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Multinational enterprises' Entry Mode Strategies and Uncertainty: A Review and Extension

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  • Acknowledgements: The authors thank Professors Kamel Mellahi, Tailan Chi and Jay Van Wyk as well as the three anonymous reviewers for their guidance and encouragement. This research was supported in part by Pittsburg State University's Youngman Grant and San Diego State University's Center for International Business Education and Research (CIBER).

Abstract

The issue of uncertainty has been one of the most important topics in the research on multinational enterprises' foreign market entry modes. This paper provides a conceptual review of the literature on the role of uncertainty in entry-mode strategies. It is found that transaction cost theory has focused primarily on entry modes as a way of minimizing behavioural uncertainty, while research using the more recent real options approach has distinguished between endogenous and exogenous types of uncertainty and provided evidence that managing uncertainty through appropriate entry modes may lead to competitive advantage. By synthesizing the relevant literature, this paper provides some new perspectives and avenues for future research on uncertainty and entry-mode choices by considering the impact of firm learning, prior experience and host market attractiveness.

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