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Transaction cost‐enhanced entry mode choices and firm performance
Author(s) -
Brouthers Keith D.,
Brouthers Lance Eliot,
Werner Steve
Publication year - 2003
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.362
Subject(s) - transaction cost , mode (computer interface) , industrial organization , normative , corporate governance , microeconomics , database transaction , theory of the firm , business , internalization theory , set (abstract data type) , economics , computer science , finance , philosophy , epistemology , programming language , operating system
According to transaction cost theory, firms select the international mode of entry that provides the most efficient form of governance. However, previous scholarship largely neglects the impact of transaction cost variables on entry mode choice and firm performance. In this study, we add transaction cost variables to a set of variables previously used to predict firm mode choice and performance. We theorize and find that firms selecting these ‘transaction cost‐enhanced international entry modes’ perform better than firms using other modes of entry. Based on our results, we conclude that ‘enhanced’ transaction cost theory appears to be normative as well as descriptive with respect to international entry mode decisions. Copyright © 2003 John Wiley & Sons, Ltd.