International risk perceptions and mode of entry: a case study of Malaysian multinational firms

Abstract

Risk perceptions are believed to influence a firm's choice of entry mode into foreign markets. However, studies of the risks faced by international businesses have typically focused on a specific category of risk, such as political or financial risk, overlooking possible interrelationships among the many types of risk that are present in the international environment. This study applies an integrated international risk framework to investigate the relationship between risk perceptions and the choice of foreign market entry mode. Data from 69 Malaysian public companies yielded a high degree of correlation among 11 international risk variables that were broadly grouped into two categories: external risks and internal risks. A significant relationship was found between the level of perceived risk and choice of entry mode, such that low risk perceptions were associated with high control modes of entry and high risk perceptions were associated with low control modes of entry.