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Imitation Of International Entry Modes

Tilburg University

Business Studies

Year 3, Semester 2

Bachelor Thesis

Strategy and Organization

Niels Ansems s546597 a.c.ansems@uvt.nl

Management Summary

This research aims to answer the question when companies imitate and how imitation influences the expansion mode choice. The choice of imitating the right entry mode is important because scholars indicate that the mode of entry has significant performance implications and once entry modes are established, they are difficult to change.

To be able to answer the question when companies imitate, I define factors that influence the choice for imitation, these are: uncertainty, experience and outcome salience. The first two are social processes, the latter is a technical process. Uncertainty is related with frequency-based and trait-based imitation, while experience influences frequency-based imitation and outcome salience affects outcome-based imitation. I find that there is a positive relation between uncertainty and outcome salience on the likelihood a company imitates, and I find a negative relation between experience and the likelihood a company imitates another company.

In order to determine how imitation influences the expansion mode choice I distinguish three different forms of entry modes: (1) contracts, (2) joint ventures (JVs), (3) wholly owned subsidiaries (WOSs). These different entry modes will be linked with three different variants of imitation, namely, frequency-based imitation, trait-based imitation and outcome-based imitation. I find that companies imitate a contract if a company operates in a highly uncertain environment because imitating contracts is the less risky form of imitation. I also find that companies imitate joint ventures when companies want to determine by themselves the amount of risk they run when imitating another company. Imitating a wholly owned subsidiary is the most risky imitation but it also realizes the highest amount of profit....