The Hierarchical Model of Market Entry Modes

In this study, we propose and test a hierarchical model of market entry modes. Entry modes can first be viewed as equity-based versus non-equity-based. Within equity-based modes, the choice is between wholly owned operations and equity joint ventures, while within non-equity-based modes, the choice is between contractual agreements and export. Empirically, we demonstrate that there are factors that exert substantial influences at the equity versus non-equity level, but rather weak influences at the lower level of choice hierarchy. The empirical results are based on a sample of over 10,000 foreign entry activities into China between 1979 to 1998. The findings provide supportive evidence for the hierarchical model of market entry modes.