Keith D. Brouthers

Boundaries of the Firm: Insights From International Entry Mode Research

Deciding on the boundaries of a firm as it expands abroad is a critical decision for managers. Despite the rapid growth in research addressing this issue, many questions remain unanswered. In this article, the authors review the international entry mode choice literature, identify weaknesses and shortcomings, and provide suggestions on how researchers can add to the knowledge of mode choice and help managers make better international boundary decisions.

Acquisition or greenfield start-up? Institutional, cultural and transaction cost influences

In this paper, we develop and test a model of diversification mode choice (how firms decide between acquisitions and greenfield start-up ventures) which includes institutional, cultural, and transaction cost variables. Using a sample of Japanese firms entering western Europe, our results show the model correctly predicts over eighty-seven percent of the mode choices. Thus, we provide strong initial evidence to support using institutional, cultural and transaction cost variables to predict firms’ choices between acquisitions and greenfield start-ups in international expansion. Our findings also suggest that organizations which have developed strong intangible capabilities may be able to more readily leverage these capabilities through greenfield start-ups. Copyright

Strategic alliances: Choose your partners

Abstract In the never-ending search for ways of gaining a sustainable competitive advantage, global corporations have increasingly turned to the use of strategic alliances as a method of international expansion. Unfortunately, many firms have been unpleasantly surprised by the outcomes of their strategic alliance relationships. In this paper, we draw upon previous theoretical and empirical work to develop a framework for analysing the likely success of international strategic alliances. Dubbed ‘the 4 Cs’, we show how this analytic framework can assist firms in their efforts to avoid picking the wrong alliance partners.

SME Entry Mode Choice and Performance: A Transaction Cost Perspective

Although small and medium sized enterprises (SMEs) account for a significant portion of international trade, little is know about how they make international entry mode decisions. Transaction cost theory has been widely used to study entry mode selection for large firms. Here we apply the theory to SME mode choices. Further, we set out to determine if SME transaction cost mode choices provide superior performance to other mode choices. We found that transaction cost theory did a good job of explaining SME mode choice and that SMEs that used transaction cost–predicted mode choices performed significantly better than firms using other modes.

Entry mode choice of SMEs in Central and Eastern Europe.

Scholars (e.g., Burgel & Murray, 2000; Jones, 1999; Zacharakis, 1997) have suggested that small and medium–sized enterprise (SME) international entry mode selection is an important new research area. In this study we attempt to determine if a model of large firm entry mode selection can be applied to SME entry mode choice. Using Dunnings eclectic framework, we examined SME entry into Central and Eastern Europe (CEE). We found that Dunnings eclectic framework did a good job of predicting SME entry mode selection in CEE markets. Managerial implications and suggestions for future research are discussed.

Dunning's eclectic theory and the smaller firm: The impact of ownership and locational advantages on the choice of entry-modes in the computer software industry

This paper set out to investigate the entry-mode selection activities of small- and medium-sized service firms. Based on Dunnings eclectic theory (1988, Journal of International Business Studies, Vol. 19, No. 1, pp. 1-31; 1993, Multinational Enterprises and the Global Economy, AddisondashWesley) and previous entry-mode research, the entry-mode selection activities of US computer software firms were examined. The findings tend to indicate that ownership and locational advantages influence the entry-mode choice of small- and medium-sized firms in a manner similar to that of larger firms. Additionally, this study confirms the applicability of the eclectic theory of foreign direct investment to a second sector of the services industry.

Real Options, International Entry Mode Choice and Performance

Recent scholarship suggests that combining insights from real option theory with transaction cost economics may improve decision-making models. In response to this suggestion we develop and test a model of international entry mode choice that draws from both perspectives. Examining samples of Dutch and Greek firms entering Central and Eastern European markets, we found that adding real option variables to a transaction cost model significantly improved its explanatory power. Additionally, firms that used the combined real option/transaction cost predicted choices had significantly higher levels of subsidiary performance satisfaction than firms that did not. Our results suggest that effective managerial decision-making may involve more than mere transaction cost minimization considerations; real option value creation insights also appear to influence the success of decision outcomes.

Key Factors for Successful Export Performance for Small Firms

What key factors result in superior export performance for small firms from small countries? Drawing on the internationalization process model and organizational learning theory, the authors hypothesize and find that (1) emphasizing international sales while (2) restricting exports to a few foreign markets results in superior perceived export performance for the sample of small firms from Greece and several Caribbean countries. Emphasizing international sales while focusing on a few markets enables small firms to develop expertise in those markets, build strong distribution networks, and manage export activities effectively.

Driving blind: Strategic decisionmaking in small companies

Abstract Strategic decisions are important for both large and small firms. Deciding on the correct course of action can mean the difference between success and failure in business. Past strategic decision making research focuses mostly on the “procedural rationality” of the decisions in large multinational firms. In this article, we examine the rationality of the strategic decision making process for a group of small Dutch firms.

Influences on Strategic Decision-making in the Dutch Financial Services Industry

Following recommendations by Rajagopalan, Rasheed, and Datta (1993) and Schwenk (1995), this study attempts to extend what is known about integrative models of strategic decision-making by examining decision-making variable interactions in a field study of non-North American managers. We find some evidence to support the use of integrative models and variable interaction. We also find that some previous results seem to generalize to our Dutch setting, whereas others do not. The study concludes by noting that: (1) integrating multiple perspectives (environmental-based decision-making and managerial characteristics) and including variable interactions enhances what we know about the strategic decision-making process; and (2) much more research is needed before knowing which aspects of strategic decisionmaking can be generalized and which cannot.