Assessment of Factors Influence Entry Mode Choice of Companies (Foreign Companies in Ethiopia)

Abstract

In today’s globalized world companies enter international market in different ways. They face  difficult  decision  with  regards  to  the  choice  of entry  mode since their choice of entry mode is influenced by different factors. Considering this, the study tried to investigate factors influencing the choice of entry modes of companies investing in Ethiopia. Specifically the study tried to investigate internal (product factors, company size and international experience) and external factors (target country market, production, environmental and firms home country factors) influencing entry mode choice of companies. This study used a survey research design and it is a Cross sectional surveys in which data are collected at one point in time. This study is explanatory research type by its nature and data was collected through close ended questionnaire.  In  addition  to  this  the  study  used  a  three  stage  sampling techniques (purposive, stratified and simple random sampling)  and drawn 98 foreign owned companies using Yamane,(1967 sample size determination formula. The study used both descriptive statistics and econometric analysis. A multinomial logit model was used to investigate factors influencing the choice of entry mode. The study found that company’s size is positively and statistically significant influence the choice of joint venture over  green field investment, also firms home country factors is negatively and statistically significant influence the choice of joint venture over green filed investment, in addition, international experience was positively and significantly influence the choice of acquisition over green field investment and target country production factor are statistically significant in choosing joint venture relative to green field investment.

Keywords: entry mode, entry mode choice, joint venture, Greenfield investment, acquisition