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Augmenting versus exploiting entry modes in soft services: Reconsidering the role of experiential knowledge

Jose Pla-Barber (Department of Management 'Juan José Renau Piqueras', University of Valencia, Valencia, Spain)
Cristina Villar (Department of Management 'Juan José Renau Piqueras', University of Valencia, Valencia, Spain)
Fidel León-Darder (Department of Management 'Juan José Renau Piqueras', University of Valencia, Valencia, Spain)

International Marketing Review

ISSN: 0265-1335

Article publication date: 10 November 2014

Abstract

Purpose

The purpose of this paper is to address foreign market entry mode as a way to enhance firm’s knowledge base, providing new insights into traditional explanations of entry mode choice for soft services. The authors offer an alternative knowledge-based approach to assess foreign investment decisions by considering the role of resource-augmenting (direct investment) and resource-exploiting strategies (licenses). In addition, the authors untie the type of experiential knowledge, i.e., host country and mode experience, to analyze its interactions with environmental uncertainties such as cultural distance.

Design/methodology/approach

Based on a customized database of the Spanish Global Hotel industry covering practically all foreign entries until 2012, the authors use regression analysis to test the proposal.

Findings

The authors demonstrate how in hotel chains (a) cultural distance influences the use of high resource-augmenting modes, due to both the difficulties in transferring the knowledge to third parties but also the imperative need of learning from local markets and (b) how strong brands tend to use resource-augmenting modes in their first steps abroad as a strategy to achieve a minimum level of resource basis to exploit it in a later stage.

Originality/value

The findings question the appropriateness of prior assumptions from traditional internationalization process theories for soft services MNE and provide an alternative approach to assess entry mode choice in this context.

Keywords

Acknowledgements

Authors acknowledge the financial support from the Ministry of Education and Science (ECO2013-43196-R).

Citation

Pla-Barber, J., Villar, C. and León-Darder, F. (2014), "Augmenting versus exploiting entry modes in soft services: Reconsidering the role of experiential knowledge ", International Marketing Review, Vol. 31 No. 6, pp. 621-636. https://doi.org/10.1108/IMR-09-2013-0209

Publisher

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Emerald Group Publishing Limited

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