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Focuses on characteristics of a host country′s market that influence a firm′s entry mode choice of exporting versus producing in that foreign country. A survey was conducted among US manufacturers who exported a given product to one country and locally produced the same product within another country. The host country′s market characteristics were described in terms of their business environment, production factors, and competitiveness of local competitors. The hypotheses tested indicated that the level of competitiveness of local competitors and availability of local production factors have a greater impact on the firm′s entry mode choice than a host country′s business environment factors.

Oxenfeldt and Kelly argue somewhat tongue in cheek, that franchising as a vertical market structure is advantageous to a successful franchisor primarily in the early stages of his market expansion. They also suggest that this market device has further meaning to a would‐be franchisor for the exploitation of marginal distribution locations. They go on to state that: “If we are correct, it will be clear that the great importance attributed to franchising as a source of investment and employment, and as a haven for independent entrepreneural spirits, is largely mistaken”.