Integrative framework for the determinants of market entry: Synthesis of three alternatives based on conventional theories

The choice of foreign market entry (ME) strategies has been an issue of extensive inquiry in the international business literature due to the increase in the role of multinational enterprises (MNEs) in the global economy. By understanding well-known conventional theories on market entry strategy, this article develops an overarching conceptual model identifying key determinants of market expansion. Drawing upon six theories of internationalisation, we argue that limited experience on foreign direct investment (FDI), less possibility of licensee’s opportunistic behaviour, relatively small market attractiveness, and local government’s less favourable attitude to FDI induce multinational firms to choose licensing strategy. On the other hand, lack of experience in operation of wholly-owned subsidiary, less knowledge on host market, lower level of asset specificity, and local government intervention accelerate the formation of international joint venture. Moreover, complementarity, compatibility, and reciprocity are three additional key contingencies in establishing the cooperative mode between foreign and local firms. Based on those determinants identified in this article, further directions for future research are also suggested.