The interaction between environment and strategic orientation in born globals’ choice of entry mode

Abstract

Purpose – Entry modes are a central aspect of international business, particularly for young firms lacking organizational experience and capital, such as born global (BG) firms. Few studies on BG internationalization have addressed the antecedents to entry mode decisions in BG firms. Based on the two main groups of factors impacting entry mode decisions in general, namely environmental (external) conditions and firms’ strategic characteristics, the purpose of this paper is to explore how the interaction between country and market factors and BGs’ strategic orientation affects BGs’ choice of low- vs high-commitment entry modes. Design/methodology/approach – Data from 104 Israeli high-tech BG firms were gathered in field interviews with managers. Preliminary analyses assessed non-response bias. Findings – Most BGs showed a strong Prospector orientation manifested by exploration and exploitation of opportunities. This in turn moderated the impact of several host market factors on the choice of entry mode, encouraging BGs to choose high-commitment entry modes. Practical implications – Contrary to earlier research claiming that BGs minimize risk by choosing low-commitment entry modes, the findings show that BGs’ choice of commitment level is affected by host market characteristics. Originality/value – It is often thought that BGs’ choice of entry mode is decisively affected by the host market risk profile, encouraging the choice of low-commitment entry modes in riskier markets. As the findings show, however, BGs are also sensitive to the opportunities provided by the host market, sometimes resulting in high-commitment entry modes.

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