Internationalization Motivations and Foreign Market Entry Modes

Manuel Aníbal Silva Portugal Vasconcelos Ferreira, Fernando Ribeiro Serra, Nuno Rosa Reis


The motivations for the internationalization of firms influence the selection of foreign entry modes. In this article we use John Dunning’s (1993) classification, which distinguishes four primary motives to invest overseas – market seeking, resource seeking, strategic asset seeking and efficiency seeking –, conceptually discussing the impact of the selected foreign entry modes. The methods and strategies of multinational corporations (MNCs) are chosen in a broader framework, where internationalization motivations converge with the exploitation, or exploration, of firm-specific advantages. Our analysis is supported by a set of theoretical propositions. The results demonstrate that MNCs must develop the best possible combination of strategy-structure for their international operations, and yet conceive a casuistic analysis of each individual operation. We have therefore contributed to a better understanding of the selection of foreign market entry modes as a reflection of strategic choices or motivations.


Internationalization Motivations; Strategic Asset Seeking; Market Seeking; Foreign Market Entry Modes; Market Selection.


Agarwal, S., & Ramaswami, S. (1992). Choice of foreign market entry mode: Impact of ownership, location, and internalization factors. Journal of International Business Studies, 23(1), 1-27.

Augier, M., & Teece, D. (2007). Dynamic capabilities and multinational enterprise: penrosean insights and omissions. Management International Review, 47(2), 175-192.

Barkema, H., & Vermeulen, F. (1998). International expansion through start-up or acquisition: a learning perspective. Academy of Management Journal, 41(1), 7-26.

Barkema, H., Bell, J., & Pennings, J. (1996). Foreign entry, cultural barriers, and learning. Strategic Management Journal, 17(2), 151-166.

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120.

Beamish, P. (1985). The characteristics of joint venture in developed and developing countries. Columbia Journal of World Business, 20(3), 13-19.

Brouthers, K., & Hennart, J-F. (2007). Boundaries of the firm: insights from international entry mode research. Journal of Management, 33(3), 395-425.

Buckley, P., Cross, A., Tan, H., Xin, L., & Voss, H. (2008). Historic and emergent trends in chinese outward direct investment. Management International Review, 48(6), 715-748.

Camison, C., & Fores, B. (2011). Knowledge creation and absorptive capacity: the effect of intra-district shared competences. Scandinavian Journal of Management, 27(1), 66-86.

Cantwell, J. (1989). Technological innovations and multinational corporations. Oxford: Blackwell.

Cantwell, J. (2001). Innovation and information technology in MNE. In A. Rugman, & T. Brewer (Eds.). Oxford Handbook of International Business. Oxford: Oxford University Press.

Caves, R. (1971). International corporations: the industrial economics of foreign investment. Economica, 38(149), 1-27.

Conner, K., & Prahalad, C. (1996). A resource-based theory of the firm: knowledge versus opportunism. Organization Science, 7(5), 477-501.

Cuervo-Cazurra, A., & Genc, M. (2008). Transforming disadvantages into advantages: developing-country MNEs in the least developed countries. Journal of International Business Studies, 39(6), 957-979.

Demirbag, M., Tatoglu, E., & Glaister, K. (2008). Factors affecting perceptions of the choice between acquisition and greenfield entry: the case of Western FDI in an emerging market. Management International Review, 48(1), 5-38.

Deng, P. (2007). Investing for strategic resources and its rationale: the case of outward FDI from Chinese companies. Business Horizons, 50(1), 71-81.

Dunning, J. (1977). The location of economic activity and the multinational enterprise: A search for an eclectic approach. In B. Ohlin, P. Hesselborn, & P. Wilkman (Eds.) The international allocation of economic activity. London: Macmillan.

Dunning, J. (1988). The eclectic paradigm of international production: a restatement and some possible extensions. Journal of International Business Studies, 19(1), 1-31.

Dunning, J. (1993). Multinational enterprises and the global economy. Boston, MA: Addison-Wesley.

Dunning, J. (1998). Location and the multinational enterprise: A neglected factor? Journal of International Business Studies, 29(1), 45-66.

Dunning, J. (2001). The eclectic (OLI) paradigm of international production: past, present and future. International Journal of the Economics of Business, 8(2), 173-190.

Eckel, C. (2003). Fragmentation, efficiency seeking FDI and employment. Review of International Economics, 11(2), 317-331.

Ekholm, K., Forslid, R., & Markusen, J. (2007). Export-platform foreign direct investment. Journal of the European Economic Association, 5(4), 776-795.

Elango, B. (2009). Minimizing effects of 'liability of foreignness': response strategies of foreign firms in the United States. Journal of World Business, 44(1), 51-62.

Ferreira, M. (2005). The effect of the MNC's capabilities and knowledge strategy on the degree of equity ownership acquired. Tese de doutorado, University of Utah, Utah, Estados Unidos da América.

Ferreira, M. P. (2008). Building and leveraging knowledge capabilities through cross-border acquisitions. In S. Tallman (Ed.) A new generation in international strategic management. Northampton: Edward Elgar.

Ferreira, M. P. & Serra, F. (2008). Foreign entry modes under institutional pressures: the impact of strategic resource seeking and market seeking strategies. Revista de Ciências da Administração, 10(22), 11-29.

Ferreira, M. P., & Serra, F. (2010). Make or buy in a mature industry? Models of client-supplier under TCT and RBV perspectives. BAR - Brazilian Administration Review, 7(1), 22-39.

Ferreira, M. P., Li, D., & Jang, Y. (2009). Foreign entry strategies: strategic adaptation to the various facets of the institutional environments. Development and Society, 38(1), 27-55.

Ferreira, M. P., Li, S., Lopes, M., & Serra, F. (2007). Cross-border acquisitions of foreign firms in Portugal and of Portuguese firms abroad: exploration and exploitation through acquisitions. Economia Global e Gestão, 12(1), 125-147.

Ferreira, M. P., Serra, F., & Reis, N. (2011). On the adaptation of the firm’s strategies to the International Business Environment: A knowledge-based and evolutionary perspective. European Journal of International Management, no prelo.

Franco, C., Rentocchini, F., & Marzetti, G. (2008). Why do firms invest abroad? An analysis of the motives underlying foreign direct investments. Trento: Università Degli Studi di Trento. Discussion paper n.17.

Fujita, M., Krugman, P., & Venables, A. (2001). The spatial economy: cities, regions, and international trade. Cambridge: MIT Press.

Gao, G., & Pan, Y. (2010). The pace of MNEs’ sequential entries: cumulative entry experience and the dynamic process. Journal of International Business Studies, 41(9), 1572-1580.

Gupta, O., & Ross, G. (2001). Mergers and acquisitions through an intellectual capital perspective, Journal of Intellectual Capital, 2(3), 297-309.

Head, K., Ries, J., & Swenson, D. Agglomeration benefits and location choice: evidence from japanese manufacturing investments in the United States. Journal of International Economics, 38(3-4), 223-247.

Hennart, J-F. (1982). A theory of the multinational enterprise. Ann Arbor: University of Michigan Press.

Hill, C., Hwang, P., & Kim, C. (1990). An eclectic theory of the choice of international entry mode. Strategic Management Journal, 11(2), 117-128.

Hymer, S. (1976). The international operations of national firms: a study of direct foreign investment. Cambridge: MIT Press.

Johanson, J., & Mattsson, L-G. (1988). Internationalization in industrial systems: A network approach. In N. Hood, & J-E Vahle (Eds.). Strategies in Global Competition. New York: Croom Helm.

Johanson, J., & Vahlne, J.-E. (2009). The Uppsala internationalization process model revisited: from liability of foreignness to liability of outsidership. Journal of International Business Studies, 40(9), 1411-1431.

Li, D., Ferreira, M. P., & Serra, F. (2009). Technology transfer within MNEs: inter-subsidiary competition and cooperation. Revista de Administração e Inovação, 6(1), 139-158.

Luostarinen, R., & Welch, L. (1990). International business operations. Finland: Helsinki School of Economics.

Makino, S., & Neupert, K. (2000). National culture, transaction costs, and the choice between joint venture and wholly owned subsidiary. Journal of International Business Studies, 31(4), 705-713.

Makino, S., Lau, C., & Yeh, R. (2002). Asset-exploitation versus asset-seeking: Implications for location choice of foreign direct investment from newly industrialized economies. Journal of International Business Studies, 33(3), 403-421.

March, J. (1991). Exploration and exploitation in organizational learning. Organization Science, 2(1), 71-87.

Markusen, A. (1996). Sticky places in slippery space: a typology of industrial districts. Economic Geography, 72(3), 293-313.

Markusen, J., & Venables, A. (1998). Multinational firms and the new trade theory. Journal of International Economics, 46(2), 183-203.

Markusen, J., & Venables, A. (2000). The theory of endowment, intra-industry and multinational trade. Journal of International Economics, 52(2), 209-234.

Marshall, A. (1920). Principles of economics. London: Macmillan.

Maskell, P. (2001). Towards a knowledge-based theory of the geographical cluster. Industrial and Corporate Change, 10(4), 921-943.

Morschett, D., Schramm-Klein, H., & Swoboda, B. (2010). Decades of research on market entry modes: what do we really know about external antecedents of entry mode choice? Journal of International Management, 16(1), 60-77.

Nachum, L., & Zaheer, S. (2005). The persistence of distance? The impact of technology on MNE motivations for foreign investment. Strategic Management Journal, 26(8), 747-767.

Narula, R., & Marin, A. (2005). Exploring the relationship between direct and indirect spillovers from FDI in Argentina. Maastricht: MERIT. MERIT Research Memoranda 2005-024.

Nelson, R., & Winter, S. (1982). An evolutionary theory of economic change. Cambridge: Belknap/Harvard.

Nielsen, B., & Nielsen, S. (2011). The role of top management team international orientation in international strategic decision-making: The choice of foreign entry mode. Journal of World Business, 46(2), 185-193.

Oliver, C. (1991). Strategic responses to institutional processes. Academy of Management Review, 16(1), 145-179.

Ping, D. (2009). Why do Chinese firms tend to acquire strategic assets in international expansion? Journal of World Business, 44(1), 74-84.

Porter, M. (1990). The competitive advantage of nations. New York: Free Press.

Porter, M. (2000). Location, competition and economic development: local clusters in a global economy. Economic Development Quarterly, 14(1), 15-34.

Pradhan, J., & Abraham, V. (2005). Overseas mergers and acquisitions by Indian enterprises: patterns and motivations. Indian Journal of Economics, LXXXV(33), 365-386.

Puck, J., Holtbrugge, D., & Mohr, A. (2009). Beyond entry mode choice: explaining the conversion of joint ventures into wholly owned subsidiaries in the People's Republic of China. Journal of International Business Studies, 40(3), 388-404.

Root, F. (1994). Entry strategies for international markets. Lexington: Lexington Books.

Rugman, A. (1981). Inside the multinationals: the economics of internal markets. London: Croom Helm.

Scherer, F., & Ross, D. (1990). Industrial market structure and economic performance. Boston: Houghton and Mifflin.

Suchman, M. (1995). Managing legitimacy: strategic and institutional approaches. Academy of Management Review, 20(3), 517-610.

Tallman, S., & Fladmoe-Lindquist, K. (2002). Internationalization, globalization, and capability-based strategy. California Management Review, 45(1), 116-135.

Tallman, S., Jenkins, M., Henry, N., & Pinch, S. (2004). Knowledge clusters and competitive advantage. Academy of Management Review, 29(2), 258-271.

Teece, D., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509-533.

Tripsas, M. (1997). Unraveling the process of creative destruction: complementary assets and incumbent survival in the typesetter industry. Strategic Management Journal, 18(special issue), 119-142.

Williamson, O. (1985). The economic institutions of capitalism: firms, markets, relational contracting. New York, Free Press.

Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management Journal, 38(2), 341-363.

Zander, U., & Kogut, B. (1995). Knowledge and the speed of the transfer and imitation of organizational capabilities: an empirical test. Organization Science, 6(1), 76-92.

Zanfei, A. (2000). Transnational firms and changing organization of innovative activities. Cambridge Journal of Economics, 24(5), 515-554.

Full Text: PDF (Português (Brasil))


  • There are currently no refbacks.

Iberoamerican Journal of Strategic Management  e-ISSN: 2176-0756

Licença Creative Commons
Este obra está licenciado com uma Licença
Creative Commons Atribuição-NãoComercial-CompartilhaIgual 4.0 Internacional