Post-entry Factors as Drivers for Foreign Operation Mode Change: Case of Finnish firms in Chile
Vankova, Veronika (2013)
Vankova, Veronika
2013
Kuvaus
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Tiivistelmä
Foreign operations of a firm tend to go through changes commonly, but however, in the research area on foreign operation modes there are few studies on factors driving to changes. Therefore, this study´s interest lies in examining specifically what are the post-entry factors that drive mode changes of a firm in a specific target market and into what kind of changes they lead to. The target market is Chile, Finland´s second most important business partner in Latin America and which regardless of the increasing amount of Finnish firms operating there remains to be unknown market in Finland. Furthermore, academic research on Chilean market from Finnish perspective is minuscule. Thus, this study intends to answer the research question why do Finnish firms change foreign operation mode after entry and how do they respond to occurred post-entry factors.
The theoretical framework of this study consists of development chain of operations, which considers the entry mode decision to be determined by transaction costs, and that in the post-entry phase a firm is affected by external and internal factors, which determine further mode changes. This study applies the methods of qualitative research, and it is extensive explanatory multiple-case study. Four Finnish industrial firms are included as case companies to the study, and the empirical data has been collected mainly via semi-structured interviews, conducted with top-level managers who are or have been responsible for the company´s operations in Chile.
The findings of the study show that Finnish firms tend to enter the market with export operations due to lack of market knowledge, and increase their commitment within time. The mode changes are affected both by external and internal factors. Large amount of post-entry factors appeared to have effect on case companies´ operations. However, not all post-entry factors led to mode changes. Thus, the study found three roles of post-entry factors to be mode change drivers, reasons for choice of specific change mode, and factors faced and dealt with. The study detected from the operation paths of the case companies that two to three mode changes are carried out before establishing a local subsidiary. Changes comprised switching and stretching of mode likewise. It was observed that development of the foreign operations differs between firms with material and immaterial offerings, albeit both have sales and service operations.
The theoretical framework of this study consists of development chain of operations, which considers the entry mode decision to be determined by transaction costs, and that in the post-entry phase a firm is affected by external and internal factors, which determine further mode changes. This study applies the methods of qualitative research, and it is extensive explanatory multiple-case study. Four Finnish industrial firms are included as case companies to the study, and the empirical data has been collected mainly via semi-structured interviews, conducted with top-level managers who are or have been responsible for the company´s operations in Chile.
The findings of the study show that Finnish firms tend to enter the market with export operations due to lack of market knowledge, and increase their commitment within time. The mode changes are affected both by external and internal factors. Large amount of post-entry factors appeared to have effect on case companies´ operations. However, not all post-entry factors led to mode changes. Thus, the study found three roles of post-entry factors to be mode change drivers, reasons for choice of specific change mode, and factors faced and dealt with. The study detected from the operation paths of the case companies that two to three mode changes are carried out before establishing a local subsidiary. Changes comprised switching and stretching of mode likewise. It was observed that development of the foreign operations differs between firms with material and immaterial offerings, albeit both have sales and service operations.