Strategy antecedents of modes of entry into foreign markets

Although a firm's choice of mode of entry to a foreign market is central to the implementation of international strategy, we have only limited understanding of the effects of international strategy on the choice. This study explores the effects of business relatedness and corporate international experience. Data were collected on 173 ventures of Swedish manufacturing firms that were present on the German market, and multivariate techniques were applied to test hypotheses. It was found that product/market relatedness and intangible resource relatedness between the foreign business unit and the industrial firm's core business unit favored a full control entry mode based on sole ownership. This finding was also valid for importance of foreign markets. Further, market importance moderated the two relationships regarding business relatedness. Contributions to the literature are discussed.