Chapter 9 – Entering Foreign Markets
The institution-based view suggests that firms need to take actions deemed
legitimate and appropriate by the various formal and informal institutions
governing market entries
o Regulatory risks
o Trade and investment barriers
o Differences in cultures, norms, and values
The resource-based view argues that foreign firms need to deploy
overwhelming resources and capabilities to offset their liability of foreignness
o Value
o Rarity
o Imitability
o Organization
Location-specific advantages are the benefits a firm reaps from the features
specific to a place
Cultural distance is the difference between two cultures along identifiable
dimensions such as individualism
Institutional distance is the extent of similarity or dissimilarity between the
regulatory, normative, and cognitive institutions of two countries
First-mover advantages are benefits that accrue to firms that enter the
market first and that late entrants do not enjoy
o Proprietary, technological leadership
o Pre-emption of scarce resources
o Establishment of entry barriers for late entrants
o Avoidance of clash with dominant firms at home
o Relationships with key stake-holders such as governments
Late-mover advantages are benefits that accrue to firms that enter the
market later and that early entrants do not enjoy
o Opportunity to free ride on first-mover investments
o Resolution of technological and market uncertainty
o First mover’s difficulty to adapt to market changes
Scale of entry is the amount of resources committed to entering a foreign
market
The institution-based view suggests that firms need to take actions deemed
legitimate and appropriate by the various formal and informal institutions
governing market entries
o Regulatory risks
o Trade and investment barriers
o Differences in cultures, norms, and values
The resource-based view argues that foreign firms need to deploy
overwhelming resources and capabilities to offset their liability of foreignness
o Value
o Rarity
o Imitability
o Organization
Location-specific advantages are the benefits a firm reaps from the features
specific to a place
Cultural distance is the difference between two cultures along identifiable
dimensions such as individualism
Institutional distance is the extent of similarity or dissimilarity between the
regulatory, normative, and cognitive institutions of two countries
First-mover advantages are benefits that accrue to firms that enter the
market first and that late entrants do not enjoy
o Proprietary, technological leadership
o Pre-emption of scarce resources
o Establishment of entry barriers for late entrants
o Avoidance of clash with dominant firms at home
o Relationships with key stake-holders such as governments
Late-mover advantages are benefits that accrue to firms that enter the
market later and that early entrants do not enjoy
o Opportunity to free ride on first-mover investments
o Resolution of technological and market uncertainty
o First mover’s difficulty to adapt to market changes
Scale of entry is the amount of resources committed to entering a foreign
market
