New Institutional Perspective on Foreign Market Selection

Foreign market selection (FMS) is one of the most important decisions firms make when deciding to increase their international involvement. Yet, despite the importance of FMS, the literature generally assumes firms make that decision only on the basis of in-depth assessments of foreign markets, psychic distance or network relationships, sometimes in response to unsolicited orders. The significance of institutional environment at the local industry level is often overlooked. This book, in its emphasis on the importance of local industry institutional environment, incorporates the new institutional perspective into FMS research. The new institutional perspective is based on recognition of (1) regulatory pillars (2) normative pillars and (3) cognitive pillars that influence the legitimacy of firms and reduce uncertainty during their selection of foreign markets. This book develops a local industry institutional profile specific for FMS. Subsequently, a conceptual framework is proposed on how local industry profile might influence foreign market selection and how this influence differs at two points in time– the initial and subsequent firms'' decisions to enter a foreign market.