The experience factor in foreign market entry behavior of service firms

Abstract

Abstract. The paper examines the effect of international expe-rience on service firms ' selection of foreign markets and entry modes. The investigation utilizes survey data from 151 United States-based service firms. Results on market selection suggest that, as their experience increases and becomes geographically more diversifled, service firms tend to choose markets that are culturally less similar to their home country. On entry mode choice, the paper departs from traditional linear conceptualiza-tions and hypothesizes a U-shaped relationship between experience and propensity for integrated entry modes. Results generally support the hypothesis. The paper explains these findings and describes how service firms resemble and differ from manufac-turing firms in their foreign market entry behavior. The influence of experience on the foreign market entry behavior of firms has been extensively investigated in the literature. However, past research focussed almost exclusively on manufacturing finns. Whether the results of this research are generalizable to the service sector is not entirely clear. Not only are the production and delivery of services distinctive enough to make a direct transfer of goods marketing experiences to the service sector inap-propriate (e.g., Gronroos [1983], Lovelock [1983]), service firms face some unique challenges expanding internationally [Carmen and Langeard 1980; Cowell 1983; Palmer 1985]. In this paper, we investigate effects of the expenence factor on the service firn's foreign market entry behavior. Specifically, we examine the impact of the length and scope of the service firm's pre-entry intemational experi-ence on two major foreign market entry decisions: selection of a foreign market and choice of an entry mode