Market Entry Stratege

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Analyzing Foreign Market Entry Strategies: Extending the Internalization Approach Author(s): Peter J. Buckley and Mark C. Casson Source: Journal of International Business Studies, Vol. 29, No. 3 (3rd Qtr., 1998), pp. 539-561 Published by: Palgrave Macmillan Journals Stable URL: http://www.jstor.org/stable/155524 . Accessed: 21/05/2013 09:59 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp

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Analyzing
Extending

Foreign the

Market

Entry

Strategies:

Internalization Approach
PeterJ. Buckley*
UNIVERSITY OF LEEDS

MarkC. Casson**
UNIVERSITY OF READING

A new fully integrated analysis of the foreign market entry decision is presented, encompassing the choice between exporting, licensing, joint venturing and wholly owned foreign investment. The choice between acquisition and greenfield investment is examined, and so too are options based on subcontracting and franchising. The model extends the insights of internalization theory, and draws on concepts from the economics of industrial studies of foreign direct Li investment (FDI)have become much more ambitious in scope over the last 30 years. In the 1960s, the main focus of the Hymer-Kindlebergertheory (Hymer 1976, Kindleberger, 1969) and the prodEImpirical *Peter

organization. A special feature of the model is the distinction between investment in production facilities and in distribution investment facilities - an important practical

distinction that has been overlooked in much of the international business literature. The strength of competition from indigenous rivals is emphasized as a determinant of entry strategy into both production and distribution. uct cycle theory (Vernon 1966) was exporting versus FDI. In the 1970s the internalization approach identified licensing, franchising and subcontracting as other strategic options. The resurgence of mergers and acquisitions and Director of the Centre of

J. Buckley is Professor of International Business International Business Studies at the University of Leeds.

**Mark C. Casson is Professor of Economics at the University of Reading. A preliminary version of this paper was presented to the Annual Conference of the Academy of International Business (U.K. chapter) at Leeds University in April 1997, the Conference on International Firms, Strategic Behaviour and International Location at the University of Paris I, Pantheon-Sorbonne in May 1997, and the Joint Annual Conference of the ESRC Industrial Economics Network and the International Economics Study Group at Nottingham University, June 1997. The authors are grateful to the discussants for their comments. The paper has also benefited from the suggestions of three anonymous referees. JOURNAL OF INTERNATIONAL BUSINESS STUDIES, 29, 3 (THIRD QUARTER 1998): 539-562.

539

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FOREIGN MARKET ENTRY

in the 1980s - often as a "quick fix" route to globalization - highlighted the choice between greenfield ventures and acquisitions. At the same time, the growing participation of U.S. firms in international joint ventures (IJVs)drew attention to the role of co-operative arrangements. In the...
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