Why Service and Manufacturing Entry Mode Choices Differ: The Influence of Transaction Cost Factors, Risk and Trust


Address for reprints: Keith D. Brouthers, Fox School of Business and Management, Temple University, 111 Speakman Hall, 1810 North 13th Street, Philadelphia, PA 19122-6083, USA.


ABSTRACT In this study, we suggest that disparities between service and manufacturing firms’ international entry mode choices can be explained by differences in their reaction to transaction cost based variables and by the influence of risk and trust propensity. We find that: (1) due to the investment intensive nature of manufacturing, environmental uncertainties and risk propensity influence manufacturers’ mode choices; while (2) behavioural uncertainties, trust propensity and asset specificity influence service providers’ entry mode choices because of the people-intensive nature of services. Implications for future research are discussed.