Why Service and Manufacturing Entry Mode Choices Differ: The Influence of Transaction Cost Factors, Risk and Trust*

Keith D. Brouthers · Lance Eliot Brouthers

510 citations0/0 files storedJournal of Management Studies

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International Business and FDI Innovation and Knowledge Management Outsourcing and Supply Chain Management

Abstract

ABSTRACT In this study, we suggest that disparities between service and manufacturing firms’ international entry mode choices can be explained by differences in their reaction to transaction cost based variables and by the influence of risk and trust propensity. We find that: (1) due to the investment intensive nature of manufacturing, environmental uncertainties and risk propensity influence manufacturers’ mode choices; while (2) behavioural uncertainties, trust propensity and asset specificity influence service providers’ entry mode choices because of the people‐intensive nature of services. Implications for future research are discussed.

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References

1986Self-Reports in Organizational Research: Problems and Prospects 1996Toward a knowledge‐based theory of the firm 1991Comparative Economic Organization: The Analysis of Discrete Structural Alternatives 1988The Effect of National Culture on the Choice of Entry Mode 2018Culture's Consequences 1998Initial Trust Formation in New Organizational Relationships 1993Calculativeness, Trust, and Economic Organization 1992Structuring cooperative relationships between organizations

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