Sequential expansion in a foreign market: Knowledge drivers and contingencies of establishments of additional subsidiaries

Abstract

Purpose

A multinational firm’s expansion in a foreign market is a key issue of international business. The purpose of this study is to extend the understanding of essential drivers that will facilitate firm’s assessment of alternative modes of sequential expansion.

Design/methodology/approach

The study applies the knowledge-based view and explores a multinational firm’s sequential post-entry expansion in a foreign market. Event histories of Swedish industrial firms’ establishments of wholly owned subsidiaries in Germany, the UK and the USA were explored using Cox regression.

Findings

Broad market experiences stemming from corporate strategy and deep experiences from the preceding subsidiary increase the likelihood of a sequential investment. Effects of broad experiences are contingent on the context specified by the geographic scope of the firm and its general subsidiary experience.

Research limitations/implications

The study contributes to international expansion theory and integrates sources of knowledge originating from strategy theory and internationalization theory. The study shows that the dual approach is needed to understand international expansion.

Practical implications

In evaluating a further subsidiary investment in a foreign market, the multinational firm is advised to assess whether it possesses enough market experiences to justify the investment. The experiences should be associated with corporate strategy, the previous wholly owned subsidiary and the context specifications identified in the study.

Originality/value

The study is unique, as it addresses the simultaneous impact of broad and deep market experiences. Also, the inclusion of central context specifications makes the study novel.

Citation

Pehrsson, A. (2016), "Sequential expansion in a foreign market: Knowledge drivers and contingencies of establishments of additional subsidiaries", European Business Review, Vol. 28 No. 3, pp. 285-311. https://doi.org/10.1108/EBR-01-2016-0017