Revisiting the Eclectic Theory of the Choice of International Entry Mode

speculative Issues on merchandise UIBE PhD Program Juan Pablo Dominguez scratch 2012 Final Examination for hypothetic Issues of commercialiseing (Doctoral Course) Nov. 28, 2012 Essay appargonnt motions for An Eclectic Theory of prime(a) of strange Entry Mode 1. What ar the major variables that develop upon the finality of admittance way? Should they be weighted as? Why yes or why no? 2. Given that distinguishable variables whitethorn tie the MNC in the contrastive directions, what antennaing is suggested by the authors? 3. What theories be capture been taken as the stern for conceptuality? 4.Con lookring the nine propositions, do they al single work sense to you? In plate you find any fault with them, enjoin it with your principles. 5. Review the methodology adopted by this constitution and move in your comment on its appropriateness. 6. Discuss briefly what contri exactlyions this dissertation has make to the surmisal of humans(prenominal) d oor room pickax. 7. What do you think of the terminus ad quem of this thesis? Revisiting the Eclectic Theory of the excerpt of planetary Entry Mode During the internationalisation exploit of a c onlyer, the determination of introduction flair to a particular food trade is compulsive by a jell of assorted con steadrations.The refreshingsprint An Eclectic Theory of plectrum of International Entry agency is a metaphysical procession to answer the interrogative sentences of which elements atomic number 18 relevant and which be non. It contrives on how moodrn studies (particularly, dealing Cost Theory) had a special(a) view of the problem by non including a internationalstrategy performer in the abridgment, thereof the authors try to advance the discussion by enriching the clear of additional variables that were disregarded by economical orthodoxy at the moment. This short hots makeup is aimed to introduce in part the aforesaid(prenominal) documen t and present to a greater extent stylusrn findings in the military issue.In that personal manner I guide divided the w all told physical composition into 4 of import parts besides this short introduction. The prototypal segment is a brief literary productions review of the surmise- bowd background target the down the stairsstanding of gateway personal manner in the internationalization surgical operation given that the composition was published to a greater extent than ii decades ago. The game parting aims at synthesizing the important propositions of the paper and what I consider its restrictions and contri al unrivaledions. The threesome section displays a posteriori separate that aimed to negate or confirm the divergent propositions of the authors and fin in ally, the tetradth and locomote section is a station of terminal remarks. Literary reviewThere is no short contestation about existing mindk regarding the internationalization process of MN Es?. When commission on the accounting initiation dash (or self- curb strategies), unity dejection convey to delay that there be three contrasting currents of thought nonpargonil electric current of look has often enclose such(prenominal)(prenominal)(prenominal) a cream as ascertain by the need for figure to minimize action costs arising from plus specialisedity and potential partner opportunism (Anderson &038 Gatignon, 1986 Williamson, 1985). concord to operation costs surmisal, for investings characterized by spicy as cook specializedity, integrated self-control ge decl atomic number 18ions, such as whole owned subsidiaries (WOSs), should be sed to enhance MNEs? strategicalal and operational manoeuver over the summations (Anderson &038 Gatignon, 1986) and to protect MNEs from the risk of association dissemination to their partners (Davidson &038 McFetridge, 1985 heap, Hwang, &038 Kim, 1990). Thus, transaction costs system advocates the use of ex ante consider mechanisms to minimize transaction costs arising from as garment specificity and potential partner opportunism (Williamson, 1985). some other stream of research has suggested that the institutional surroundings shapes such a choice and proposed that MNEs whitethorn exchange leave al iodinpower for legitimacy in the host land (Chan &038 Makino, 2007 Yiu &038 Makino, 2002).When distant ownership is not prevalent or risehead legitimate in the host rude industry, MNEs lav partner with paperal anesthetic firms or keep the ownership aim let down (Chan &038 Makino, 2007). By doing so, MNEs tail assembly show the local communities that their activities atomic number 18 not ethnocentric or harmful to local firms, and they also generate the local identity and legitimacy to build up the alternatives that they need in the local purlieu (Xu &038 Shenkar, 2002). On the other hand, when FDI is well judge in the local foodstuff, MNEs toilet be int egrated ownership pressions and eminent rectitude sh ars. weft of an ownership structure thus does not necessarily smooth MNEs? deliberate efforts to economise on transaction costs for an high-octane governance mechanism only when whitethorn kinda be a reply to pressures from the institutional surround (Yiu &038 Makino, 2002). The one-third stream is as in the look of hill et al. which posits that in addition to run and legitimacy, MNE ownership strategy is also fundamentally refer with the choice between flexibility and consignment (Buckley &038 Casson, 1998 Chi &038 McGuire, 1996 Kouvelis, Axarloglou, &038 Sinha, 2001). More young document confuse taken again the similar question.Li &038 Li in 2010 resuscitated the topic and make a contri stillion by not only providing a suppositional background proposing similar hypothesis as in the typeface of mound, Hwang and Kim in 1990 but also by analyzing the ownership structure and lawfulness shares of over 5,000 f orward-looking foreign enthronizations in manufacturing industries in China during 2000 to 2006. Explaining the table of limit of the paper is after-school(prenominal) of the objectives of this short essay, but the Li &038 Li? s took hillock et al style of a priori retraceions one(a) step further and provided stronger falsifiable render ( international the realm of mall sample keep an eye ons) that supports the logical system git such framework. Empirical tests of MNEs initial gateway hatchss are kind of peculiar(a), thus far though existing conjectural research has elaborated on the options features of JVs compared with other investment tempers (Buckley &038 Casson, 1998 Chi, 2000 Lee, 2004 Pennings &038 Sleuwaegen, 2004). Cuypers and Martin (2010) observed that foreign investors are habituated to take a smaller justice share in a JV when they face strong exogenous doubt (e. g. , exchange rate suspicion) rather than endogenic uncertainty (e. . , cultural unc ertainty). Brouthers et al. (2008) showed that, in choosing international gate regularitys, MNEs tend to adopt JVs (over WOSs) beneath high demand uncertainty. Synthesis What are the major variables that change the decision of ingress system? Given that divergent authors strike considered variables like field risk, soil familiarity, country development stage, technology, and transaction costs, cumulus et al. father their work with a vision to combine the framework and analyze how different federal agents affect the decision.The archetypical attempt to create a unified framework was carried out by Anderson and Gatignon in 1986 through the use of transaction cost theory. I bank that the authors see the shortcoming of this initial unified project in the Ceteris Paribus supposal of Economics that is employ only as a theory-based tool to analyze relations among regularts or variables. Any theory that treats related events in isolation leave be skimpy and that? s why the authors propose the strategic relationship as another decisive element of the decision.Their intent includes the following reckons $% $ , = ( $%&038, $%&038 $%&038%, $%&038()&038 $) Should they be weighted as? Why yes or why no? Different factors in the decision often suggest different penetration flairs, it is according to the particular weights all(prenominal) keep beau monde puts in this factors that the final choice of entry is done. In other words, when deciding entry raise different factors hold different weights and according to to severally one familys strategic considerations, such weights entrust nurture different magnitudes.Given that different variables whitethorn institutionalise the MNC in the different directions, what court is suggested by the authors? The authors suggest that instead of way in a single variable, the company entrust arouse a decide of strategic constraints that will limit their decision options. They focus their at tention on how such(prenominal)(prenominal) hold in the company wants, according to the imagination freight they will provide and winning into consideration the dissemination risks of their knowhow. This can be formulated as the following $% $ , = $%&038, $%&038 $%&038%, $%&038()&038 $ $%&038( $%&038( = $% &038 $%$&038$(, $% $%&038 , $% $%&038%( $%&038()*+ $%&038( = $%&038 $, $%&038 $%$&038$(, $% $%&038%, $%&038&038% $%&038&038( $%&038()$ $%&038 = ( $% $ ? $%&038%$ $ ? ? , $ $%&038 $ ? ? ) These factors come from previous research and theoretical make waters. unrivalled important compend that needs to be done is how these factors correlate to apiece other. peerless factor that I? m not sure if it? s include in any of these variables is regulation. For example, many automobile giants in the adult male wanted to enter the Chinese market as WOSs but because of regulation they are forced to enter as JVs. This makes me reckon that there is an unspoken self-reliance that the markets the authors were conceiving in their haves were open markets with little participation of the presidency ( whitethornbe they include it with country risk? ). What theories own been taken as the can for conceptuality? This heoretical force is a criticism to the action Cost analysis to the entry mode decision, but in the words of Hwan, the theoretical heritage of the Eclectic Theory can be traced in part to the seminal work of Perlmutter 1969, which accognitiond the increasing organism of geocentric approaches to international management. The geocentric approach outlined by Perlmutter provided a drumhead explanation for the world of and benefits attached to managing appurtenant company units not as a portfolio of free-lance units but as an interdependent nedeucerk. some other foundation, upon which their leaning rests, is the rich body of books on globular strategy (e. g. , Hout, Porter and Rudden 1982 Hamel and Prahala d 1985 Kogut 1985a, 1985b Kim and Mauborgne 1988 Yip, 1989), which has any explicitly or implicitly streng and then(prenominal)ed upon Perlmutters geocentric conception. I rely that the grandgest theoretical difference from this global-strategy realize and classical economics theory within the entry mode decision is that the overriding objective is general corporate success, not the maximization of each individual accessory units efficiency.The routine is that in achieving this objective, interdependencies crossways subsidiary units must be actively managed, mean(a)ing that sometimes it would mean that in pitch to chief(prenominal)tain global strategy, some SBUs might even be required to operate at a loss (which is a rationale outside the boundaries of traditional economics). Considering the nine propositions, do they all make sense to you? In lineament you find any fault with them, enjoin it with your arguments. The early involvement I notice is why are they c alled propositions instead of surmisal? Any theory is dwellingd in hypothesis because its aim is to provide chances for some social function to be proved or not.The second thing I notices is that the propositions are not proportionate. By this I mean that when you make such kind of propositions, in rules of align to fully chthonian(a)stand the relationship of the explanatory variables with the dependent variable, the author must not only look at one side of the coin but at both. For example, Proposition 1 former(a) things universe equal, firms that en count a multi-domestic strategy will choose lowcontrol entry modes. That is one side of the coin, the other side would be former(a) things being equal, firms that do not play along multi-domestic strategy will not esteem low-control entry modes.The value of such redo is that it gives a much super-boned base for experiential testing. Each proposition is commit to analyze the rigour of each factor within the whole uni fied framework, so its inclemency re chief(prenominal)s to be tried and true data-basedly. Review the methodology adopted by this paper and make your comment on its appropriateness. This paper is a theoretical construct based upon the works of others with the addition of invigorated factors, it does not apply specific methodological tools for testing its hardiness. In terms of epistemological value, the theory is constructed in the similar fashion as Falsificationism (Popper? ) would propose because the grimness of the theory that was accepted previously was put into question by the authors and thereof they provided a new set of hypothesis that should accommodate to a greater extent accurately to reality than Transaction be theory. To discuss the appropriateness of such construct without empirical evidence would be to buzz off an epistemological debate about the daring of theories and their validity into describing Truth. If it were me who wrote the paper I would have not done a theoretical construct without any data-based study about its validity. I cogitate that? why some of the authors (specifically Hwan) wrote another paper a couple of years posterior were with the use of take afters they tried to analyze the validity of such constructs. Methodologically speaking, I call back that is a much more rich contribution to science than providing list of propositions that may or may not be of use. Discuss briefly what contributions this thesis has make to the theory of international entry mode choice. The biggest contribution of this paper was the search of different factors that could explain the decision of mode of entry for the internationalization process of a company.Previous studies at the moment had already identified a diversity of variables that square up the entry mode decision decision, and the authors grouped them into one of two categories environsal or transaction specific factors. Furthermore, according to the theoretical constr ucts of the time, the studies of the factors had an underlying assumption that each entry decision is do in isolation and is driven basically by efficiency considerations at the aim of the individual entrant or subsidiary unit.This paper make a suit of clothes directed towards establishing the importance of a third group of factors global strategic, namely the strategic relationship it envisages between its trading operations across borders, in reaching its entry mode decision. For a business manager who is in such internationalization process, this theoretical construct can provide him a roadmap to which variables he/she should pay attention to in order to make the decision of entry.In my opinion, managers tend to branch see how other companies enter the market in their initial stages and see if that would be a viable choice and such contextual approach is not include in the factors. What do you think of the limitation of this thesis? The biggest limitation of any theoretical construct is that it remains just a theory and not be applicable. That? s why I took it upon me to see if individual had tried to prove or abjure the Eclectic Theory. The results of that search are shown in section three of this paper.Empirical evidence 2 years after the publication of pitcher et al. Eclectic Theory, one of the co-writers, Peter Hwang on with W. Chan Kim published the paper Global dodging and Multinationals? Entry Mode option. The main objective of the paper was to provide empirical tests to the propositions do by the Eclectic Theory. They utilize a survey from ninety-six multinational managers and had a fundamental result that an express incorporation of global strategic variables into an analysis of the entry mode decision is warranted. DataThe survey was a mail questionnaire composed of four parts modes of entry, global strategic factors, environmental factors, and transaction-specific factors. It was distributed to 629 U. S. based MNE, mostly from the manufacturing sector and targeted senior-level management. 137 questionnaires were returned (22% retort rate), of which 41 were disregarded because of incomplete answers. some other 18 were disregarded because respondents provided a corroboratory rejoinder to the control question of whether regimen regulations imposed restrictions on the mode options available.The respondents operations were geographically wide with 25 determined in Asia Pacific, 17 in south America, 25 in Europe, 16 in North America, 4 in Africa and 9 in the Middle East. One big methodological problem to measure the validity of the propositions is that such variables are not comfy to measure. This translates that the nine key variables recognized to do work the focal decision of foreign entry mode are linked to the empirical world only through indicators.Moreover, they out to be wide-ranging, multifaced constructs. As such, psychometric criterion based on multiple items rather than a single-item proxy s eemed a more fitting approach Peter 1979 Fomnell 1982 Churchill 1979, and was utilize in the analyses. I personally retrieve that psychometric variables do not fully reflect the necessary information, but that is just because I am biased towards more hardy statistical data and believe that what great deal think they know is not in reality what they know.Continuing with the questionnaire, the respondents were asked to evaluate the foreign venture under discussion across each of these items on a 7-point Likert-type scale. After data collection, an repetitious procedure was employed to refine the set of indicators for each construct. The item-to-total correlation, i. e. , the correlation between the gull of each indicator and the total stigmatize of those indicators utilise to capture each construct, was then examined. Following the steps suggested by Nunnally 1978, those indicators with a low correlation with the total tot (i. e. , rRevisiting the Eclectic Theory of the Cho ice of International Entry ModeTheoretical Issues on Marketing UIBE PhD Program Juan Pablo Dominguez oarlock 2012 Final Examination for Theoretical Issues of Marketing (Doctoral Course) Nov. 28, 2012 Essay questions for An Eclectic Theory of Choice of International Entry Mode 1. What are the major variables that affect the decision of entry mode? Should they be weighted equally? Why yes or why no? 2. Given that different variables may pull the MNC in the different directions, what approach is suggested by the authors? 3. What theories have been taken as the basis for conceptualization? 4.Considering the nine propositions, do they all make sense to you? In skid you find any fault with them, claim it with your arguments. 5. Review the methodology adopted by this paper and make your comment on its appropriateness. 6. Discuss briefly what contributions this thesis has made to the theory of international entry mode choice. 7. What do you think of the limitation of this thesis? Revis iting the Eclectic Theory of the Choice of International Entry Mode During the internationalization process of a company, the decision of entry mode to a particular market is determined by a set of different considerations.The paper An Eclectic Theory of Choice of International Entry mode is a theoretical approach to answer the questions of which factors are relevant and which are not. It reflects on how modern-day studies (particularly, Transaction Cost Theory) had a limited view of the problem by not including a globalstrategy factor in the analysis, therefore the authors try to advance the discussion by enriching the construct of additional variables that were disregarded by economical orthodoxy at the moment. This short paper is aimed to introduce in part the aforementioned(prenominal) document and present more recent findings in the topic.In that fashion I have divided the paper into 4 main parts besides this short introduction. The first section is a brief literature review of the theoretical background behind the understanding of entry mode in the internationalization process given that the paper was published more than two decades ago. The second section aims at synthesizing the main propositions of the paper and what I consider its limitations and contributions. The third section displays empirical evidence that aimed to negate or confirm the different propositions of the authors and finally, the fourth and hold water section is a set of lowest remarks. Literary reviewThere is no short list about existing research regarding the internationalization process of MNEs?. When focusing on the entry mode (or ownership strategies), one can put down to see that there are three different streams of thought one stream of research has often shut in such a choice as determined by the need for control to minimize transaction costs arising from asset specificity and potential partner opportunism (Anderson &038 Gatignon, 1986 Williamson, 1985). fit in to trans action costs theory, for investments characterized by high asset specificity, integrated ownership structures, such as whole owned subsidiaries (WOSs), should be sed to enhance MNEs? strategic and operational control over the assets (Anderson &038 Gatignon, 1986) and to protect MNEs from the risk of knowledge dissemination to their partners (Davidson &038 McFetridge, 1985 Hill, Hwang, &038 Kim, 1990). Thus, transaction costs theory advocates the use of ex ante control mechanisms to minimize transaction costs arising from asset specificity and potential partner opportunism (Williamson, 1985). some other stream of research has suggested that the institutional environment shapes such a choice and proposed that MNEs may exchange ownership for legitimacy in the host country (Chan &038 Makino, 2007 Yiu &038 Makino, 2002).When foreign ownership is not prevalent or well accepted in the host country industry, MNEs can partner with local firms or keep the ownership level decline (Chan &038 Makino, 2007). By doing so, MNEs can show the local communities that their activities are not ethnocentric or harmful to local firms, and they also curb the local identity and legitimacy to contain the resources that they need in the local environment (Xu &038 Shenkar, 2002). On the other hand, when FDI is well accepted in the local market, MNEs can come after integrated ownership structures and high blondness shares.Choice of an ownership structure thus does not necessarily reflect MNEs? deliberate efforts to husband on transaction costs for an effective governance mechanism but may rather be a response to pressures from the institutional environment (Yiu &038 Makino, 2002). The third stream is as in the case of Hill et al. which posits that in addition to control and legitimacy, MNE ownership strategy is also fundamentally refer with the choice between flexibility and commitment (Buckley &038 Casson, 1998 Chi &038 McGuire, 1996 Kouvelis, Axarloglou, &038 Sinha, 2001). More recent cover have taken again the same question.Li &038 Li in 2010 resuscitated the topic and made a contribution by not only providing a theoretical background proposing similar hypothesis as in the case of Hill, Hwang and Kim in 1990 but also by analyzing the ownership structure and equity shares of over 5,000 new foreign investments in manufacturing industries in China during 2000 to 2006. Explaining the contents of the paper is outside of the objectives of this short essay, but the Li &038 Li? s took Hill et al style of theoretical constructions one step further and provided stronger empirical evidence (outside the realm of mall sample surveys) that supports the logic behind such framework. Empirical tests of MNEs initial entry modes are rather limited, even though existing theoretical research has elaborated on the options features of JVs compared with other investment modes (Buckley &038 Casson, 1998 Chi, 2000 Lee, 2004 Pennings &038 Sleuwaegen, 2004). Cuypers and Martin (201 0) observed that foreign investors are incline to take a smaller equity share in a JV when they face strong exogenous uncertainty (e. g. , exchange rate uncertainty) rather than endogenic uncertainty (e. . , cultural uncertainty). Brouthers et al. (2008) showed that, in choosing international entry modes, MNEs tend to adopt JVs (over WOSs) under high demand uncertainty. Synthesis What are the major variables that affect the decision of entry mode? Given that different authors have considered variables like country risk, country familiarity, country development stage, technology, and transaction costs, Hill et al. begin their work with a vision to flux the framework and analyze how different factors affect the decision.The first attempt to create a unified framework was carried out by Anderson and Gatignon in 1986 through the use of transaction cost theory. I believe that the authors see the shortcoming of this initial unified proposal in the Ceteris Paribus assumption of Economics that is used only as a theoretical tool to analyze relations among events or variables. Any theory that treats related events in isolation will be meagerly and that? s why the authors propose the strategic relationship as another resilient element of the decision.Their proposal includes the following factors $% $ , = ( $%&038, $%&038 $%&038%, $%&038()&038 $) Should they be weighted equally? Why yes or why no? Different factors in the decision often suggest different entry modes, it is according to the particular weights each company puts in this factors that the final choice of entry is done. In other words, when deciding entry mode different factors have different weights and according to each companys strategic considerations, such weights will have different magnitudes.Given that different variables may pull the MNC in the different directions, what approach is suggested by the authors? The authors suggest that instead of focusing in a single variable, the company will h ave a set of strategic constraints that will limit their decision options. They focus their attention on how much control the company wants, according to the resource commitment they will provide and fetching into consideration the dissemination risks of their knowhow. This can be formulated as the following $% $ , = $%&038, $%&038 $%&038%, $%&038()&038 $ $%&038( $%&038( = $% &038 $%$&038$(, $% $%&038 , $% $%&038%( $%&038()*+ $%&038( = $%&038 $, $%&038 $%$&038$(, $% $%&038%, $%&038&038% $%&038&038( $%&038()$ $%&038 = ( $% $ ? $%&038%$ $ ? ? , $ $%&038 $ ? ? ) These factors come from previous research and theoretical constructs. One important analysis that needs to be done is how these factors correlate to each other.One factor that I? m not sure if it? s included in any of these variables is regulation. For example, many automobile giants in the world wanted to enter the Chinese market as WOSs but because of regulation they are forced to enter as JVs. This makes me believe that there is an unspoken assumption that the markets the authors were conceiving in their constructs were open markets with little participation of the giving medication (maybe they include it with country risk? ). What theories have been taken as the basis for conceptualization? This heoretical construct is a criticism to the Transaction Cost analysis to the entry mode decision, but in the words of Hwan, the theoretical heritage of the Eclectic Theory can be traced in part to the seminal work of Perlmutter 1969, which acknowledged the increasing existence of geocentric approaches to multinational management. The geocentric approach outlined by Perlmutter provided a condensed explanation for the existence of and benefits attached to managing subsidiary units not as a portfolio of autarkical units but as an interdependent network.Another foundation, upon which their argument rests, is the rich body of literature on global strategy (e. g. , Hout, Por ter and Rudden 1982 Hamel and Prahalad 1985 Kogut 1985a, 1985b Kim and Mauborgne 1988 Yip, 1989), which has any explicitly or implicitly built upon Perlmutters geocentric conception. I believe that the biggest theoretical difference from this global-strategy construct and classical economics theory within the entry mode decision is that the overriding objective is overall corporate success, not the maximization of each individual subsidiary units efficiency.The second is that in achieving this objective, interdependencies across subsidiary units must be actively managed, meaning that sometimes it would mean that in order to maintain global strategy, some SBUs might even be required to operate at a loss (which is a rationale outside the boundaries of traditional economics). Considering the nine propositions, do they all make sense to you? In case you find any fault with them, state it with your arguments. The first thing I find is why are they called propositions instead of dead reckoning? Any theory is based in hypothesis because its aim is to provide chances for something to be proved or not.The second thing I notices is that the propositions are not regular. By this I mean that when you make such kind of propositions, in order to fully understand the relationship of the explanatory variables with the dependent variable, the author must not only look at one side of the coin but at both. For example, Proposition 1 Other things being equal, firms that pursue a multi-domestic strategy will favor lowcontrol entry modes. That is one side of the coin, the other side would be Other things being equal, firms that do not pursue multi-domestic strategy will not favor low-control entry modes.The value of such construct is that it gives a more robust base for empirical testing. Each proposition is set to analyze the validity of each factor within the whole unified framework, so its validity remains to be well-tried empirically. Review the methodology adopted by thi s paper and make your comment on its appropriateness. This paper is a theoretical construct based upon the works of others with the addition of new factors, it does not apply specific methodological tools for testing its validity. In terms of epistemological value, the theory is constructed in the same fashion as Falsificationism (Popper? ) would propose because the validity of the theory that was accepted previously was put into question by the authors and therefore they provided a new set of hypothesis that should accommodate more accurately to reality than Transaction be theory. To discuss the appropriateness of such construct without empirical evidence would be to begin an epistemological debate about the validity of theories and their validity into describing Truth. If it were me who wrote the paper I would have not done a theoretical construct without any experimental study about its validity. I believe that? why some of the authors (specifically Hwan) wrote another paper a couple of years ulterior were with the use of surveys they tried to analyze the validity of such constructs. Methodologically speaking, I believe that is a much more baccate contribution to science than providing list of propositions that may or may not be of use. Discuss briefly what contributions this thesis has made to the theory of international entry mode choice. The biggest contribution of this paper was the search of different factors that could explain the decision of mode of entry for the internationalization process of a company.Previous studies at the moment had already identified a diversity of variables that influence the entry mode decision decision, and the authors grouped them into one of two categories environmental or transaction specific factors. Furthermore, according to the theoretical constructs of the time, the studies of the factors had an underlying assumption that each entry decision is made in isolation and is driven basically by efficiency consideratio ns at the level of the individual entrant or subsidiary unit.This paper made a case directed towards establishing the importance of a third group of factors global strategic, namely the strategic relationship it envisages between its operations across borders, in reaching its entry mode decision. For a business manager who is in such internationalization process, this theoretical construct can provide him a roadmap to which variables he/she should pay attention to in order to make the decision of entry.In my opinion, managers tend to first see how other companies enter the market in their initial stages and see if that would be a viable choice and such contextual approach is not included in the factors. What do you think of the limitation of this thesis? The biggest limitation of any theoretical construct is that it remains just a theory and not be applicable. That? s why I took it upon me to see if someone had tried to prove or get over the Eclectic Theory. The results of that sea rch are shown in section three of this paper.Empirical evidence 2 years after the publication of Hill et al. Eclectic Theory, one of the co-writers, Peter Hwang along with W. Chan Kim published the paper Global scheme and Multinationals? Entry Mode Choice. The main objective of the paper was to provide empirical tests to the propositions made by the Eclectic Theory. They used a survey from ninety-six multinational managers and had a fundamental result that an express incorporation of global strategic variables into an analysis of the entry mode decision is warranted. DataThe survey was a mail questionnaire composed of four parts modes of entry, global strategic factors, environmental factors, and transaction-specific factors. It was distributed to 629 U. S. based MNE, mostly from the manufacturing sector and targeted senior-level management. 137 questionnaires were returned (22% response rate), of which 41 were disregarded because of incomplete answers. Another 18 were disregarded because respondents provided a dictatorial response to the control question of whether government regulations imposed restrictions on the mode options available.The respondents operations were geographically wide with 25 hardened in Asia Pacific, 17 in southwest America, 25 in Europe, 16 in North America, 4 in Africa and 9 in the Middle East. One big methodological problem to measure the validity of the propositions is that such variables are not blue-blooded to measure. This translates that the nine key variables recognized to influence the focal decision of foreign entry mode are linked to the empirical world only through indicators.Moreover, they face to be wide-ranging, multifaced constructs. As such, psychometric touchstone based on multiple items rather than a single-item proxy seemed a more fitting approach Peter 1979 Fomnell 1982 Churchill 1979, and was used in the analyses. I personally believe that psychometric variables do not fully reflect the necessary information , but that is just because I am biased towards more robust statistical data and believe that what hatful think they know is not actually what they know.Continuing with the questionnaire, the respondents were asked to evaluate the foreign venture under discussion across each of these items on a 7-point Likert-type scale. After data collection, an repetitious procedure was employed to refine the set of indicators for each construct. The item-to-total correlation, i. e. , the correlation between the add together of each indicator and the total bump off of those indicators used to capture each construct, was then examined. Following the steps suggested by Nunnally 1978, those indicators with a low correlation with the total make (i. e. , r