Unformatted text preview: 94). 17 LITERATURE REVIEW
Home Country Factors
Market, production, and environmental factors in the home country also influence a
company’s choice of entry mode to penetrate a target country. A big domestic market allows a
company to grow to a large size before it turns to foreign markets. The competitive structure
of the home market also affects the entry mode. Firms in oligopolistic industries tend to
imitate the actions of rival domestic firms that threaten to upset competitive equilibrium.
Finally, there are two other home country factors that deserve to be mentioned. High
production costs in the home country relative to the foreign target country encourage entry
modes involving local production, such as licensing, contract manufacture and investment.
The second factor is the policy of the home government toward exporting and foreign
investment by domestic firms (Root, 1994).
In addition Root (1994) also bring forward the geographic distance as an influencing factor
due to the fact of high transportation cost when the distance is great and to suc...
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