The Internet and foreign market entry mode : some evidence from Hong Kong

Abstract

Perspectives on entry mode choice are broad, emphasising different tenets and variables. However, none of them has examined the impact of the Internet, which has emerged since the 1980s. The thesis aims to investigate to what extent differing Internet usage impacts on foreign market entry mode choice, the achievement of a web site and the performance of a firm. The different Internet uses include using what the technology offers to businesses, getting ready for Internet business by disseminating information online and providing online customer service, and selling products and services online. Propositions are compiled and tested by using data collected with a structured questionnaire in a survey of 569 Hong Kong firms. Some pilot case studies were conducted to motivate the construction of the questionnaire. Sample firms were selected from the Hong Kong Business Web Directory 2000 and www.yahoo.com.hk. Data obtained through the questionnaire were analysed with the use of hierarchical logistic regression and hierarchical multiple regression models. It was found that firm size does not affect entry mode choice when the Internet is used, and having previous international experience is not a prerequisite for a firm to choose equity modes. Using what the Internet offers businesses and selling products and services online have a significant negative and positive impact on equity mode choice respectively. Findings on other variables such as special abilities, market potential, investment risk, and transaction cost are all influential by the use of the Internet, but their effects are less significant. In the examination of the achievement of a web site, special abilities, having previous international experience and using the Internet to sell products and services were found to have significant positive effects; while investment risk and industry type have significant negative effects. In the examination of the performance of firms, special abilities, using what the Internet offers businesses and getting ready for Internet business were found to have significant positive effects. In comparison, transaction cost and mode type have significant negative effects. Overall, the pattern of findings suggest that Internet usage has important positive and negative effects upon entry mode choice and a range of variables concerning foreign market entry choice, at least from the sample of Hong Kong organisations. The main contributions of the present research are three-fold. First, it has examined the impact of different uses of the Internet on entry mode choice. The findings on the impact of firm size and previous international experience pose challenge to prior perspectives. When the Internet is used in firms' internationalisation, both small and large firms may follow the same pattern. Firms' previous international experience is no longer as important as in prior studies. This has implications for the ways in which prior entry mode perspectives embrace the relative new technology. Secondly, it has investigated these uses in great detail. Prior research depicts different commercial uses of the Internet. In the present research, pilot case studies and surveys were adopted to examine these uses and their impact on entry mode choice. Thirdly, a method was suggested in the present research to measure these uses