Foreign sequential entry mode choice: A structural inertia perspective and evidence from Chinese firms

Abstract

Purpose

The purpose of this paper is to use the theoretical perspective of structural inertia as a unique lens to study foreign sequential entry mode choices of multinational firms.

Design/methodology/approach

It adopts quantitative analysis of a sample of 121 Chinese publicly listed firms with 564 foreign entry incidents in the 2001-2012 period to test the hypotheses.

Findings

The empirical results show that multinational firms have a tendency to adopt the same mode in the subsequent entry as the number of prior entry mode choice of a given type (joint venture (JV) in this study) increases. The results support the theoretical prediction that organizations repeat their past activities due to structural inertia. Moreover, such an inertia effect in foreign sequential entry mode choices becomes stronger for older multinational firms, larger multinational firms and state-owned multinational firms.

Research limitations/implications

Consistent with existing research, this study focuses on the entry mode choice between JV and wholly owned subsidiaries. However, it is better to examine the relationship identified in the study for different types of entry mode choices to assess result generalizability.

Practical implications

It reminds managers of multinational firms that they should be cautious to the influence of structural inertia that can be a barrier to strategic flexibility when they make entry mode choices.

Originality/value

The main contribution of this study resides in introducing structural inertia perspective to help understand the determinants of foreign sequential entry mode choices of multinational firms.

Citation

Xu, G., Guo, B., Li, W. and Wang, X. (2018), "Foreign sequential entry mode choice: A structural inertia perspective and evidence from Chinese firms", Baltic Journal of Management, Vol. 13 No. 4, pp. 544-563. https://doi.org/10.1108/BJM-09-2017-0280