Modes of Foreign Entry: A Transaction Cost Analysis and Propositions

A “frontier issue” in international marketing is the appropriate choice of entry mode in foreign markets. The objective of this paper is to offer a transaction cost framework for investigating the entry mode decision. This framework provides 1) a theoretical basis for systematically interrelating the literature into propositions, 2) propositions about interactions which resolve the apparently contradictory arguments advanced to date. Specifically, the paper: The entry mode literature is reviewed in the context of these propositions, and guidelines are derived for choosing the appropriate mode of entry, given certain characteristics of the firm, the product, and the environment.