2004). A high commitment entry mode enables firms to protect technological knowledge from diffusing to competitors (McNaughton & Bell, 2001), and minimise opportunistic behaviour displayed by individuals in foreign markets (Klein, Frazier, &

Roth, 1990), while a low resource intensive entry mode allows firms to remain flexible to market and institutional challenges in foreign markets (Erramilli & Rao, 1993).

The institutional approach is an extension of the eclectic paradigm (Brouthers, Brouthers, & Werner, 2008). It suggests that the institutional environment of a foreign market, which encompasses culture, economy and politics, affects the boundary of a firm’s choice of entry mode (Brouthers & Hennart, 2007). The great distance in culture and ideology between home and host country, and/or the inefficient functioning of the political, legal, and economic institutions in a host country entail high cost and risk for doing business (De Villa, Rajwani, & Lawton, 2015; Schwens, Eiche, & Kabst, 2011).

The perceived risk and cost subsequently discourage firms from using a resource-intensive entry mode (Kraus et al., 2015; Laurell, Andersson, & Achtenhagen, 2013).

The negative influence of institutional distance on internationalisation is even more prominent in the context of SMEs, since they are resource constrained and tend to have relatively weak legitimacy in foreign markets (Ojala, 2015). Recently, research has examined the influence of home country institutional environment on entry mode choice.

Some studies found that the level of political risk in the home country affects the development of certain capabilities, which helps firms confront challenges of internationalisation (Cuervo-Cazurra, Ciravegna, Melgarejo, & Lopez, 2018).

The Uppsala model has also been applied to examining entry mode choice (Johanson &

Vahlne, 1977). Similar to the case of foreign market selection, a firm follows an incremental process to increase the amount of resources committed to the entry mode adopted in a foreign market. Usually, it starts with exporting, followed by contract agreements, joint ventures and lastly establishment of wholly-owned operations. Thus, the entry mode selection is a time-dependent process (De Villa et al., 2015; Johanson &

Vahlne, 2009). The previously applied entry modes, especially those frequently used, determine the subsequent entry mode choice (Swoboda, Elsner, & Olejnik, 2015). The Uppsala model highlights the importance of prior experience as a valuable firm-specific resource that affects entry mode choice. This point also echoes the central argument of

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the resource-based view that valuable, rare, and inimitable firm-specific resources and capabilities are critical for development of competitive advantages.

Performance implications of entry mode diversification

Entry mode choice has been considered an important strategic decision, since it involves resource commitment in foreign markets with different levels of control and risk. Unlike the research on antecedents to entry mode choice, the research on its performance implications has progressed in a fragmented manner and mainly focused on MNEs. A significant amount of research attention has focused on the performance implications of equity-based entry modes in the context of MNEs, rather than those of non-equity entry modes (Zhao, Ma, & Yang, 2017). More specifically, research efforts have been mainly devoted to comparing the performance effects of two equity-based entry modes, namely joint ventures and wholly-owned subsidiaries (Brouthers & Hennart, 2007). Some studies have found that the wholly-owned subsidiaries outperform joint ventures (Woodcock, Beamish, & Makino, 1994; Zhao et al., 2017). To take it further, some studies stated that the survival and performance implications of joint ventures and wholly-owned subsidiaries depend on alignment of transactional and institutional factors (Brouthers, 2013; Meschi, Phan, & Wassmer, 2016).

The performance implications of SMEs’ entry mode choice have received scant research attention. It has traditionally been accepted that SMEs with limited resources would choose entry modes with low resource commitment, such as exporting, when operating in foreign markets. Nevertheless, some SMEs, known as international new ventures, have been found to commit to foreign markets through resource-intensive entry modes. Accordingly, entry mode choice by SMEs has received increasing research attention. With a significant body of research focusing on the performance effect of exporting, only a few studies have attempted to compare the performance implications of equity- and non-equity entry modes in the context of SMEs. The empirical results remain conflicting. Some studies suggest that equity entry modes outperform non-equity entry modes (Lu & Beamish, 2001), while other studies found that the influence of entry mode choice on performance is not clear (Brouthers & Nakos, 2004; Hollender et al., 2017). These studies conceptualised entry mode as binary: equity entry mode versus non-equity entry modes. The classification of entry mode choice as binary may be not

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appropriate in the context of SMEs, as SMEs are not a smaller version of MNEs.

Compared to their larger counterparts, SMEs are resource constrained, which limits their ability to choose entry modes that involve a high level of resource commitment (Ripollés, Blesa, & Monferrer, 2012). Thus, non-equity entry modes are the dominant mode of operation adopted by SMEs. Moreover, SMEs differ from their large counterparts in ownership and managerial styles (Cheng & Yu, 2008), which lead to different choices in equity-based entry modes. To be more specific, many SMEs are family-owned and/or owner-managed. These firms display great risk aversion and strong intention to maintain management control over business operations; thus they are more willing to choose wholly-owned subsidiaries rather than joint ventures (Boellis, Mariotti, Minichilli, & Piscitello, 2016; Yamanoi & Asaba, 2018). In addition, SMEs are highly sensitive to external challenges and are vulnerable to changes in market conditions and institutional/technological environment (Cheng & Yu, 2008), thereby compromising SMEs’ ability to bear risk associated with resource-intensive entry modes.

The conceptualisation of SME entry mode choice as binary overlooks the critical issue of whether SMEs diversify their entry modes as a way to diversify risk in response to market and institutional challenges and ultimately improve performance (Arregle et al., 2016; Oliveira et al., 2018). In order to reflect the heterogeneous choices in entry modes, especially those among non-equity entry modes, recent studies have applied a new range of entry modes. It encompasses indirect exporting, direct exporting, contractual agreements (such as contract production, licensing and franchising), joint ventures, and wholly-owned subsidiaries. This conceptualisation of entry modes provides a better opportunity to reflect SMEs’ simultaneous commitment to multiple entry modes and to capture the associated performance implications.

2.2.3 Combined effects of the selection of foreign market and entry mode on