The influence of decision making logics on Finnish internationalising small and medium sized enterprises' choice of foreign market entry mode

Abstract

The research of the internationalisation process of the small and medium sized enterprises (SMEs) and their choice of the foreign market entry modes have gained increasing interest in Finland within the past decades. The aim of this master’s thesis is to help to fill the research gap related to the influence of the decision making logics, namely the causational and the effectual decision making logics, on the choice of the Finnish SMEs foreign market entry mode and level of commitment. The foreign market entry modes examined in the research are internet sales, export, contractual, joint venture and subsidiary modes. The foreign market entry modes are categorized based on the level of commitment to foreign target market. In addition to the examination of the influence of the causational and effectual decision making logics on the Finnish SMEs choice of the foreign market entry mode also the two moderating influences, namely the size of the enterprise and the environmental uncertainty, are examined. Based on a literature review a theoretical model and hypotheses for the research are developed.

For the empirical part of the research, a data from 184 Finnish SMEs decision makers’ responses is collected by running an online survey. The responses are further analysed by a multiple regression analysis using IBM’s SPSS statistics program. The results of the empirical part of the research show that the use of the effectual decision making logic encourages the Finnish SMEs to choose higher commitment and the causational decision making logic lower commitment foreign market entry modes. The larger size of the enterprise moderates the use of the causational decision making logic in a way that the choice of the higher commitment foreign market entry modes is strengthened. The environmental uncertainty has a moderating influence on the use effectual decision making logic in a way that it weakens the likelyhood to choose the higher commitment foreign market entry modes. In the case of the causational decision making logic the moderating influence of the environmental uncertainty is the opposite. The research findings complete the previous literature by providing an insight of the influence of the decision making logics on the Finnish SMEs choice of the foreign market entry mode.