The impact of industry environment on early market entry decisions by B2B managers in the U.S. and Japan

Managers form simplified mental models to cope with market environment uncertainties and to process information. A critical decision is whether to enter a high-potential market early. Large innovation and development investments involved in this decision increase uncertainty. We examine the importance ascribed by U.S. and Japanese managers to competitive forces when making early market entry decisions. We expect that the competitive forces will have different effects on the likelihood of early market entry in the U.S. versus Japan due to cultural and business environment differences, and we thereby develop several propositions. We develop a decision-making exercise simulating early market entry decisions, and tested our propositions with managers in medium to large business-to-business (B2B) firms from both countries. We assessed impacts of the competitive market forces on entry strategy selection via relative weights, repeated-measures analysis of variance, and frequency analysis. Our findings revealed differences in the mental models of Japanese and U.S. managers. Buyer power had a larger effect on the decision to make an early market entry for Japanese managers, while threat of new firm entry had a larger effect for U.S. managers; these findings were consistent with our propositions. We also found several areas of agreement between U.S. and Japanese managers. We conclude with theoretical implications and recommendations to B2B management.     

The impact of cultural differences in U.S. business-to-business export marketing channel strategic alliances

Given slower growth and fierce competition in the domestic market, combined with increasing opportunities in many overseas markets, more and more U.S. companies are going international. While many doing so may initially use a direct exporting approach that relies on foreign channel members to distribute the product in the host country, over time, strategic alliances among distribution partners may form based on trust, commitment, and cooperation. For these alliances to succeed, the partners' perceptions of these variables need to be congruent so that expectations on each side of the dyad are reasonably similar. However, what happens when the cultural backgrounds of each channel partner are substantially different? This study empirically examines whether cultural differences do affect trust, commitment, and cooperation in international marketing channel alliances between U.S. exporters and their foreign distribution partners. Based on the survey responses from 149 U.S. exporters with marketing alliances abroad, cultural differences do affect trust, commitment, and cooperation. The greater the cultural differences between channel partners, the lower the levels of trust, commitment, and cooperation. Managerial implications are discussed, and study limitations are identified.     

Idiosyncratic Risk of House Prices: Evidence from 26 Million Home Sales

This paper uses about 26 million home sales to measure house price idiosyncratic risk for 7,580 U.S. zip codes during three periods: (1) when the U.S. housing market was stable (1996–2000), (2) booming (2001–2007) and (3) busting (2007–2012), and investigates the determinants of house price risk. We find very strong relationships between risk and some basic housing market characteristics. There is a U‐shaped relationship between risk and zip‐code level median household income; risk is higher in zip codes with more appreciation volatility; and risk is not compensated with higher appreciation.     

Foreign entrant survival and foreign market share: Canadian companies' experience in united states medical sector markets

We show that successful foreign market entry is related to the extent of foreign presence in an industry at the time of entry. Survival of 31 Canadian-based businesses that entered 24 U.S. medical sector markets between 1968 and 1989 tended to be somewhat longer in product markets in which foreign-based businesses held a moderate market share when the Canadian businesses entered than in low and high foreign share product markets. The result controls several other industry and business-level factors, including industry concentration, entry year, corporate size, related diversification, entry mode, and service sector status.     

Does product market competition foster corporate social responsibility? Evidence from trade liberalization

This study examines whether product market competition affects corporate social responsibility (CSR). To obtain exogenous variation in product market competition, I exploit a quasi‐natural experiment provided by large import tariff reductions that occurred between 1992 and 2005 in the U.S. manufacturing sector. Using a difference‐in‐differences methodology, I find that domestic companies respond to tariff reductions by increasing their engagement in CSR. This finding supports the view of “CSR as a competitive strategy” that allows companies to differentiate themselves from their foreign rivals. Overall, my results highlight that trade liberalization is an important factor that shapes CSR practices. Copyright © 2014 John Wiley & Sons, Ltd.     

U.S. Multinational Activity Abroad and U.S. Jobs: Substitutes or Complements?

Critics of globalization claim that firms are being driven by the prospects of cheaper labor and lower labor standards to shift employment abroad. Yet the evidence, beyond anecdotes, is slim. This paper reports stylized facts on the activities of U.S. multinationals at home and abroad for the years 1977 to 1999. We focus on firms in manufacturing and services, two sectors that have received extensive media attention for supposedly exporting jobs. Using firm‐level data collected by the Bureau of Economic Analysis (BEA) in Washington, D.C., we report correlations between U.S. multinational employment at home and abroad. Preliminary evidence based on the operations of these multinationals suggests that the sign of the correlation depends on the crucial distinction between affiliates in high‐income and low‐income countries. For affiliates in high‐income countries there is a positive correlation between jobs at home and abroad, suggesting that foreign employment of U.S. multinationals is complementary to domestic employment. For firms that operate in developing countries, employment has been cut in the United States, and affiliate employment has increased. To account for firm size, substitution across firms and entry and exit, we aggregate our data to the industry level. This exercise reveals that the observed “complementarity” between U.S. and foreign jobs has been driven largely by a contraction across all manufacturing sectors. It also reveals that foreign employment in developing countries has substituted for U.S. employment in several highly visible industries, including computers, electronics, and transportation. The fact that there were U.S. jobs lost to foreign affiliates in key sectors, despite broad complementarity in hiring and firing decisions between U.S. parents and their affiliates, helps explain why economists view the impact of globalization on U.S. jobs as benign despite negative news coverage for declining industries.     

R & D,Foreign Direct Investment and Technology Sourcing?

The U.S. experienced a surge in foreign directinvestment (FDI) during the 1980s.To date, we do notfully understand what the research and development(R & D) effects of FDI are. FDI can affect the hostcountry's R & D activities in at least two ways. First,if domestic firms perceive foreign entrants as seriousthreats to their domestic market share, they willchange their R & D policies hence industry-wide R & Dintensity also changes. Second, the increase in R & Dintensity may be attributed to foreign firms' R & Dactivities to acclimatize to U.S. conditions. Using apanel of 4-digit SIC industries from 1981–91, there issome evidence that the latter scenario may be apossible explanation for the observed changes inindustry-wide R & D intensity.     

WHO COMPETES WITH WHOM? THE CASE OF DEPOSITORY INSTITUTIONS*

The willingness of consumers to substitute between banks and thrifts and between multimarket and single‐market institutions is of strong interest to policymakers, yet little empirical work exists in this area. We estimate a structural model of consumer choice of depository institutions using a broadly representative panel data set covering the U.S. from 1990–2001. Using a flexible framework, we uncover utility parameters that affect a consumer's institution choice and measure the degree of market segmentation for two institutional subgroups. Our estimated parameters, elasticities and policy experiments suggest limited substitutability between banks and thrifts and between multimarket and single‐market institutions, especially in urban markets.     

Dynamics of dyadic competitive interaction

In this study of firms’ entries into and exits from each other’s markets, we link research on multipoint competition to the emerging action‐oriented, dyadic approach to interfirm rivalry by specifying market interdependencies between pairs of firms that condition their potential for rivalry over time. Our dynamic analysis of competitive interactions between pairs of commuter airlines in California reveals the idiosyncratic and asymmetric market microstructures that characterize dyadic competitive relationships and helps explain why firms grapple vigorously with some of their competitors while being passive toward others. We show that there is an inverted U‐shaped relationship between firms’ rates of entry into and exit from each other’s markets and the level of multimarket contact in competitor dyads. We also show how this basic curvilinear effect varies from dyad to dyad as a function of relative levels of multimarket contact with competitors in other dyads and the relative sizes of competitors in a focal dyad. Copyright © 1999 John Wiley & Sons, Ltd.     

Exploring Mediating and Moderating Influences on the Links among Cycle Time,Proficiency in Entry Timing,and New Product Profitability*

Development cycle time is the elapsed time from the beginning of idea generation to the moment that the new product is ready for market introduction. Market‐entry timing is contingent upon the new product's cycle time. Only when the product is completed can a firm decide whether and when to enter the market to exploit the new product's window of opportunity. To determine the right moment of entry a firm needs to correctly balance the risks of premature entry and the missed opportunity of late entry. Proficient market‐entry timing is therefore defined as the firm's ability to get the market‐entry timing right (i.e., neither too early nor too late). The literature has produced divergent evidence with regard to the effects of development cycle time and proficiency in market‐entry timing on new product profitability. To explain these disparities this study (1) explores the mediating roles of development costs and sales volume in the relationships among development cycle time, proficiency in market‐entry timing, and new product profitability, respectively; and it (2) explores the moderating influence of product newness on the relationship between development cycle time and development costs and that of new product advantage on the link between proficiency in market‐entry timing and sales volume. The results from a survey‐based study of 72 manufacturers of industrial products in the Netherlands suggest that development costs mediate the relationship between development cycle time and new product profitability and that sales volume mediates the link between proficiency in market‐entry timing and new product profitability. In addition, the findings indicate that new product advantage strengthens the positive relationship between proficiency in market‐entry timing and sales volume. The results provide no evidence for a moderating effect of product newness. These results have important implications because to maximize new product profitability managers need to distinguish between costs and demand side effects of development cycle time and market‐entry timing on new product profitability. Keeping this distinction in mind should help them to better determine the relative profit impact of investments in cycle time reduction or improved entry timing. Moreover, the findings suggest that highly advantaged products that enter the market at the right time may have a highly attenuated sales volume. It also implies that new products with lower advantage may have very little leeway in hitting the “sweet spot” in market. The message is that “doing the right thing” (i.e., to develop a highly advantaged new product) may be at least as important as correctly balancing the risks of premature entry and the missed opportunity of late entry.     

Sell-Offs of U.S. Real Estate: The Effect of Domestic versus Foreign Buyers on Shareholder Wealth

Large foreign acquisitions of U.S. real estate always seem to generate considerable public concern. Most recently the reaction has been to Japanese purchases, but similar reactions occurred to Arab petro-dollar purchases in the early 1970s. This study examines the impact of the buyer's nationality on the change in the wealth of the selling firm's shareholders for voluntary sell-offs of U.S. real estate. In general, this study indicates that voluntary sell-offs of real estate assets result in a significant increase in the wealth of the selling firm's shareholders. However, the change in the wealth of the selling firm's shareholders for U.S. buyers was not significantly different from that for non-U.S. buyers. Since no advance is indicated for foreign buyers over domestic buyers, laws or regulations hindering the foreign acquisition of U.S. real estate cannot be supported. The assumption of a "non-level playing field" for U.S. real estate investors who bid against foreign firms for U.S. real estate assets is not confirmed.     

When experience meets national institutional environmental change: foreign entry attempts of U.S. firms in the Central and Eastern European region

We develop an institutional change perspective to examine the tension that can exist between evolving external environmental influences and internal organizational influences on foreign entry attempts. Using data on the entries of 215 U.S. public firms made into 11 Central and Eastern European transition economies during the period of 1990–2003, we find that shifts in national institutional environments, from a socialist to a market economy, reduce the extent of challenges encountered to make a hierarchical entry, which leads to an increase in foreign hierarchical entry attempts but not necessarily to a decrease in relational entry attempts as institutional transformation. We find evidence of inertial influences as experienced entrants tend to follow their previous decisions when making subsequent entry attempts. Further, they are less responsive in their foreign entry strategies to the institutional transformation in a given host country than inexperienced firms. We also find that the experience gained from relational entries results in more hierarchical entry attempts, but hierarchical entry experience results in fewer relational entry attempts. Copyright © 2009 John Wiley & Sons, Ltd.     

Complementarity,status similarity and social capital as drivers of alliance formation

Using data on U.S. investment banking firms’ syndication in underwriting corporate stock offerings during the 1980s, this study explores the factors that drive alliance formation between two specific firms. We compare resource complementarity, status similarity, and social capital as a basis of alliance formation. The findings indicate that the likelihood of investment banks’ alliance formation is positively related to the complementarity of their capabilities, as well as their status similarity. Social capital arising from banks’ direct and indirect collaborative experiences also plays a very important role in alliance formation. The number of deals given by a lead bank to a potential partner over the past three years has an inverted U‐shaped relationship to the probability that the lead bank will invite the potential partner to form an alliance. Our findings indicate that status similarity and social capital have a stronger effect on alliance formation in initial public offering deals than in secondary offering deals, as the former are more uncertain than the latter. Using these findings, we discuss the role of complementarity, status similarity, and social capital in alliance formation. Copyright © 2000 John Wiley & Sons, Ltd.     

Unraveling the mechanisms of reputation and alliance formation: A study of venture capital syndication in China

Extant research shows that resources are significant to a firm's choice of alliance formation. We focus on an important form of intangible resource—firm reputation—and examine how it affects a firm's propensity to form alliances. We propose an inverted U‐shaped relationship between a firm's reputation and its likelihood of alliance formation, resulting from the opposing mechanisms of opportunity and need. We also examine how this relationship may vary across two contingencies: (1) foreign and domestic firms; and (2) different levels of institutional development. Empirical analyses of China's venture capital (VC) industry provide support for our hypotheses. Copyright © 2013 John Wiley & Sons, Ltd.     

The effects of strategic and market complementarity on acquisition performance: evidence from the U.S. commercial banking industry, 1989–2001

Most traditional research on mergers and acquisitions tends to focus on the role of similarity in explaining acquisition performance. While scholars have recently begun to examine acquisition complementarity, there is still little evidence concerning how complementarity influences acquisition performance. Further, previous research has not drawn the connections between related contexts and the potential benefits from complementarity. In this article, we move the study of acquisition complementarity forward by investigating the effects of strategic and market complementarity on acquisition performance in the context of related horizontal acquisitions. We also propose that two key attributes of acquirers—strategic focus and out‐of‐market acquisition experience—will moderate this relationship. We investigate our research questions in the context of all 2,204 acquisitions made by publicly traded U.S. commercial banks during the 12‐year period from 1989 to 2001. Our findings are generally supportive, suggesting complementarity is an important antecedent of acquisition performance, and raising important issues on the nature of acquisition research in general. Copyright © 2009 John Wiley & Sons, Ltd.     

DISTANCE,BANK HETEROGENEITY AND ENTRY IN LOCAL BANKING MARKETS*

We examine the determinants of entry into Italian local banking markets during the period 1991–2002 and build a simple model in which the probability of branching in a new market depends on the features of both the local market and the potential entrant. Econometric findings show that banks are more likely to expand into those markets that are closest to their pre‐entry locations. Large banks are also more able to cope with distance‐related entry costs than small banks. Finally, banks have become increasingly able to open branches in distant markets, due to the advent of information and communication technologies.     

A NEW PERSPECTIVE ON INDUSTRY R&D AND MARKET STRUCTURE*

This paper aims to shed some new insights on the long‐debated and both extensively and intensively explored relationship between market concentration and industry R&D intensity. In order to do so, this study develops, from a classic Dorfman‐Steiner [1954] model of firm R&D, a model of industry R&D, where consumer preference over quality and price, R&D technology, and the joint distribution of firm‐specific technological competence and market share jointly determine the level of industry R&D intensity. The joint distribution term, which reflects both the underlying distribution of firms‐specific technological competence and the strength of its link with market share, suggests that the concentration‐R&D relationship differs depending on the strength of the link or simply the appropriability of R&D in terms of market share: A positive relationship is predicted for low‐appropriability industries, where market concentration supplements low R&D appropriability, while a negative or an inverted U‐shaped relationship for high‐appropriability industries. An empirical analysis of data, disaggregated at the five‐digit SIC level, on R&D and market concentration of Korean manufacturing industries provides supportive evidence for the predictions.     

Export and domestic sales: their interrelationship and determinants

We examine the interrelationship between export and domestic sales. Our expectation is that they are simultaneously determined, and as such should not be examined in isolation. We also investigate how firm factors—such as R & D and advertising investments—and external factors—such as market growth and exchange rate changes—impact export and domestic sales. Using a non‐recursive system of equations, we test our arguments on a representative sample of Spanish manufacturing firms between 1990 and 1997. We find significant interrelationships between export and domestic sales with striking differences between Spanish‐owned firms and foreign‐owned firms operating in Spain. For Spanish‐owned firms, domestic and export sales are complements. These firms appear to focus on the domestic market and strength in the domestic market drives their export sales. In contrast, domestic and export sales are substitutes for foreign‐owned firms. These firms' export strategies appear subsumed under strategies of managing a multinational network in which the focus is sales outside of Spain. We discuss the importance of these findings for understanding and managing export strategies. Copyright © 2005 John Wiley & Sons, Ltd.     

Firm resources and entry-related advantages: An empirical study in China

The majority of research on order of market entry has focused on market pioneer advantages or the specialized assets that industry incumbents would need to possess. However, relatively little attention has been paid to whether and how certain firm resources or capabilities may provide latecomers with entry-related advantages. This issue is of particular interest when multinational organizations decide to enter emerging markets, such as China, where the transitional economy provides both opportunities and challenges. This study attempts to bridge this gap by discussing the entry-related advantages in terms of pioneer advantages, early follower advantages, and late entrant advantages, and by investigating how each of the entry-related advantages has unique impacts on market performance. In particular, this study examines the relations between innovation management, firm resources, entry-related advantages, and market performance simultaneously with cross-sectional data from 191 firms in China. Our findings reveal that technical resources and skills (R&S), marketing R&S, and market intelligence are associated with different advantages for market pioneers, early followers, and late entrants. Technical R&S is also found to have significant impacts on order of market entry as pioneers. Furthermore, the findings show that remarkable differences exist among the three entrant types (i.e., market pioneers, early followers, and late entrants) in their strategic approaches to attain market performance. We offer implications to foreign firms operating in China or intending to enter China's markets.     

Foreign Entry and Firm Advertising Intensity: Evidence from China

This paper investigates the determinants of advertising intensity at the firm level by focusing on the role of foreign entry. In a monopolistically competitive market with heterogeneous firms, we show that foreign entry affects the expected advertising intensity of domestic firms through its impact on the cost of resources, brand image, and productivity spillovers and its impact on firms’ exit behaviour. Then, using comprehensive firm-level data from China’s manufacturing sector between 2005 and 2007, we test this hypothesis and find that foreign entry significantly affects advertising intensity.