An Investigation of Market Entry Strategy Selection: Exporting vs Foreign Direct Investment Modes—A Home-host Country Scenario

Abstract

A critical issue for firms considering conducting business overseas is the choice of market entry mode. The two most widely options are exporting and foreign direct investment. This study examined a number of factors which have been suggested in the literature as important determinants of the choice between these two entry modes. Key factors examined included international business experience, immigrant effect, service requirements, and market size. The study employed a logistic regression analysis method to examine the market entry mode decisions of 124 New Zealand firms operating in a single foreign market (Taiwan). Significant factors identified included product type and proxy experience (firms' experience with Japan), and an "immigrant effect" which impacted on the choice of FDI mode.