Institutional Influence on Mode of Entry

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Journal of International Business Studies (2013) 44, 1–13

& 2013 Academy of International Business All rights reserved 0047-2506


Institutional, cultural and transaction cost influences on entry mode choice and performance

Keith D Brouthers
University of East London, London, UK Correspondence: KD Brouthers, King’s College London, 150 Stamford Street, London SE1 9NH, UK. email:

Abstract In this study, we examine foreign market entry mode choice and firm performance for a sample of European Union firms. Examining both financial and non-financial performance measures, we attempt to determine if firms that select their entry mode based on transaction cost, institutional context, and cultural context variables perform better than firms that make other mode choices. We found that mode choice did matter. Firms whose mode choice could be predicted by the extended transaction cost model performed significantly better, on both financial and non-financial measures, than did firms whose mode choice could not be predicted by the extended transaction cost model. Implications for future research are discussed. Journal of International Business Studies (2013) 44, 1–13. doi:10.1057/jibs.2012.22

INTRODUCTION Research efforts in the area of international entry mode selection have tended to concentrate on transaction cost explanations (Anderson & Gatignon, 1986; Cleeve, 1997; Erramilli & Rao, 1993; Gatignon & Anderson, 1988; Hennart, 1991; Makino & Neupert, 2000; Padmanabhan & Cho, 1996; Taylor, Zou, & Osland, 1998). However, recently scholars such as Brouthers & Brouthers (2000) and Delios and Beamish (1999) have begun extending transaction cost entry mode theory by including cultural context and institutional context variables, as well as transaction cost variables. Researchers (Kogut & Singh, 1988; North, 1990) have suggested that adding both institutional and cultural context variables to...
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