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Chapter 7 Linking Entry Timing (ET) and Entry Mode (EM) Decisions in International Market Expansion by Malaysian Construction Firm: Toward the Development of ETEM Model

Abstract Neglecting to properly choose the right combination of entry mode and entry timing strategies can lead to poor performance in international business ventures. The paper focuses on the linking of entry timing (ET) and entry mode (EM) decisions and the factors influencing both decisions. By consolidating the findings for both entry decisions, an ETEM model to guide the construction firms to access the targeted markets will be developed. The questionnaire surveys were sent to 115 Malaysian construction firms listed under Construction Industry Development Board (CIDB) Malaysia with 39.1 % response rate. The logistic regression (LR) model revealed that the majority of construction firms have chosen to be the late movers (LMs). Factor analysis carried out shows that the factors significantly influenced the firms' entry timing decision as LMs are the firm's international experience, level of knowledge, research and development intensity, competencies in project management, specialist expertise and technology, and financing capacity. The multinomial logistic regression (MLR) model has shown that majority of the construction firms preferred both equity (EQ) and non-equity (NEQ) entry modes. The factor analysis revealed that the factors that significantly influenced the firms' entry mode decisions to choose both types of entry mode are the firm's management of quality and risk attitudes, strong resources, experience in similar works, ability to assess market signals and opportunities, superior management and organizational dynamic capabilities, availability of partner/alliance, and existence of strict time limitations. The consolidation of findings shows that the majority of the Malaysian construction firms were the late movers, and they preferred both EQ and NEQ entry modes. Hence, this study contributes to an improved understanding of particular relationships that exist between the entry timing and entry mode decisions made by firms into international market.

7.1 Introduction

Expanding into foreign country is one of the most critical business strategies made by a firm to export their capabilities and exploit the opportunities in international market. Many firms have gained access to foreign countries using combinations of international market entry strategies. Three interlinked entry strategic decisions outlined by Gaba et al. [1] are considered by the firms with regard to the international expansion: which market to enter (entry location), how to enter (entry mode), and when to enter (entry timing). However, these decisions require the firm's commitment to operate within an unknown environment which sets the foundation for its future international business ventures [2]. Nonetheless, most of the previous research has addressed these questions in segregation, with very few studies attempting to establish relationships between the three interlinking decisions. A study carried out more than a decade ago by Koch [3] proposed an integration of entry location and entry mode selection named the MEMS model establishing both decisions as one process. The processes within the proposed MEMS model were incorporated with internal firm factors such as the firm's strategic objectives, international market selection experience, international competitiveness, and also subjected to external environmental factors such as the host country market potential and risks involved [4]. Studies on the relationship between entry timing decision and the other two dimensions (entry mode and entry location decisions) were claimed insufficiently carried out and analyzed through empirical research [5]. Recently, these issues are further addressed with empirical work by Gallego et al. [5], establishing linkages between the choices of entry location, entry timing, and entry mode of firms into foreign markets. The proposed model uses entry timing as the main variable which influences the other two dimensions (entry location and entry mode), which, in turn, are related to each other and include various factors influencing the proposed linkages [5]. Although the analyses on the factors relative to these entry decisions have been the subject of numerous studies, there still remain a number of questions that need to be addressed especially in choosing the appropriate combination of entry decisions and determining the significant influential factors on these decisions to enter international market. In order to answer these questions, this present study contributes empirically on the findings of factors influencing the entry timing and entry mode decisions of construction firms in international market. Hence, this study further consolidates the factors commonly affecting both decisions by using the empirical finding to develop the ETEM model.

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