Katrijn Gielens & Marnik G. Dekimpe
Executive Summary
International entries into transition economies occur infrequently and involve considerable uncertainty. As a consequence, many firms are reluctant to commit considerable resources quickly because they realize that their investments will be largely sunk when initial expectations do not materialize. Still, they also tend to be confronted with saturated markets in their home country and fear being left out of interesting growth opportunities when investing too little, too late. This raises the question as to whether managers who have limited own experience account for their competitors’ prior decisions when deciding on their own entry timing and size and, especially, whether there is value in doing so. To address these questions, this article studies the entry decisions by the top 75 European grocery retailers into 11 countries of Central and Eastern Europe.
The authors find that firms indeed pay close attention to prevailing practices in their industry. Prior entries first serve as a legitimation but eventually become a deterring factor. Moreover, rather than just imitating the most popular or modal decision when determining own entry timing and size, managers pay closer attention to the actions of their home competitors; react differently to prior entries of same-format and different-format competitors; and adjust the observed industry practice for the specificity of their own resources, as reflected in their size, private-label share, and distance to the potential new host market. The authors further show that it is possible to infer competitors’ future entry behavior and to account for how they will likely react to a firm’s own internationalization decisions.
Finally, the authors argue that managers are justified in taking the combined industry wisdom into account; deviations from prevailing industry practice, in terms of both timing and size, hurt the efficiency of their operations in subsequent years. Thus, attempts to develop own, distinct entry rules tend to be dysfunctional. Moreover, corrective actions are easier to implement along the size than along the time dimension; the detrimental effects of entering at a different time than the industry norm persist and even become amplified over time, whereas the negative impact of size deviations is temporary.
Biography
Katrijn Gielens (PhD, Catholic University Leuven) is Associate Professor of Marketing at the Erasmus University, Rotterdam. She has published in Journal of Marketing, Journal of Consumer Research, and International Journal of Research in Marketing. She won best-paper awards in International Journal of Research in Marketing (2001, 2002). Her current research examines new product introductions, the internationalization of retail firms, and the growth of private labels.
Marnik G. Dekimpe (PhD, University of California, Los Angeles) is Research Professor of Marketing at Tilburg University and Professor of Marketing at the Catholic University Leuven. He has published in Marketing Science, Management Science, Journal of Marketing Research, Journal of Marketing, International Journal of Research in Marketing, and Journal of Econometrics, among others. He won best-paper awards in Marketing Science (1995, 2001), Journal of Marketing Research (1999), International Journal of Research in Marketing (1997, 2001, 2002) and Technological Forecasting and Social Change (2000). He serves on the editorial board of Marketing Science, Journal of Marketing, Journal of Marketing Research, International Journal of Research in Marketing, Journal of the Academy of Marketing Science, and Journal of Interactive Marketing. His current research focuses on the impact of product-harm crises, the internationalization of retail firms, and the growth of private labels.
Journal of Marketing, Vol. 71, No. 2, April 2007
View Table of Contents