Academic journal article Management International Review

Mode Combinations and International Operations: Theoretical Issues and an Empirical Investigation

Academic journal article Management International Review

Mode Combinations and International Operations: Theoretical Issues and an Empirical Investigation

Article excerpt

Abstract:

* An enduring characteristic of extant literature on foreign operation modes is its discrete choice approach, where companies are assumed to choose one among a small number of distinctive alternatives.

* In this paper, detailed information about the operations of six Norwegian companies in three key markets (China, UK and USA) is used as the basis for an exploration of the extent to which, and how and why, companies combine clearly different foreign operation modes. We examine their use of foreign operation mode combinations within given value activities as well as within given countries.

* The study reveals that companies tend to combine modes of operation; thereby producing unique foreign operation mode "packages" for given activities and/or countries, and that the packages are liable to he modified over time--providing a potentially important optional path for international expansion.

* The data show considerable variation across cases; ranging from extensive use of mode combinations to a singular focus on a specific mode of operation. The study contributes to a refinement of our understanding of the path of internationalisation, and throws up a number of awkward theoretical questions about the process.

Keywords: Entry modes * Modes of operation * Mode combination * Case studies

Introduction

Some international business scholars have recently highlighted the importance of mode combinations for companies in developing international business operations (Benito and Welch 1994; Benito et al. 2009; Petersen and Welch 2002). In essence, these scholars argue that companies frequently use foreign operation modes (FOM) in combination rather than as singular entities in foreign market activity. These combinations may be employed at the outset of a foreign market entry, or they may evolve over time as one or more modes are added to singular mode use. The experience of the Finnish multinational Kone in Japan illustrates how mode addition over time, in response to evolving market circumstances and strategic priorities, can produce quite sophisticated mode packages (Benito et al. 2009). Starting with exporting, eventually Kone moved on to a broad operation mode package in its relationship with Toshiba that included an equity share in a separate company, licensing, technical and purchasing cooperation, marketing cooperation in China, and seats on each other's boards.

While it is evident that companies sometimes use mode combinations in international operations, there has been an absence of research that specifically addresses this phenomenon. In particular, we know little about how common their use is, and whether they are temporal or part of a continuing approach to international operations. It is timely, therefore, that empirical research be undertaken to answer this question. Is the reality so pervasive that not taking account of the phenomenon diminishes existing theories and empirical research in international business? In this article we report on a study that addresses this major gap in international business research. We also address some of the theoretical questions and ramifications of the mode combination reality.

Seemingly, one of the reasons for the lack of empirical research in this area is the difficulty of obtaining credible responses from companies on their use of modes in combination--particularly over time. However, the study reported in this article indicates that companies do have a consciousness of the concept of mode combinations, and of the way they might be arrayed along its value chain.

In this paper we use detailed information about the operations of six Norwegian companies in three key markets (China, the UK and USA) as the basis for an exploration of the extent to which, and how and why, companies combine distinctly different foreign operation modes. We examine their use of foreign operation mode combinations within given value activities as well as within given countries. …

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