Foreign market entry mode choice in service firms: A business model perspective

The topic of foreign market entry in service sector could benefit from a more granular approach, since the business model (BM) employed varies greatly across different types of services. It is argued that this in turn would affect the internationalization strategy to be employed in each service case. In this paper, services are classified along three dimensions (inseparability, capital intensity, degree of customization), and propositions are developed regarding the right foreign market entry mode for each of the eight service variations. The propositions are grounded in business model and general strategic management theories, since it is argued that service firms design their activity systems in host countries via tradeoffs between adjustment costs and transaction costs involved. As the service classification defines the nature of these costs for the focal firm, previous findings regarding the choice of foreign market entry mode reflects BM designs to optimize such costs. The scientific value of this paper is the introduction of the business model concept as a new perspective for research on decision making in service firm internationalization.