Contemporary Research Trends in International Marketing

Contemporary Research Trends in International Marketing
Oxford Handbooks Online

Contemporary Research Trends in International Marketing: The 2000s
Masaaki Kotabe and Crystal X. Jiang
The Oxford Handbook of International Business (2 ed.)
Print Publication Date: Jan 2009
Online Publication Date: Sep 2009
Subject: Business and Management, Marketing, International Business

DOI: 10.1093/oxfordhb/9780199234257.003.0017
Abstract and Keywords

International business research is probably more influenced by various forces of the economic and political climates than its domestic (or generic)
counterpart. The emergence of new market economies in Eastern Europe, China, India, and Brazil, the consolidation of the European Union, as well as
a decade of economic stagnation and recent resurgence in Japan's economy has given global competition greater significance. This article looks at
research in international marketing to see if the discipline has overcome the deficiencies outlined in the previous studies. It examines the state of the art
in international marketing research, with particular emphasis on conceptual frameworks and theory development. Its primary focus is on studies
published since the year 2000 because the first decade of the twenty-first century has been characterized by changes in virtually all aspects of
businesses and personal life.
Keywords: international marketing, market economies, Eastern Europe, European Union, economic stagnation, conceptual framework
The climate of the time continues to shape the contextual nature of business research. International business research is probably more influenced by
various forces of the economic and political climates than its domestic (or generic) counterpart. The emergence of new market economies in Eastern
Europe, China, India, and Brazil, the consolidation of the European Union, as well as a decade of economic stagnation and recent resurgence in
Japan's economy has given global competition greater significance. The emergence of regional trading blocs in the form of the EU (European Union),
the NAFTA (North American Free Trade Agreement), and MERCOSUR (Mercado Comn del Sur) and an increasing number of bilateral trade
agreements (e.g. EUMexico, JapanMexico, JapanSingapore) have necessitated reorganization of firms' production and marketing strategies.
Advances in technology enhance communication and permit access to everincreasing amounts of information. Globalizing trends in culture,
technology, and financial markets drive global demand and global supply chains. Given these facts, it is no surprise that multinational enterprises
(MNEs hereafter) have evolved into increasingly complex business environments. They attempt to maximize economic gains and efficiencies by
increasing their scope of operations, penetrating ever more obscure markets, and accumulating knowledge from ever wider networks of subsidiaries,
alliances, and acquisitions in this increasingly fastpaced, turbulent, and competitive environment.
As MNEs have pushed the geographic frontiers of their operations, the paradigm has shifted from a hierarchical MNE federation focus to a network
based focus by emphasizing firms' integrated strategies and organizations (Holm and Pedersen 2000). It becomes imperative that firms conduct more
research in unfamiliar and distant markets and in less developed and rapidly changing emerging economies. They must also increase their speed in
collecting, interpreting, and reacting to new and unfamiliar market stimuli in order to respond with effective marketing strategies (Craig and Douglas
2001).
Although national boundaries have begun to lose their significance as psychological and physical barriers to international business, local
environments, particularly cultural, political, and legal environments, still play an important role not as a facilitator, but rather as an inhibitor, of optimal
global marketing strategy development. Indeed, we still debate the very issue raised forty years ago: counteracting forces of unification versus
fragmentation in developing operational strategies along the value chain. As early as 1969, John Fayerweather wrote emphatically:
What fundamental effects does (the existence of many national borders) have on the strategy of the multinational firm? Although many effects
can be itemized, one central theme recurs; that is, their tendency to push the firm toward adaptation to the diversity of local environments
which leads toward fragmentation of operations. But there is a natural tendency in a single firm toward integration and uniformity that is
basically at odds with fragmentation. Thus the central issue is the conflict between unification and fragmentationa closeknit operational
strategy with similar foreign units versus a loosely related, highly variegated family of activities.
(Fayerweather 1969: 1334)
The same counteracting forces have since been revisited by many authors with such terms as standardization versus adaptation (1970s),
globalization versus localization (1980s), global integration versus local responsiveness (1990s), and most recently, scale versus sensitivity, and
online scale versus offline market sensitivity (2000s). Basically, the leftside concept (i.e. unification, standardization, globalization, global integration,
scale, and online scale) refers to a supply side argument in favour of the benefit of economies of scale and scope, while the rightside concept (i.e.
fragmentation, adaptation, localization, local responsiveness, sensitivity, and offline market sensitivity) refers to a demandside argument addressing
the existence of market differences and the importance of catering to the differing market needs and conditions. Terms have changed, but the
quintessence of the strategic dilemma that MNEs face today has not changed and will probably remain unchanged for years to come (Kotabe and
Helsen 2007).
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The importance of these changes is reflected in the development of new research streams in international marketing (Balabanis, Theodosiou, and
Katsikea 2004; Craig and Douglas 2001; Czinkota and Ronkainen 2002; Kotabe, Martin, and Domoto 2003; Nakata and Huang 2005; Douglas and
Craig 2006; Katsikeas, Samiee, and Theodosiou 2006), market globalization/regionalization (Zou and Cavusgil 2002; Rugman 2003; Subramaniam
and Hewett 2004), collaborative business arrangements (including strategic alliances) (Warrington, Abgrab, and Caldwell 2000; Luo 2002; Robson
2002; Reus and Ritchie 2004), and multinational corporations in emerging markets (Steenkamp and Burgess 2002; Meyer 2004; Luo 2007a).
These trends have increased the importance of research in international marketing, but it is not clear how research in the field has coped with this
broadened responsibility. Past reviews of international marketing research (Kotabe 2001; Nakata and Huang 2005; Douglas and Craig 2006)
highlighted two major deficiencies: studies in international marketing were simple, narrow and, perhaps, parsimonious without supplying a strong
theoretical framework to guide firms' global expansion; and international marketing research lacked the methodological rigour, particularly in
equivalence of constructs and concepts, in comparison to generic (or domestic) research. While the first deficiency can be attributed to the
preponderance of incorporating simple conceptualizations to represent complex relationships among multidimensional constructs (Nakata and Huang
2005), the latter can be attributed to the difficulties inherent in research involving more than one country (Aulakh and Kotabe 1993) (e.g. conducting
primary data collection, the problem of data comparability in crosscultural research, the implementation of methodological techniques in foreign
markets). There have been various attempts to address these problems (e.g. Craig and Douglas 2000).
This study looks at research in international marketing to see if the discipline has overcome the deficiencies outlined in the previous review articles. We
examine the state of the art in international marketing research, with particular emphasis on conceptual frameworks and theory development. Our
primary focus is on studies published since the year 2000 because the first decade of the twentyfirst century has been characterized by changes in
virtually all aspects of businesses and personal life.
Earlier review articles (e.g. Kotabe 2001; Cavusgil and Li 1992; Douglas and Craig 1992; Aulakh and Kotabe 1993) classified the research into three
main streams: macroenvironmental issues, marketing management, and consumer behaviour. This review of the international marketing literature
follows the classification system originally employed in Douglas and Craig (1992).
Advances in International Marketing (20002007): This chapter reviews both macro and microenvironmental topics in international marketing.
Research for this review spanned more than 1,000 articles in the journals from marketing and other related business areas that are listed in the
ProQuest database. A list of the journals reviewed in this survey is provided in the Appendix. Although the list is not comprehensive, it sufficiently
covers the domain of research in international marketing. A large majority of articles published in the 2000s deal specifically with issues related to
marketing management rather than the macroenvironments that affect marketing management practices.
17.1 The Macro Context

International marketers have paid relatively limited attention to these global economic, legal/institutional and political/social developments. Oftentimes
the environmental factors are perceived as foreign environment uncontrollables and receive limited academic attention (Young 2001). The same
author summarized the impact of the global business environment on international marketing literature and suggested the following research agenda:
examine the impact of the evolution of regulation and liberalization in different countries or regional markets and sectors on the firm
take a country focus to investigate government intervention in international trade and investment, as well as government assistance and support
on FDI
uncover how multilateral institutions, such as the WTO, influence trade and investment relations and international marketing
examine international marketing strategies of the nongovernment organizations (NGOs)
use a macroeconomic perspective to examine both developing country firms operating abroad and MNEs operating in poor nations in terms of
international marketing and economic development.
The macroenvironmental context in which the issues of area studies, consumerism in society and institutional infrastructure are addressed is not
examined in detail here due primarily to the lack of substantial and specific research addressing those issues in the 2000s. As stated earlier, research
focus in the 2000s has been predominantly on international marketing strategy issues. However, the discussion on the microenvironmental issues
familiarizes the reader with the countries or regions that have captured the attention of international marketing researchers. A few articles addressed
the issue of consumerism in society. O'Shaughnessy and O'Shaughnessy (2002) examined the connections among marketing, the consumer society,
globalization, and the hedonistic lifestyle, and discussed whether marketing is guilty as charged. They propose that marketing cannot really be the
cause of materialism and that there is existence of credible alternatives. Later, Abela (2006) evaluated the claims made by O'Shaughnessy and
O'Shaughnessy and found associations between consumerism and reduced personal wellbeing and between the historical development of
consumerism and rise of modern marketing; although in both cases the existence of a causal relationship and its likely direction remain unclear. The
author calls for future research to investigate the possibility of working within the current market economy to reduce the incidence of materialism.
17.2 The Micro Context

The microcontext of research in international marketing constitutes the bulk of research conducted in the field. Although there is no single best way to
arrange various topics, they are arranged as follows. First, we examine research in both organizational and personal consumer behaviour as it
represents the initial interfaces between firms and customers. In particular, the effect of country of origin on consumer behaviour received a significant
amount of research attention. Second, research in various modes of entry and their performance implications is examined. Third, the literature on the

marketing mix strategy is highlighted as it constitutes the crux of marketing. Fourth, research in global strategy and strategic alliances is covered. Both
marketing and strategy researchers generally share common research interest in these strategyrelated issues. Researchers in marketing tend to be
more interested in market performance implications of global strategy and strategic alliances, while strategy researchers seem to place more
emphasis on the theories driving the strategies. In the next segment, we review emerging issues concerning the Internet in global marketing, ethics in the
global market place, and marketing strategies for emerging markets. Finally, research methodologies that are in the extant literature are examined. A
map of the topics covered under the microcontext is summarized in Table 17.1.
17.2.1 Organizational and Consumer Behaviour

17.2.1.1 Organizational Buying Behaviour
Organizational buying research has focused on the structure of the informal group that is involved in buying decisions (e.g. Dawes, Lee, and Dowling
1998), the decisionmaking process (e.g. Smith and Taylor 1985), and the factors that influence both matters (e.g. Ghingold and Wilson 1998).
Hunter, Bunn, and Perreault (2006) examined interrelationships among key aspects of the procurement process used by organizational customers. In
their study, the procurement process included the relationships among purchase importance, extensiveness of choice set, buyer power, reliance on
procedural controls, a proactive focus on longterm strategic issues, and search for information.
Barclay and Bunn (2006) categorized organizational buying behaviour as follows: decision stages, buying activities, process heuristics, choice
heuristics, and decision tactics. They focused on process heuristics and examined how it relates to aspects of the market and organizational context
and to the buying situation of an organization.
17.2.1.2 International Negotiations

Extant studies in this area examine issues on crosscultural businesstobusiness negotiations. As global companies rely increasingly on the
effectiveness of business negotiations for their survival and growth, international business negotiations have attracted considerable attention among
researchers over the last decade.

Table 17.1 A mapping of the topics covered under the micro context
1. Organizational and consumer behaviour
1.1 Organizational buying behaviour

1.2 International negotiations
1.3 Consumer behaviour
1.4 Country of origin (COO)
2. Market entry decisions
2.1 Initial mode of entry

2.2 Specific modes of entry
2.2.1 Exporting
2.2.2 Joint ventures
2.2.3 Franchising
3. Local market expansion: marketing mix decisions
3.1 Global standardization vs. local responsiveness

3.2 Marketing mix
3.2.1 Product policy
3.2.2 Advertising
3.2.3 Pricing
3.2.4 Distribution
4. Global strategy
4.1 Competitive strategy

4.1.1 Conceptual development
4.1.2 Competitive advantage versus competitive positioning
4.1.3 Sources of competitive advantage and performance implications
4.2 Strategic alliances
4.2.1 Learning and trust
4.2.2 Recipes for alliance success
4.2.3 Performance for different types of alliances
4.3 Global sourcing
4.3.1 Global sourcing in a service context
4.3.2 Benefits of global sourcing
4.3.3 Country of origin issues in global sourcing
4.4 Multinational performance
4.4.1 Determinants of performance
4.4.2 A different interpretation of performance
5. Emerging issues
5.1 Internet in global marketing

5.2 Ethics in the global marketplace
5.3 Marketing strategies for emerging markets
6. Analytical techniques in crossnational research
6.1 Measurement issues

6.2 Reliability and validity issues
A review study on international business negotiations from 1990 to 2000 identified five categories of interests in negotiation research: environmental
and organizational conditions, cultural influences, characteristics of the individual negotiators, the negotiation situation itself, and the outcome of the
negotiation (Reynolds, Simintiras, and Vlachou 2003). Environmental conditions include the legal and political environment, currency fluctuations,
foreign exchange, foreign government controls, instability and change. The organizational factors include firmspecific characteristics and firms'
decisionmaking process. Nakamura's (2005) study, for instance, examined how firms' intangible assets can be an integral source of their bargaining
power in negotiations with potential joint venture partners in the host country. However, the foreign partner's bargaining power relative to joint venture
partners' does not remain constant since, in a dynamic context, the joint venture itself can enhance the partners' bargaining power as they learn from
their own international joint ventures and through increased R&D capacity.
The impact of cultural factors on international negotiation has caught researchers' attention, especially in an emerging economy context. Leung and
Chan (2003) examined business to business (BtoB) relationships in terms of issues such as inducement factors, face work and favour from a
Hong KongChina intracultural negotiation environment. Their findings suggested that Western negotiators should adapt face work as a cultural
strategy to facilitate their market entry to the Chinese market. In an Eastern cultural context, face work, which can be conceptualized as saving face,
facilitates smooth business transactions and longterm relationship building.

With the increasing growth of international trade and business opportunities in the Arab region, it becomes important to investigate the dynamics of
crosscultural negotiation processes in an Arab context. Drawing a sample from the United Arab Emirates (UAE), AlKhatib, Rawwas, and Swaidan
(2005) examined the impact of Idealism, Relativism, and Machiavellianism on the perceived appropriateness of five opportunistic negotiation tactics:
traditional competitive bargaining, attacking opponent's network, making false promises, misrepresentation of information, and inappropriate
information gathering. Idealism and Machiavellianism are found to be strong predictors of managers' perceptions of the ethical appropriateness of
negotiating tactics.
17.2.1.3 Consumer Behaviour

The issue of international consumer behaviour suffers from three key problems a lack of theories, a lack of measurement reliability and a neglect of
moderating variables. Research in this area has been extensive and mostly can be grouped under the following subtitles:
impact of culture on consumer behaviour
universality of American consumer behaviour models to the international context
debate on global consumer homogeneity versus heterogeneity
descriptions of international consumer behaviour.
Culture and Consumer Behaviour: Recently, more scholars are interested in exploring the influence of culture on consumer attitudes and behaviour.
Kongsompong (2006) compared Australian and Singaporean consumer purchasing decisions and orientation toward locus of control. The study
showed that Singaporean consumers, representing a typical collectivist country, demonstrated more external locus of control tendencies and were
more responsive to social influence in a hypothetical buying situation than those from a typical individualist country (e.g. Australia). Similarly, Keillor,
Hult, and Kandemir (2004) reported significant differences across eight countries in the impact that technical (physical goods quality) and functional
(service quality and servicescape) elements of the service encounter had on consumers' behaviour intentions.
Universality of American Consumer Behaviour Models: As noted by Steenkamp and Burgess (2002), it is problematic to apply measurement
instruments established in Western cultures to other cultures when more than 80 per cent of the world's consumers live in emerging consumer markets
and transitional economies. It is necessary, therefore, to develop consumer behaviour measurements that fit into the political, legal, economic, and
cultural background of these countries. Keillor, Owens, and Pettijohn (2001) investigated factors that contribute to social desirability bias in a cross
cultural/crossnational setting. They found that the factors influencing social desirability bias vary across countries and cultures. These factors can be
categorized as either internal (e.g. from within the nation, culture or local business community) or external (e.g. from other localities, nations or cultures).
This paper clearly presents the notion that although businesses predict an increasing homogeneous pattern of consumer behaviour due to increased
economic development, the strong influence of family, friends, and cultural traditions may override the multinational exposure. Hence, given the
complexity of the international business environment, care must be taken when applying current instruments to businesses in diverse cultural contexts.
Consumer heterogeneity versus homogeneity: Research was conducted on the attitudes of Japanese, Chinese, and Korean consumers towards
foreign countries and products (Kotabe and Jiang 2006). The authors suggest that although consumers in Japan, China and Korea differ in their brand
orientation, quality/price perceptions, and product feature preferences, young generations in the three countries demonstrate similarities that allow for
standardized strategies across national boundaries. It is essential that business strategists identify strategically equivalent segments, suggesting that
a geocentric orientation in approaching global markets is necessary to reflect both similarities and differences among consumers.
Descriptive Consumer Behaviour: Research was conducted on the influence of situational factors on the Japanese giftgiving market (Gehrt and Shim
2002). Those situational factors are (1) the age of the recipient in relation to that of the giver; (2) the relationship between the recipient and the giver
(informal vs. formal); and (3) the occasion of the gift (ordinary visit vs. giftgiving season). Situational influence was found to have a significant impact
on Japanese consumer behaviour and the magnitude of situational influence is substantial.
In examining the reality of counterfeits and consumers' experience with the phenomenon, Gentry et al. (2001) indicated that consumers in emerging
markets may consider the brand and the product as separate entities serving different purposes. They are generally willing to pay disproportionate
parts of their income for symbolic Western brands and often lowerpriced Western merchandise is mistakenly perceived as counterfeit rather than as
a comparable product with lowprice.
Soman and Gourville (2001) examined one of the marketing practices, specifically price bundling and found that consumers are more likely to refrain
from consuming and demand less compensation for an individual benefit when it is purchased as part of a bundle.
17.2.1.4 Country of Origin (COO)

Although the COO research falls under the domain of consumer behaviour research, it will be examined separately as it has carved out its own niche
in international marketing research. The pattern of research in this domain can be placed under the following themes:
conceptual refinement
COO and information processing
establishing further proof for robustness of COO measure
proof on robustness of COO measure
measurement issues.
Conceptual Refinement: The COO construct is decomposed into the following components: country of product design (COD), country of parts
manufacture (COP), country of product assembly (COA), and country of manufacture (COM) (Chao, 2001; Quester, Dzever and Chetty 2000; Insch

and McBride 2004). Prior results indicate that countryoforigin components do affect consumer perceptions of design quality, manufacturing quality,
and overall quality for each product in distinctly different ways (Chao 2001; Insch and McBride 2004).
COO and Consumer Information Processing: Recent studies examine how consumer ethnocentrism, patriotism, and economic nationalism affect
product purchase behaviour (Balabanis et al. 2001; Balabanis and Diamantopoulos 2004). The COO effect may be an outcome of a combination of
two processescultural stereotypes and personal beliefs. Similarly, Riefler (2007) suggested that consumers differ in their animosity targets and there
may be different reasons, such as economic, political, religious, or personal, that cause their animosity feelings and thus determining their foreign
product purchasing behaviour. Singh et al. (2007) compared the differences between Western (US) and Eastern (China) consumers in moral intensity
and personal moral philosophies in decisionmaking processes
Kwak, Jaju, and Larsen (2006) used data from three diverse cultural and economic environments and confirmed that consumer ethnocentrism
provokes negative attitudes toward foreign advertisements and foreign products. However, their study suggested that consumer variables such as
global mindset and a market's email communication efforts mediate consumer ethnocentrism attitudes toward foreign brands. COO could be either a
benefit or a liability. Amine, Chao, and Arnold's (2005) study explored how negative COO effects and animosity can slow down a firm's globalization
efforts.
Pharr (2005) conducted a narrative review of empirical studies of COO evaluations researched from 1995 to 2005. The review indicated that COO
influence was subject to culturally derived antecedents and moderated by both productbased and individual consumer factors. A number of culturally
derived factors affecting COO evaluations were identified (e.g. ethnocentrism, countryspecific animosity, stereotypes, and Hofstede's cultural
dimensions) (GrhanCanli and Maheswaran 2000a; Balabanis and Diamantopoulos 2004; Insch and McBride 2004). For example, Laroche et al.
(2003) suggested that COO effects vary significantly based on the consumers' subcultural differences such as geographic region and language.
External factors such as a country's level of economic development or the influence of a consumer's evaluation also affect COO evaluations (Liu and
Johnson 2005).
As for the moderators of COO effects, brand image or brand equity were found to moderate the effect of COO on product evaluations and purchase
intentions, indicating that COO evaluations may operate through a brandbased construct rather than based on product quality evaluations or
purchase intentions. It is reported that consumers' perceptions of a brand's developmental origins are more important than COO information in
relationship to the product's parts, assembly, design, or manufacture (Pharr 2005). Based on the framework of accessibilitydiagnosticity and
information integration, Jo, Nakamoto, and Nelson (2003) found that brand image protects against the effects of negative COO evaluations. Strong
brands were less influenced by consumer perceptions of countriesoforigin than brands with weak images.
Establishing Further Proof for Robustness of COO Measure: Research was conducted to examine the influence of COO relative to other product
attributes in consumers' evaluation of domestic and foreign food products (Ahmed et al. 2004). The results indicated that when buying lowinvolvement
products, COO mattered to Singaporean consumers in terms of its effects on highinvolvement product categories in developed countries. However,
when considering other extrinsic factors, such as price and brand, the impact of COO was weak and brand became an important factor for local
consumers. Another significant finding was that country quality perception varied across product categories.
Research by Piron (2000) examined whether a product's COO affects consumers' purchasing intentions of public versus private and luxury versus
necessity products. COO was important for luxury products and necessities but less important than intrinsic cues, such as a product's reliability and
performance. Further, it was noted that consumers' purchasing intentions were higher with no COO information than when presented with a moderate
impression.
By examining Hong Kong consumers' perception of products coming from China and other major sourcing countries, Kaynak and Kucukemiroglu
(2001) suggested that made in images of products affect consumers' product selection. These made in images can be influenced by national
characteristics, representative products, political and economic background and past experience with the sourcing countries and their products.
Proof against Robustness of COO Measure: As more research decomposes COO measurement, the salience of COO information itself in consumers'
product evaluations and choices has been questioned. For example, Liefeld (2004) reported that COO of products is not an important attribute in the
choice processes of North American consumers. Suggesting that past research may have inflated the influence of COO on consumers' consumption
behaviour, a study conducted by Samiee, Shimp, and Sharma (2005) revealed that consumers have only modest knowledge of the national origins of
brands, since factors such as socioeconomic status, past international travel, foreign language skills, and gender affect American consumers'
capability of recognizing foreign brand origins. Furthermore, brand origin recognition is based largely on consumers' associations of brand names with
languages that suggest country origins. Another study by Chao, Whrer, and Werani (2005) suggested that in a country (Austria) where consumers
speak a different language with very different cultural heritage, the use of a foreign celebrity and a foreign brand name balances negative COO
product evaluations. Consumer ethnocentrism is considered a plausible explanation for this observation.
Finally, in contrast to the general notion of using countryoforigin or madein labels as the key research cue, Bradley (2001) examined the influence of
country effects and company effects on company preferences among industrial buyers of electrical and electronic equipment. It was found that
company effects (i.e. elements of the firm's marketing programme) were stronger and dominated country effects. Country effect had a weak impact on
company preference and serve as an interaction variable mediated by company advertising.
Measurement Issues: Pereira, Hsu, and Kundu (2005), among others, looked at COO evaluations as part of the larger COO image construct which
includes cognitive, affective, and conative components. These studies indicate that countryoforigin bias may stem not only from countryspecific
beliefs but also one's emotions or feelings toward a country (GrhanCanli and Maheswaran 2000b). It is therefore not only necessary to examine what
is being perceived based on country image but also who is doing the perceiving (Insch and Miller 2005).
17.2.2 Market Entry Decisions


Market entry decisions have been of great interest to international business academics and practitioners (Malhotra, Agarwal, and Ulgado 2003;
Mayrhofer 2004). The choice of an MNE's foreign market entrymode, for instance, licensing, equity joint venture (EJV), or whollyowned subsidiary
(WOS), represents one of the most important strategic decisions for a firm engaging in foreign direct investment (FDI). The entrymode decision
influences a firm's commitment of financial and human resources. It determines development and implementation marketing programmes, the
coordination of business activities both within and across markets, and ultimately the MNEs' success in foreign markets (Malhotra, Agarwal, and
Ulgado 2003; Chen, Griffith, and Ru 2006).
17.2.2.1 Initial Mode of Entry

Research in this area has focused its attention on three areas:
to lay a conceptual foundation for understanding the choice of entrymode
entrymode choice in service firms and how this differs from manufacturing firms
entrymode choice in emerging economies.
Conceptual Foundation: Earlier studies on foreign entry strategy have followed a transaction cost aspect (Hennart and Park 1993; Hennart and Reddy
1997; Makino and Neupert 2000) and resourcebased perspective (Barney 1991). Extant studies have examined the influence of the combination of
internal factors and external institutional pressures on a firms' foreign entrymode. Davis, Desai, and Francis (2000) examined the market entry
decisionmaking process and found that firms' entrymode choices can be affected by internal (parent) and external (host country) institutional
pressures. Particularly, business units that are greatly influenced by their parent firm's institutional norms would prefer whollyowned entrymodes,
whereas business units that are influenced more by host country environmental factors would prefer export as their entrymode. More importantly, a
firm's goal of internal isomorphism could be more important than host country factors in determining entrymode choice.
Further, Elango and Sambharya's (2004) study tested for the influence of host country industry structure factors, such as entry barriers, nature of
demand, and degree of rivalry, on entrymode choice. This study supports the notion that firms seek to fit their mode of entry with host country
industry characteristics.
It is argued that the larger the institutional distance, the more difficult it is for MNEs to establish legitimacy in the host country and to transfer strategic
routines to foreign subsidiaries (Kostova and Zaheer 1999). New studies have emerged from institutional theory on institutional distance and FDI (Xu
and Shenkar 2002). These studies argue that entry strategies must be matched with institutional distance from the host country in order to gain the
advantage over competitors with small institutional distance or those who have experience working with large institutional distance. Trevio, Franklin,
and Mixon (2004), for instance, believe that MNEs must conform to the institutional environment prevailing in the host country (DiMaggio and Powell
1983). That is, firms should understand the level of macroeconomic and institutional reform that has taken place in proposed host countries and
managers should undertake FDI where the institutional distance is minimal. Thus, following institutional theory, when institutional distances exist, firms
tend to seek legitimacy as well as efficiency, by selecting less integrated modes of entry (Delios and Beamish 1999; Brouthers 2002).
By incorporating multilevel factors, Luo (2001) used an integrated framework to investigate whether entrymode choices can be affected by country,
industry, firm, and project factors. The author indicated that firms should assess the risk, return, control, and stock of owned resources for each entry
mode.
Brouthers, Brouthers, and Werner (2003) applied transaction cost variables to predict firms' entrymode choices and found that asset specificity and
economic uncertainty can predict entrymode choices. Their results indicate that transaction costenhanced selected entrymode choices lead to
superior firm performance. Erramilli, Agarwal, and Dev (2002) explored how firms make nonequity entrymode decisions and reported that the
availability of management capabilities, firm's imperfectly imitable capabilities, and the availability of a support infrastructure affect the modes chosen.
Entry Mode Choice in Service Firms: SanchezPeinado, PlaBarber, and Hbert (2007) identified principles in the manufacturing sector that can be
applied to service firms and others that can be modified to the specific characteristics of services. They suggest that entrymode choices for service
firms cannot be fully examined through the perspectives offered in the manufacturing sector.
By incorporating transaction cost factors and the influence of risk and trust propensity, Brouthers and Brouthers (2003) investigated the differences
between service and manufacturing firms' international entrymode choices. The entrymode of service firms was driven by peopleoriented measures
of uncertainty: asset specificity, behavioural uncertainty, and trust propensity; whereas manufacturing firms' looked at investmentbased uncertainties,
such as environmental uncertainty and risk propensity.
Ekeledo and Sivakumar (2004) suggested that resourcebased theory can be applied to entrymode strategies. Their analysis indicated that the
transferability of entrymode concept, practice or theory from manufacturing to service firms depended on the type of services involved. They found
significant differences between entrymode strategies for nonseparable service firms and those of manufacturing firms due to simultaneity of
production and consumption of nonseparable services.
Entry mode choice in emerging economies: Prior research has examined the ownership and control of entry strategies focusing primarily on the mature
market economy context. It was not until lately that studies have looked at entrymodes of MNEs in emerging markets. Entering into transition
economies presents considerable uncertainty for businesses. Gielens and Dekimpe (2007) study indicated that managers should take certain industry
wisdom into consideration, in terms of entry timing and size; otherwise a firm's attempt to develop unique entry rules can be dysfunctional. In addition,
rather than just imitating the most popular or wellrecognized decision in terms of entry timing and size, managers should closely monitor the actions of
their home competitors, distinguish their actions between sameformat competitors and differentformat ones, and adjust the observed industry
practice for the specificity of their own resources. Furthermore, the negative effects of entering at a different point in time from the industry norm persist
and even become amplified over time, whereas the negative impact of size differences is temporary.

Meyer and Nguyen (2005) examined how institutions in an emerging economy influence entry strategy decisions. They reported that subnational
institutional variables demonstrate a significant influence on both location and mode of foreign entry. Institutional pressures arising from incumbent
stateowned firms and the domestic market orientation of the investor lead to a preference for joint venture entry, while the availability of scarce
resources affects the location of FDI and the likelihood of greenfield entry.
17.2.2.2 Specific Modes of Entry

17.2.2.2.1 Exporting
Exporting has been one of the most frequently studied areas in the literature on entrymodes. Most of the academic work revolved around the following
issues:
conceptual foundation
exporting and the marketing mix
determinants of exporting
export performance
exporting and small business
factors of export success
barriers to exporting
exporting and strategic alliances.
Conceptual Foundation: The literature on export mode choices has evolved from the lenses of Hymer's theory, through International Product Life Cycle,
Internationalization, Internalization, Eclectic Paradigm, Transaction Cost Economics, to the presentday Resourcebased View explanation (Sharma
and Erramilli 2004). Recently, export studies have examined the contribution of firms' resources and capabilities to the realization of their competitive
advantage in export markets, including experiential, scale, tangible resources, informational, relationship marketing, pricing, distribution,
communication, and product development capabilities (Zou, Fang, and Zhao 2003; Morgan, Kaleka, and Katsikeas 2004).
Exporting and the Marketing Mix: Lim, Sharkey, and Heinrichs' study (2003) explored the importance of new product development practices to the
export development process. The following aspects of the new product development process were investigated: team development, customer
involvement, modular design, supplier involvement, and computer usage. The results support the notion that in order to achieve a higher degree of
export involvement, a firm must possess new product development capabilities. The key to exporting success includes the firms' capability to gather
and analyse information to take advantage of opportunities and its ability to develop internal resources and capabilities to support new product
development.
Determinants of Exporting: The impact of organizational culture and ownership type in a firm's export intention is explored by DosogluGuner (2001).
The results indicate that while adhocracy increases the likelihood of a firm's intention to export, internally oriented cultures (such as clan culture)
decrease the likelihood. Analyses of ownership type indicate that externally controlled firms are more willing to engage in export activities than
managercontrolled and ownercontrolled firms.
Export Performance: Leonidou, Katsikeas, and Samiee (2002) conducted a metaanalysis of extant literature and assessed relationships between
export marketing strategy and performance. Their study suggested: (1) a strong association between export marketing strategy and export
performance measures although the relationship is not always significant; (2) that of the export performance measures examined in various studies,
stronger effects are observed in relation to export proportion of sales (such as export intensity); only a few marketing parameters (product advantage,
pricing strategy, and dealer support, respectively) affect different measures of performance; and (3) study characteristics (such as the time of study,
geographic focus, and product type) have a limited impact on export performance.
By examining export strategyperformance relationships of firms from emerging economies, Aulakh, Kotabe, and Teegen (2000) suggested a strong
relationship between degree of cost leadership and performance in developed markets, whereas a strong relationship between the degree of
differentiation and performance in developing countries. Standardization may be appropriate for firms to enter a culturally closed foreign country and
there is an inverted Ushaped relationship between international diversification and firm performance.
MacPherson (2000) identified key factors influencing firm success in exporting machine tools: an international focus, gathering market intelligence to
understand foreign niche market product requirements, product specialization instead of a broad product line, and adequate R&D investments.
Cadogan, Cui, and Li (2003) investigated the effect of export marketoriented (EMO) behaviour on export performance. EMO behaviours were
important predictors of export performance in terms of growth and profits. Further, EMO behaviour was more important under turbulent competitive
conditions in firms' export operations.
Sivakumar and Nakata (2003) studied culture's role in the process and outcomes of new product development. Their theory identified four factors that
influence new product development: intensity of cultural values, heterogeneity of culture values, and consistency of culture across the two development
phases, and newness of the product to both the firm and the market. They found that all four factors must be considered to ensure optimal results.
Gregory, Karavdic, and Zou (2007) integrated ecommerce concepts with export marketing strategy theory and examined how ecommerce affects a
firm's export market strategy and export performance. Their study illustrates the importance of using ecommerce concepts to enhance our
understanding of exporters' international operations and export performance.

Exporting and Small Business: In investigating smaller firms' export behaviour, Wilkinson and Brouthers (2006) suggested that firms' export success
largely depends on the ability to assemble and deploy appropriate resources. Since small firms generally lack necessary internal resources, export
promotion activities can complement internal firm resources to enhance firms' export performance.
Economic growth of East Asian countries as well as Central and Eastern European countries has made them attractive targets for international firms,
both large and small and mediumsized enterprises (SMEs). Haahti et al. (2005) proposed that SMEs employing cooperative strategies to enrich their
knowledge base about export markets can consequently improve their performance. They found that knowledge intensity mediated the relationship
between cooperative strategy and export performance. Firm size does not have a direct relationship with performance, but demonstrates an indirect
effect on export performance through cooperative strategy and knowledge intensity.
Ibeh (2003) examined the effect of external environment on the export venture creation process of small business. This author highlights the
importance of possessing an entrepreneurial orientation when challenged by hostile operating environments. A committed top management team, the
firm's requisite competencies in product quality and technology, foreign market information search, new market development, and networking skills
also contribute to export venturing prospects.
A study by Brouthers and Nakos (2005) indicated that SMEs that adopt a systematic methodology in selecting foreign target markets (systematic
market selection) outperform those with an ad hoc market selection methodology. When controlling for decisionmaker and firmspecific characteristics,
systematic international market selection serves as a significant determinant of SMEs' export performance. Further, firm size serves as a necessary
and sufficient condition for export success (Mittelstaedt, Harben, and Ward 2003).
Factors for Export Success: Gencturk and Kotabe (2001) found that export marketing involvement and the use of government export promotion
assistance programs are important export success factors. These findings support the importance of firms' export involvement behaviour for export
success in terms of efficiency through improved profitability, effectiveness through growth in export sales, and competitive position.
Technological progress has been considered an important driver of the changing patterns of exports (Balabanis, Theodosiou, and Katsikea 2004). For
instance, the Internet helps exporters initiate and maintain constructive relationships with foreign customers (Chaffey et al. 2003) and assists with
market research (Quelch and Klein 1996). More empirical research is necessary to determine how the Internet can support a firm's export objectives
and what factors could prevent effective use of the Internet (Balabanis, Theodosiou, and Katsikea 2004).
Barriers to Exporting: An attempt is made to review, assess, and synthesize existing empirical research on barriers hindering small business export
development (Leonidou 2004). Internal barriers (incorporating informational, functional, and marketing) and external barriers (procedural,
governmental, task, and environmental) are summarized from prior studies. It is suggested that the impact of export barriers is situationspecific, which
can be explained by the idiosyncratic managerial, organizational, and environmental background of the firm. Regardless of the influence of these
variables, certain barriers (such as information inefficiencies, price competitiveness, foreign customer habits, and politicoeconomic hurdles) seem to
have a systematically strong negative effect on export behaviour.
Exporting and strategic alliances: An empirical study is conducted to examine whether cultural differences affect trust, commitment, and cooperation in
international marketing channel alliances between US exporters and their foreign distribution partners (Mehta et al. 2006). The study indicates that
cultural differences have a negative effect on trust, commitment, and cooperation. In other words, greater cultural differences between channel partners
result in lower levels of trust, commitment, and cooperation.
In summary, recent studies have incorporated a resourcebased view into the industrial organization perspective by suggesting that firms'
responsiveness to the external environment and their capabilities and resources (e.g. experiential, scale, financial and physical resources,
informational, relationship building, pricing, distribution, communication and product development capabilities) contribute to the achievement of a
competitive advantage in export markets (Zou, Fang, and Zhao 2003; Morgan, Kaleka, and Katsikeas 2004).
Although marketing researchers have developed a wide range of explanations for understanding export mode choices based upon respective
paradigms within the firm, theoretical challenges for export marketing are summarized as follows (Balabanis, Theodosiou, and Katsikea 2004):
1. More attention should be directed to addressing the issue of leveraging export firms' capabilities and transferability of capabilities across
borders.
2. Further investigation of factors that facilitate or inhibit the use of entrepreneurial and strategymaking processes; the relationships between
capabilities, process for strategymaking, strategy and export performance.
3. Call for more empirical study of international relationship marketing in an international context, especially involving partners from developing
and transitional economies.
17.2.2.2.2 Joint Ventures

Research in this area examined the following issues:
Joint Venture Performance
Selection International Joint Ventures
Failing in Joint Ventures.
JV Performance: With firms' increasing adoption of the international joint venture (IJV) as a strategic foreign market entrymode, considerable amount
of research has focused on identifying factors conducive to superior IJV performance. Robson, Leonidou, and Katsikeas (2002) provided a systemic
review and integrated assessment of over ninety empirical studies on drivers of IJV performance. Their evaluation is based on an integrated

framework including background, antecedent, core, and external variables on IJV performance.
Yeheskel et al. (2001) investigated firms' alliance activities and performance in Israel's medical technology industry and found that firms that have
undertaken alliances marginally underperformed those that have not. Both marketing and R&D alliances with a foreign partner are found to outperform
alliances with local firms, yet marketing alliances demonstrate no effect on firms& survivability. In contrast, production alliances that involve another
Israeli firm will outperform alliances with a foreign firm, except for cost. Firms learn more through IJVs than through licensing contracts (Anand and
Khanna 2000). IJVs allow firms to build relational capital, learn integrative approaches to managing conflict, and be protected from opportunistic
behaviour (Kale, Singh, and Perlmutter 2000). Studies also found that personal and structural attachments contribute to IJV performance although
such effects diminish as the attachments increase. Further, personal and structural attachments strengthen each other in their effects on IJV
performance (Luo 2002).
When competing in foreign countries, firms can align with partners that have local knowledge to mitigate shortage of resources and capabilities (Lu and
Beamish 2001).
Selection of International Joint Ventures: Chen and Hennart (2002) examined how market barriers and firm capabilities affect MNEs' choice of joint
ventures versus whollyowned subsidiaries. Japanese investors are more likely to choose joint ventures when facing high market barriers, while those
possessing strong competitive capabilities are more likely to set up whollyowned subsidiaries. They reported that marketing factors, such as
advertising intensity and brand equity, were more influential than technological ones in determining the choice of partial versus full ownership. These
findings, however, vary across subsamples representing lowversus hightech industries and consumer versus industrial products.
Failing in Joint Ventures: In the face of the increasing failed joint venture cases, joint venture conflicts have become an important subject in alliance
practice and research. Conflicts lead to poor performance, failure, and even dissolution. In investigating terminated joint venture relationships, Peng
and Shenkar (2002) used divorce as a metaphorical image to discuss a fourphase dissolution process, initiation, going public, uncoupling, and
aftermath. Their study indicated that a JV relationship can be complicated by its multiparent origins.
17.2.2.2.3 Franchising
By incorporating the analogy of marriage to enhance current understanding of the businesstobusiness relationship in international retail franchising,
Doherty and Alexander (2004) show that rational or hard benefits alone (such as financial stability) are not sufficient to sustain the relationships.
Instead, it is essential to have mutual attraction and a trusting relationship that strives for understanding, seeking, evaluating franchise partners, and
sustaining the stabilizing role of partnerships. Pak (2002) tested dynamic links between strategic motivation and the ownership structure of international
franchisers. Based on the knowledgebased view perspective, Pak's paper examines how international franchisers can be recognized not only as
market seekers but also learners in terms of knowledgegaining and strategic learning.
17.2.3 Local Market Expansion: Marketing Mix Decisions

This section examines the studies relating to the global standardization debate, followed by a discussion of the international marketing mix variables of
product policy, advertising, pricing, and distribution.
17.2.3.1 Global Standardization vs. Local Responsiveness

The issue of a standardized marketing programme versus customized programmes to suit the specific needs of individual foreign markets has
received research attention in the last four decades. The findings of each study in international marketing are summarized below:
1. Katsikeas, Samiee, and Theodosiou (2006) focused on the nature and performance implications of fit between marketing strategy
standardization and adaptation by incorporating prior studies on strategy fit from the strategic management and organization theory literature. It is
reported that the degree of strategy standardization is significantly related to similarity between markets with respect to regulatory environments,
technological intensity and velocity, customs and traditions, customer characteristics, a product's stage in its life cycle, and competitive intensity.
They show that a firm's superior performance results from strategy standardization only to the extent that there is a fit or coalignment between
the MNE's external environmental and its international marketing strategy choice.
2. Kotabe (2002) suggested that globally operating firms need to constantly seek to kill two birds with one stone, or meet the counteracting forces
between supplyside and demandside to sustain their competitive advantage. In order to cope with the notsopeaceful business environment,
firms need to proactively assess their supplyside and demandside requirements simultaneously.
3. By examining the 500 largest MNEs in the world, Rugman (2003) posited that there are very few truly global firms and that most MNEs operate
in their home region of the triad. The study shows that multinationals are not global, but regional. US firms, for instance, are more intraregionally
oriented when compared to their counterparts in Europe and Asia. It is inappropriate to assume a unified and homogeneous perspective when
discussing today's businesses; neither is it appropriate to substitute global strategy for regional triad strategies.
4. Malhotra et al. (2003) examined the variations in perception of service quality dimensions (e.g. reliability, customer understanding,
responsiveness, competence, courtesy, communication, credibility, security, and tangibility) in banking services in the US, India, and the
Philippines. They reported significant differences in perceptions of these dimensions and attributed them to economic and sociocultural factors.
5. Chung's study (2003) revealed that the spectrum of degree of standardization of marketing programme/process constructs in the homehost
scenario should be product process price distribution promotion. Product type, consumer behaviour, marketing infrastructure, political
environment, and firm size are important factors in the selection of standardized marketing strategies in the homehost scenario.
6. Backhaus, Mhlfeld, and Van Doorn (2001) investigated advertisement elements that can be perceived as standardized for international
advertising campaign and reported that the visual aspect is the most important determinant of a standardized advertisement campaign, while
other factors play a minor role in determining perceptions of similarity. As such, by using the same visual elements in an international campaign,
firms can mitigate problems of image confusion and irritation caused by localized campaigns.

17.2.3.2 Marketing Mix
The formulation of an optimal marketing mix is challenging when considering its effectiveness across international markets. Extensive literature exists
on the influence of crosscultural differences in consumption. Generally, culture values and norms determine consumers' buying motives (De Mooij
2005). For example, customers' willingness to pay for products will vary across cultures. In Japan, consumers view nonprice information, such as
brand, packaging, and advertisement, as important variables in assessing product quality and in making their buying decisions. However in emerging
countries, charging a high price may be considered gouging the customer (Kotabe and Helsen 2007). Further, advertising styles that are effective in
one country maybe counterproductive in others. Obviously, consideration of cultural differences can be costly when firms have to adapt marketing
strategies to numerous environments. On the other hand, if marketers do not consider cultural differences, they may be accused of having an
ethnocentric view of the world. Current studies indicate the importance of flexibility in marketing strategies to accommodate cultural differences and
similarities, interdependence, productmarket conditions, and broader global concerns (Grein 2000).
17.2.3.2.1 Product Policy

The bulk of the studies in this domain examined the following two key concepts:
determinants of new product development and management in international markets
new product adaptation and firm performance.
Determinants of New Product Development: Verhees and Meulenberg (2004) investigated the combined effect of market orientation and innovativeness
on product innovation and firm performance in small companies. They confirmed that effective market intelligence allows the small firm owner to better
understand his firm's markets, make better decisions in developing and marketing new products, and improve firm performance. However, market
intelligence may slow down a firm's product innovation when the owner is highly innovative, and enhances it with less innovative owners.
Sivakumar and Nakata (2003) looked at ways global new product teams deal with cultural variances. This paper presented a theoretical framework
focusing on the impact of national culture on product development tasks. Using analytical derivations and comparative statistics, their model
examined the levels and variances of culture values that maximize product development success by taking into account dimensions of GNPT (global
new product team) performance. Their analysis provides group compositions that optimize product development results. In the context of global
product development, where to develop and deliver timely and innovative products across heterogeneous cultures, locales, and markets are critical
and ongoing challenges. Dealing with such challenges requires that firms operate effectively across the geographic, political, and cultural boundaries
that are encountered in global operations.
As the timetomarket dimension of new product development (NPD) has become a critical determinant of an MNE's competitive advantage, MNEs
increasingly rely on crossteams to exploit their knowledge throughout their dispersed subsidiaries. Murray and Chao (2005) examined the
antecedents and outcomes of international knowledge acquisition at the crossteam level. Their study showed the importance of fostering NPD project
teams' realized absorptive capacity to transform acquired knowledge resources into NPD capabilities so as to enhance new product market
performance.
Investigating the relationship between strategic, organizational and process factors and new product performance (NPP), a study of Japanese and
South Korean companies revealed that innovation success depends on process capabilities, which are derived from a strategic focus on customers,
skilled and capable NPD personnel, and intensive collaboration and effective communication across functions (Im et al. 2003).
An analysis of 4,840 dyads between new product development teams and subsidiaries that were potential targets for competence transfers in a high
technology multinational company revealed that studying the determinants of competence transfer separately can yield biased results. The authors
suggested broadening research by analysing multiple determinants of competence transfer on synergies, integration, technology transfers, and
geographical and cultural differentiation in multinational enterprises (Hansen and Lvs 2004).
New Product Adaptation and Firm Performance: Calantone et al. (2006) studied the antecedents of product adaptation strategy, namely internal and
external firm factors, and export performance of firms in the United States, Korea, and Japan. They reported a positive relationship between product
adaptation strategy and export performance. Further, innovative organizational practices (e.g. better communication) enhance firms' export
performance. Interestingly, the influence of the similarity between the home and foreign market effect is more significant in the US than in Japan or
Korea.
Cultural differences also influence consumers' product choice decisions and the diffusion of new products (Yaveroglu and Donthu 2002). Yeniyurt and
Townsend's (2003) study shows that Hofstede's cultural dimensions (individualism, power distance, and uncertainty avoidance), moderated by socio
economic variables, can explain consumers' acceptance of new products.
17.2.3.2.2 Advertising
The bulk of the literature in this domain has struggled with the issues surrounding the standardization vs. adaptation debate. As globalization has
demonstrated a powerful homogenizing influence on consumers in many countries, consumers worldwide receive the same intense communications
and perceive global brands as ubiquitous. MNEs are increasingly interested in understanding the transferability of brand equity across cultural
geographies and the management of global positioning and communication programs (Ewing, Caruana, and Zinkhan 2002). Therefore, the three key
areas that have received most of the research attention are:
Advertising Standardization versus Customization
International Advertising Strategy

Measurement Issues.
Advertising Standardization vs. Customization: An effort has been made to review, assess and recommend international advertising strategies
(Melewar and Vemmervik 2004). Three basic schools of thought concerning advertising standardization have been identified: standardization,
adaptation and compromise. Advantages and disadvantages of advertising standardization, adaptation as well as some of the contingency models
have been discussed extensively. The authors provide the following recommendations and directions for future research:
designing a comprehensive survey that tracks companies and sectors over time
a clear and easily understood definition of standardization
a sufficient sampling frequency
an identical statistical analysis over time and across sectors.
Over the last fifty years, academic researchers have generally advocated the adaptation approach, while practitioners have alternated between
advertising standardization and customization with a trend toward standardization. Even with a global theme, MNEs still find it essential to address
local cultural differences in the foreign market. Using a case analysis of Toyota's Land Cruiser SUV advertising campaign in China, Li, and Shooshtari
(2006) encouraged MNEs to recognize the importance of understanding sociolinguistic systems indigenous to targeted consumers in international
markets. The message is clear that marketing researchers should incorporate bicultural and bilingual ethnographic studies outside the wellexplored
Western cultural dimension to examine international marketing behaviours. The perspective of subsidiary managers in multinational corporations
should be taken into consideration in the advertising planning process in order to avoid conflict that could decrease the effectiveness of global
campaigns (Jaeseok, Tharp, and Choi 2002). Further, regional consumer clustering is more exaggerated than is applicable (Kanso and Nelson 2002).
International Advertising Strategy: Two dimensions to advertising strategies have been identified (Melewar and Vemmervik 2004), to what extent an
advertisement or a campaign is standardized and the geographical coverage of the campaign. The standardized school of thought promotes the idea
that markets are homogeneous and that an adapted strategy is unnecessary (Levitt 1983; Peebles 1988). The adaptation school argues that
advertising is more dependent on cultural influences than other marketing elements, thus making it difficult to standardize (Boddewyn, Soehl, and
Picard 1986). For example, Teng and Laroche (2006) stressed the importance of matching advertising to the distinctive cultural values of the target
consumers during international advertising and marketing campaigns. Another school of thought advocates local differences with some degree of
advertising standardization (Papavassiliou and Stathakopoulos 1997).
Measurement Issues: Few studies have investigated the generalizability of marketing models, concepts and theories to nonUS contexts. Ewing,
Caruana, and Zinkhan (2002) extend the theory of crossnational measurement invariance by examining the equivalence of four advertising response
scales across six countries. They report equivalence for some of the scales.
17.2.3.2.3 Pricing
Global pricing is one of the most critical and complex issues which global firms face. An important issue for managers is whether to adapt or
standardize the domestic pricing strategy to the foreign market. A firm's global pricing strategy may make or break its overseas expansion efforts.
However, with the exception of a few recent studies (e.g. Cavusgil, Chan, and Zhang 2003), studies on pricing have been ignored (Nakata and Huang
2005). The following two key areas have received considerable research attention:
pricing standardization versus customization
nonconscious factors.
Standardization vs. Customization: It has been suggested that globalization of markets does not lead to standardized pricing. Market idiosyncrasies,
such as different levels of country risk, market size, and strategic importance of the market to the firm, typically justify adapted prices in local markets
(Solberg, Stttinger, and Yaprak 2006). By investigating factors that influence international pricing strategy along the standardizationadaptation
continuum and incorporating the viewpoints of subsidiary managers, Theodosiou and Katsikeas (2001) suggested that customer characteristics and
behaviour, economic and legal conditions, and stage of product life cycle should be taken into account when formulating pricing strategies. It is
imperative that managers match their marketing programmes with the environmental and market conditions of the foreign markets served.
It is posited that customer preference, customer retention, and price elasticity differ across service quality dimensions in vertical, horizontal, and global
segment dimensions (Bolton and Myers 2003). The connection among global customers' price elasticities, service quality preferences, and
organizational characteristics indicates that (1) firms can optimize profits from establishing specific price points for service feature bundles that attract
and retain customers; (2) service delivery systems can be customized to match individual customer preferences for perceived service quality; (3) the
importance of understanding how price elasticities vary across different service delivery and organization profiles.
Nonconscious factors: In examining the effect of nonconsciousness expectations on the relationships between price and quality on consumers, Irmak,
Block and Fitzsimons (2005) suggested that consumers' nonconscious beliefs about the price quality relationship changes their experience with the
merchandise. More notably, motivation can drive marketing placebo effects, thereby suggesting that innocuous marketing activities could do far more
than meets the eye.
Fairness has been defined as a judgment of whether an outcome and/or the process to reach an outcome are reasonable, acceptable, or fair (Bolton,
Warlop, and Alba 2003). Xia, Monroe, and Cox (2004) integrated theoretical foundations of fairness perceptions and summarized empirical findings
on price fairness. The authors suggested the following factors that influence price fairness judgments: transaction contextual information, procedure
information, buyerseller relationships (e.g. different types and dimensions of trust along relationship development), and more generic influences such
as social norms, consumer knowledge, and individual characteristics. Shehryar and Hunt (2005) investigated whether consumers' familiarity with

products impacts the degree to which consumers are sensitive to a seller's violation of procedural fairness norms in pricing. When less familiar with a
product, consumers are more likely to rely on procedural fairness to form purchase intentions and often equate procedural fairness with perceived
quality.
The following topics in pricing are identified as deserving of further investigation (Nakata and Huang 2005):
pricing in inflationary or deflationary environments
using pricing to position products effectively in emerging markets
pricing transparency and signaling in regional markets
effects of dual currency pricing or dollarization on purchasing behaviours
preventing grey market through international pricing coordination.
17.2.3.2.4 Distribution
Research in this area focused on the following broad issues:
Channel Cooperation and Conflict
Channels in Emerging Markets
Channels and MNE Performance
Standardization versus Adaptation Debate.
Channel Cooperation and Conflict: This is a popular area of research in the international marketing field. Rose and Shoham (2004), for example,
examined the antecedents and consequences of task and emotional conflicts on the quality of the strategy employed and their effect on business
performance and manufacturer's satisfaction with the distribution channel. Their results suggested that team spirit and interorganizational
connectedness reduce task and emotional conflicts and increase manufacturers' satisfaction with the distribution channel. Both task and emotional
conflicts have a negative impact on international channels of distribution.
Channels in Emerging Markets: Griffith, Chandra, and Fealey (2005) study investigated whether international marketing decisionmakers incorporate
the natural channel when entering an emerging market. They proposed that the use of natural channels, the utilization of natural resources contained
within an area of trade, allows firms to overcome the weaknesses in infrastructure and fragmented retail structure prevalent in emerging markets. Of
particular note is that a mismatch between channel choices and internal (e.g. corporate elements and product elements) and external factors (e.g.
market elements and customer elements) could impede the effectiveness of the entire marketing strategy in an emerging market context such as in
India.
Zhang, Cavusgil, and Roath (2003) focused on the direct and indirect effects of the manufacturer's use of governance via relational norms and its
competitiveness in the export market. Their findings indicated that the power of relational norms resides not only in their influence on tangible outcomes,
such as enhanced competitive position of manufacturers in export channels, but also in their ability to generate an intangible relational asset, such as
trust. The indirect effect resulting from the mediating role of trust makes a key contribution to the understanding of the role of relational governance in
crossborder relationships and export performance.
Recognizing the environmental differences across countries and the impact of external and internal factors on channels, Kaynak and Kara (2001)
examined channels of distribution in developing countries and suggested that channels should be studied based on levels of socioeconomic
development.
Channels and MNE Performance: Using the powersatisfactioncommitment performance framework, Ramaseshan, Yip, and Pae (2006) explored
channel exchange relationships in China. They discovered a subtle difference in channel member behaviour between individualist and collective
cultures. Although the relationships between power, satisfaction, commitment, and performance are applicable to China, it is essential for firms to
exercise power with caution by accounting for the collectivistic cultural context.
In examining the development and maintenance of longterm channel relationships, channel governance relies on two different types of satisfaction
economic and social satisfaction (Geyskens and Steenkamp 2000). Economic satisfaction indicates a channel member's evaluation of the economic
outcomes that flow from the relationship and social satisfaction refers to a channel member's evaluation of the psychosocial aspects of the
relationship and interactions with its exchange partner. Future studies are necessary to examine different roles of satisfaction, either separately or in
combination, in managing longterm channel relationships.
Standardization vs. Adaptation Debate: It is noted that research on marketing standardization has focused primarily on products and advertising (Kustin
2004). Few studies have examined international standardization strategies for the total marketing mix. Chung (2003) suggested that productrelated
constructs are the most likely standardized aspects, followed by process and promotion. The two least likely standardized constructs are distribution
and price. A standardized distribution channel has an effect on firm performance in terms of sales growth and market share (Chung 2003).
17.2.4 Global Strategy

A literature review was performed to advance the knowledge in the four subareas as identified by Douglas and Craig (1992). They are: competitive
strategy, strategic alliances, sourcing, and multinational company performance. Search for articles in these four areas was conducted within an
international or global context.

17.2.4.1 Competitive Strategy
Three broad issues seem to be dominant in mainstream research:
1. Theoretical and Conceptual Development to help in Understanding the Role of Competitive Strategy;
2. Difference between Competitive Advantage and Competitive Positioning;
3. Sources of Competitive Advantage in International Marketing Strategy and Performance Implications.
17.2.4.1.1 Conceptual Development

A resourcebased strategic management model of MNE market entry demonstrates the value of this new conceptual framework to the understanding
of competitive strategies of MNEs (Tallman 1991). The integrationresponsiveness framework in the choice of the models of international strategy is
less helpful for devising competitive strategy (Taggart 1998). A contingency framework illustrates how national and political institutions of a country
impact the effectiveness of an MNE's international strategies (Murtha and Lenway 1994). The PorterDunning Diamond model of international
competitiveness is used to explain the current situation and the further development of the international competitive strategy of mainland China's
manufacturing sector (Liu and Song 1997).
17.2.4.1.2 Competitive Advantage vs. Competitive Positioning

Strategy literature in the 1990s tried to differentiate between two sources of competitive strategycompetitive advantage and competitive positioning.
A firm experiences competitive advantage in terms of its core competencies. A firm's competitive positioning, on the other hand, raises the need for
important strategy choices beyond the core competencies of a single corporation. Such an overall strategy then combines the internal competencies of
each company to become the core competencies of the entire competitive system. Competitive positioning strategy interacts with internationalization
strategy in the formulation of an overall strategy (Morrison and Roth 1992).
Gupta and Govindarajan (2001) suggested that global presence does not automatically equate with global competitive advantage. Firms should
evaluate their global network for each valuechain activity along the dimensions of activity architecture, competencies at the locations, and
coordination across locations. Subsequently, they should design and execute actions to mitigate or eliminate the suboptimalities.
17.2.4.1.3 Sources of Competitive Advantage and Performance Implications

Ghemawat (2003) suggested that globalizing firms must consider the tradeoffs among globalization, regionalization, and semiglobalization marketing
strategies. Semiglobalization presents the most cautious alternative for competing across multiple locations. The author discussed the need for
international business strategy to maintain a balance between attention to locationspecificity and other types of specificity. Ghemawat also examines
conditions under which market specific problems should be given priority.
Yeniyurt, Cavusgil, and Hult (2005) suggested that in order to achieve sustainable competitive advantage, there must be global market knowledge
development and coordination. The interfunctional and the valuechain coordination of firms and their ability to share information and integrate
business functions across the global company will result in improved strategic and financial performance.
17.2.4.2 Strategic Alliances

Literature in this area has focused on three broad areas:
Issues of Learning and Trust in Alliances
Recipes for Alliance Success
Performance Issues for Different Types of Alliances.
17.2.4.2.1 Learning and Trust

Voss et al (2006) integrated the cultural sensitivity construct into a relational exchange model of international alliances. Their findings showed that
quality information exchange is a key construct in relational exchange and that it mediates the trust and alliance marketing performance relationship.
US firms place a higher emphasis on behavioural exchanges than their relatively more affective Japanese partners. As for Japanese partners, the
benevolence dimension of trust is a more important determinant of managerially assessed alliance marketing performance than for US firms.
17.2.4.2.2 Recipes for Alliance Success

Nielsen (2007) extended our understanding of the international strategic alliance (ISA) relationship between ex ante and ex post alliance formation
factors and multiple measures of performance, taking both outcome and process into consideration. The results report a significant relationship
between alliance performance and host country risk as well as partner reputation proceeding alliance formation. Prealliance formation factors, such
as prior experience, do not predict alliance performance. Postalliance formation factors, such as collaborative knowhow, trust, and protectiveness,
however, are found to have an impact on ISA performance.
Trust is beneficial to alliance relations and can have different effects on alliance performance, depending on the levels of behavioural and
environmental uncertainty (Krishnan, Martin, and Noorderhaven 2006). The benefits of trust can be magnified with high behavioural uncertainty;
however, the beneficial effect decreases in light of strong environmental uncertainty. In other words, alliance partners should use caution in relying on
interorganizational trust and expend more effort on scanning to handle environmental uncertainty. It is believed that success of international strategic
alliances requires not only the hard side of the alliance relationship management (e.g. financial issues and other operational issues) but also its soft
side (e.g. the development and management of relationship capital in the alliance) (Cullen, Johnson, and Sakano 2000). Two important areas of

relationship capital, specifically mutual trust and commitment have an effect on the performance of ISA within the Japanese firms. In examining
relational exchange in marketingoriented nonequity international strategic alliances, Kevin et al. (2006) reported that the exchange of relevant, timely
and important information affects firms' performance. Information exchange relies on the development of trust and cultural sensitivity in the
relationships. US firms place more emphasis on behavioural exchange than their relatively affective Japanese partners, whereas Japanese partners
give emphasis to the benevolence dimension of trust.
Investigating how procedural, distributive, and interactional justice can be individually and interactively associated with alliance performance, Luo
(2007b) study suggests that strategic alliance performance is not only determined by economic/structural factors (such as contracting, control,
complementary, and governance) and social/relational forces, such as justice, but also trust, attachment, and interpersonal relationships.
Hyder and Eriksson (2005) examined why two multinationals end their alliance relationships after years of collaboration. They posit that alliance
partners should be prepared for separation when the goals of the partners are fulfilled. Environmental changes and changes in personnel can also
cause the breakdown of successful alliances. These changes are not always negative; they can create viable growth opportunities for both parties.
17.2.4.2.3 Performance for Different Types of Alliances

An analysis of 463 R&D alliances in the telecommunications equipment industry revealed that alliances contribute significantly to firms' innovation
when their technological capabilities align with those of the alliance partners. In addition, organizational form influences the ability and incentives to
share information, which also affects performance. Equity joint ventures improve firms' benefits when the firms are more technologically diverse
(Sampson 2007).
After examining 135 alliances among competing firms over a thirtyyear period, Dussauge, Garrette, and Mitchell (2000, 2004) reported significant
differences in the outcomes of scale alliance where partner firms make similar contributions and link alliances where partners make complementary
contributions. More asymmetrical outcomes of link alliances resulted in greater changes in the relative market shares of the partner firms due to inter
partner learning or learningbydoing. Proper coalignment of alliance attributes (such as trust) and alliance forms (equity vs. nonequity alliances)
enhance alliance performance (Murray and Kotabe 2005).
17.2.4.3 Global Sourcing

Isolated studies examined the role of global sourcing as a critical factor in a variety of competitive strategies, differentiated between opportunistic and
strategic sourcing (Samli, Browning, and Busbia 1998) and offered suggestions on how to reduce the uncertainty associated with supplier selection in
global markets (Min, LaTour, and Williams 1994). The global market environment has changed drastically in the last decade due to events such as the
Asian financial crisis in 1997 and the terrorist attack on the United States in 2001. More attention has been given to global sourcing strategy in the
context of an unstable world economy resulting in suggestions that firms need to meet the counteracting forces of both supplyside and demandside
without sacrificing marketing flexibility, manufacturing capability and R&D activities (Kotabe and Murray 2004).
The three broad areas most often studied in this domain are:
Global Sourcing in a Service Context
Benefits of Global Sourcing
Country of Origin Effects.
17.2.4.3.1 Global Sourcing in a Service Context

A growing area of interest has been the comparability of product versus services sourcing strategies. International offshoring of services is primarily
driven by (1) large wage differentials between developed and developing countries and the availability of skilled employees in developing countries; (2)
economic liberalization of developing countries; (3) dramatic technological change in telecommunication sectors (Ramamurti 2004).
Using the transaction cost economics paradigm, Murray and Kotabe (1999) investigated the locational (domestic vs. global sourcing) and the
ownership (internal vs. external sourcing) aspects of service sourcing strategy. Performance implications were also discussed. Teigland and Wasko
(2003) suggested that it is important that a firm find the balance between relying on internal sources of knowledge and pushing the boundaries by
exploring the knowledge base of external sources. Tiwana and Keil (2007) examined the importance of peripheral knowledge in technological
outsourcing alliances and suggested that outsourcing firms may need knowledge outside their common domain to effectively facilitate their alliance
governance. Similar to the risks of separating manufacturing activities from R&D and marketing which may decrease firms' capability in terms of
pioneering product design and innovation over time, global sourcing of services also requires close coordination of R&D, service, and marketing
activities on a global basis (Kotabe and Murray 2004). Further, given the intensified competition of service activities worldwide, firms should make
great efforts to align with strategic partner firms that have the capability to deliver innovative supplementary service activities. This could result in a
competitive advantage for the outsourcing firms by allowing them to utilize the external suppliers' investment, innovations, and specialized professional
capabilities that would be prohibitively expensive or even impossible to duplicate. It also allows them to spend their financial and developmental
resources on their core service activities (Kotabe and Murray 2004).
Sako (2006) believed that outsourcing business services can be part of corporate restructuring through unbundling of corporate functions as well as
vertical disintegration. However, the future of businessservice productivity enhancement depends on the combination of greater standardization and
capturing value from customized solutions.
17.2.4.3.2 Benefits of Global Sourcing

The benefits of global sourcing have been an important focus of academic interest over the course of the last three decades. Since the 1970s,

outsourcing topics have been examined through the lenses of economies of scale, competitive analysis of firms, strategic focus, relational rent, and
knowledge management.
Murray (2001) suggested that strategic alliancebased global sourcing when highly specific assets are deployed may enhance a firm's competitive
advantage by combining resources in unique ways. This article presents the benefits gained by a firm that forms partnerships with its suppliers
through global outsourcing. These partnerships create competitive advantages when suppliers possess resources that cannot be generated internally
by the firm. Similarly, Kotabe, Martin, and Domoto (2003) confirmed the importance of relationspecific assets as a source of competitive advantage
by extending literature on knowledge transfer, buyersupplier partnerships and the performance dynamics of inter and intrafirm relationships. It is
proposed that supplier performance will increase most where timebound relational assets have developed between a buyer and supplier and the
firms exploit the resulting communication efficiency by transferring productive knowledge.
Recent research (Leiblein 2003; Leiblein and Miller 2003) suggested that the makeorbuy decision can also be framed as a real option where
outsourcing and vertical integration create a platform for future investments and strategizing. The larger the uncertainty surrounding decisionmaking,
the more valuable such options become.
Trent and Monczka (2002) summarized factors that differentiate successful from less successful global sourcing efforts and provided suggestions to
enhance firms' global sourcing performances. One important note is that international outsourcing does not always enhance firms' global
performances. However, outsourcing from the same economic region demonstrates clear advantages (Mol, Van Tulder, and Beije 2005) when lowered
transportation and transaction costs and shared institutional regimes are taken into consideration.
17.2.4.3.3 Country of Origin Issues in Global Sourcing

It is important to understand how COO information and other cues influence MNEs' buying processes when considering global sourcing. Andersen and
Chao (2003) reviewed countryoforigin (COO) effects on global industrial sourcing and developed an integrated framework to assess how COO cues
(such as product performance, price expectation, supplier performance and exchange regime of country) affect firms' sourcing decisions.
Li, Murray, and Scott (2000) examined how global sourcing locations and other related factors influence consumers' product evaluations in the context
of multiple countryoforigin considerations (e.g. countryofdesign, countryofassembly, countryofcorporation). MNEs should consider country
designations for product design because of all the COO factors, country of destination (COD) seems to have the biggest influence on consumers'
evaluations of a product's key functional and symbolic qualities. For MNEs from newly developed countries, firms should utilize global sourcing to
overcome or reduce the effects of unfavorable stereotypes consumers hold against their products.
17.2.4.4 Multinational Performance

The literature here has focused on two sets of issues:
Determinants of PerformanceWhat Leads to High MNE Performance
An Environmental Interpretation of Performance.
17.2.4.4.1 Determinants of Performance

Murray, Kotabe, and Zhou (2005) examined the linkage between sourcing strategy and firm performance in an emerging economy context. They
reported that at low levels of product innovativeness and technological uncertainty, firms' use of strategic alliance sourcing is positively related to
market performance. However, product differentiation and demand uncertainty do not demonstrate a significant impact on the sourcingperformance
relationship. Cousins and Lawson (2007) noted that relationship approaches have an effect on performance outcomes.
Lu and Beamish (2004) found a nonlinear horizontal sshaped relationship between geographic diversification and firm performance. It was
suggested that intangible assets, such as R&Dbased and advertisingbased assets, enhanced the value of firms in geographic expansion. Further,
firms ability to internalize the intermediate markets, such as technology, production knowhow, and brands, was positively associated with their
performance.
A metaanalysis of fiftysix studies conducted in twentyeight countries was conducted by Ellis (2006). It suggested that market orientation and
contextual factors (e.g. the cultural setting of the study, size of the firm's dominant market, and the level of development of the market) had an effect on
firm performance.
An insightful review of theoretical perspectives on multinationality and firm performance was conducted by Li (2007). The author suggested the
following areas for further conceptual development and empirical investigation: (1) conceptual refinement and measurement of multinationality as a
construct; (2) costefficiency implications of multinationality; (3) impact of internationalization motivation on both multinationality and performance; (4)
twoway relationships between multinationality and performance; and (5) moderating roles of important external and internal contextual factors.
High commitment of resources and the timing of entry were also found to have positive effects on the perceived economic performance of the Sino
Japanese joint ventures (Isobe, Makino, and Montgomery 2000). The effects were related to internal and external factors such as the strategic
importance of an investment, parental control of a joint venture, and the availability of supporting local infrastructure.
Hult et al. (2007) investigated the role of strategy and other organizational dimensions, such as leadership, culture, structure, and processes, on the
performance of globally focused marketing firms. It is reported that a complex interplay of strategy, leadership and culture drives the structure and
processes, which, in turn, influence marketing and financial performance.

17.2.4.4.2 A Different Interpretation of Performance
The measurement of firm performance includes financial and operational performance. Earlier studies incorporated accountingbased and market
based financial indicators. Operational factors such as cost efficiency and technological capability determine firms' underlying processes which
ultimately affect financial performance (Venkatraman and Ramanujam 1986).
Another determinant of performance is customer fit (Santala and Parvinen 2007). The study revealed that different customer fits are necessary given
the heterogeneous, situational and contextual (e.g. cultural and social) nature of customer tastes.
17.2.5 Emerging Issues

Internet in Global Marketing
Ethics in the Global Marketplace
Marketing Strategies for Emerging Markets.
17.2.5.1 Internet in Global Marketing

The Internet has become a powerful medium for reaching and servicing customers around the world. The fast growing Internet world has provided
marketers with new ways of promoting, communicating, and distributing information and products (Warrington, Abgrab, and Caldwell 2000). Research
in this area focused on the following broad issues:
Standardization vs. Localization
Internet and Performance.
17.2.5.1.1 Standardization vs. Localization

Although the Internet helps companies at both global and local levels (Yip and Dempster, 2005), companies have to implement strategies to
accommodate crossnational differences in infrastructure, regulation, language, buyer demographics and behaviour, payments, and currency
regulations (Guilln 2002). For instance, products whose features and performance are highly desired by the customers will need a strong local
responsiveness in terms of web design, local language, currency, customer services, etc. On the other hand, global commodities, such as CDs,
books, videos can adopt global lowcost strategies because efficiency is the main source of competitive advantage (Guilln 2002).
Often viewed as the soft aspect of international marketing, the consideration of culture has become crucial in international marketing, such as in the
context of website adaptation. Singh, Zhao, and Hu (2005) looked at local websites in China, India, Japan, and US to determine if they are culturally
neutral or infused with the values of the host country. Their study indicates the importance of firms' being culturally mindful when launching
standardized or machinetranslated websites for their global audience.
17.2.5.1.2 Internet and Performance

Just as in a directmarketing exchange, it is essential to build customers' trust in the electronic world through such cues as product guarantees, secure
website transactions, and alternative ordering processes (Singh, Zhao, and Hu 2005). An important message is that today's businesses must initiate
and nurture trust with online shoppers in order to develop longterm relationships.
Hunter et al. (2004) classified organizational purchasing situations into categories with implications for ebusinesses. The authors suggested that the
utilities of ebusiness vary and that these benefits depend on buying circumstances. It is important that buyers and sellers match their needs with the
different uses of ebusinesses to maximize the benefits of ebusiness in BtoB transactions.
Sharma (2005) provided a new explanation for the survival of export management companies by linking firms' marketbased assets with e
businesses (any business conducted over the Internet) and suggested that the linkages can enhance firms' competitive position in their value chains,
resulting in better performance.
An investigation of the Internet's roles in firms' international business activities in an emerging economy context was conducted by Nguyen and Barrett
(2006). They suggested that it was important for a firm to use the Internet to collect data and transfer information effectively and efficiently to improve
foreign sales intensity.
The Internet also has an impact on the following (Balabanis, Theodosiou, and Katsikea 2004):
internationalization of small and mediumsized enterprises (SMEs)
communication and information management
relationship management
marketing intelligence
pricing strategies
the structure of distribution channels.
17.2.5.2 Ethics in the Global Marketplace

This area has been underresearched in the past. It has recently been gaining attention due to an increased awareness of the importance of cultural
differences in international marketing and firms being good corporate citizens in foreign markets. Gaining institutional legitimacy in foreign markets has

become an increasingly important focus for many multinational companies. Multinational firms must be cognizant of the social and environmental
concerns that engage newly energized actors (e.g. NGOs, popular anticapitalist and antiglobalist movements, and religious and ideological groups
with economic agendas). The important points in this research area are:
business ethics at the macro level
ethical perceptions at the behavioural level
ethical issues in complex social and political environment.
At the macro level, business ethics are examined as part of a firm's profit motive and, further, as part of capitalism. The health and wellbeing of
consumers is a subject of social responsibility in business ethics. It is hard to ignore the ethics gaps between what societies expect and what
marketing scholars are delivering (Carrigan, Marinova, and Szmigin 2005).
At the behavioural level, ethical perceptions about various business practices differ across countries. Carrigan, Marinova, and Szmigin (2005) gave a
summary of the current debate on ethics and international marketing and lamented that development in the field of marketing ethics, both in theory and
practice, has not progressed as quickly as those early scholars might have desired or predicted.
The increasing globalization of firms and the growing interdependencies among countries require today's marketers to have a better understanding of
cultural influences on ethical and organizational practices. Paul, Roy, and Mukhopadhyay (2006) investigated the relationship between the cultural
values and marketing ethics in two diverse countries. They reported significant differences in the interpretation of the marketing ethical norms between
the countries. Their study clearly indicated the need for sensitivity to the values, culture and ethical standards of the countries that multinational
companies enter into. MNEs are concerned about the effect their handling of ethical matters has on financial performance. A recent metaanalysis
conducted by Orlitzky, Schmidt, and Rynes (2003) indicated that corporate virtue in the form of social responsibility is likely to pay off.
Since images serve as a foundation for future attempts to comprehend and construct the world around us, Borgerson and Schroeder (2002) examined
the ethics of representation in international marketing communication. It is suggested that firms should try to avoid bad faith and be aware of potential
negative communication. They believe that increased visual and semiotic literacy is an important component of societal marketing and that firms
should consider multiple constituents for corporate activities, including marketing communication.
Ethical relativists (e.g. Crane and Matten 2004) suggested that morals are based on the social norms of the society in which they are practiced. It is
inappropriate to apply universal moral standards to all peoples at all times. Cui et al. (2005) identified potential pitfalls for researchers who use the
original, unmodified Forsyth's Ethical Position Questionnaire (EPQ) scale in any country. The authors suggested that researchers employ a culture
specific approach whenever possible to ensure measurement invariance and optimal capture of cultural diversity. These studies highlight a need for
marketing adaptation within a particular market over time as the societal culture, knowledge, and technology evolve (Carrigan, Marinova, and Szmigin
2005).
Marta and Singhapakdi (2005) compared the perceived intensity of unethical marketing practices, corporate ethical values (CEV) and perceived
importance of ethics by Thai and US business people. The authors suggested that economic development drives countries in a common direction,
regardless of the divergence of their cultures and histories. Top managers need to be explicit about the behaviours they consider unethical and
management training should change the corporate ethical values' of an organization. The paper also raised the problems of unethical practices and
the ethics gap in emerging markets illustrated by such issues as bribery and the need for companies to abide by the ethical principles of the local
community. International marketing scholars should examine how MNEs manage the moral standards in their countries of operation, and present
guidelines for managers facing normative decisions (Meyer 2004).
Mainstream research on marketing ethics has generally focused on developed economies while emerging markets have received rather limited
attention (Donaldson 1985; Rogers, Ogbuehi, and Kochunny 1995). Wellestablished MNEs have bargaining power greater than that of local
governments in many developing economies. Foreign markets, therefore, are more vulnerable to unethical marketing due to their desire for economic
growth, their low bargaining power, and a lack of legal framework and law enforcement to protect local firms, consumers and the society as a whole.
The moral issues inherent in developing and implementing marketing strategies in developing countries are important than ever before as MNEs
expand into international markets seeking untapped market growth potential, creating new market segments and penetrating existing ones, and
expanding the product life cycle of outdated products (Carrigan, Marinova, and Szmigin 2005). Frenkel and Scott's (2002) study indicated that global
firms' application of codes of labour in foreign countries, such as emerging economies, can uphold core labour standards, improve workers' wellbeing,
and affect workplace performance. However, compared with compliance type relationships, a collaborative partnership between a global firm and its
contractor generates superior performance for both parties and for their workers. In addition, higher standards may protect MNEs from negative
publicity in developing countries (Frenkel and Scott 2002).
17.2.5.3 Marketing Strategies for Emerging Markets

During the twentieth century, large economies and large trading partners have been located mostly in the triad regions of the world, North America,
Western Europe and Japan, collectively producing over 80 per cent of world GDP with only 20 per cent of the world's population. However, as the
centre of economic activity shifts toward nontraditional markets in newly emerging economies (e.g. Chinese Economic Area (CEA, comprising China,
Hong Kong region, and Taiwan), India, Commonwealth of Independent States (CIS, comprising Russia, Central Asia, and the Caucasus State), South
Korea, Mexico, Brazil, Argentina, South Africa, Central European countries, Turkey, and the Association of Southeast Asia Nations (ASEAN, comprising
Indonesia, Brunei, Malaysia, Singapore, Thailand, the Philippines, and Vietnam)) multinational firms are learning to cope with institutional environments
characterized by a different set of institutional criteria, such as limited property rights, less sophisticated legal structures, and different kinds of
socioeconomic relationships.

Accordingly, there has been an increased amount of research on how to enter and compete in emerging markets and how firms from emerging
markets can compete successfully in the developed parts of the world. Are traditional models and methods adequate to describe this changing world?
Do we need to adopt new approaches to decipher the different institutional environments? Most importantly, how can multinational firms benefit from
these changes?
Many studies point to a fundamental inconsistency in the emerging market strategies of multinational firms. On the one hand, they see the market
potential of billions of new consumers in the emerging market; on the other hand, their marketing programs are scarcely adapted for those markets.
The result is low market penetration, disappointing market shares, and poor profitability. Meyer (2004) provided a comprehensive review on the FDI
impact in emerging economies from the perspectives of industrylevel, firmlevel, and business ethics, and presented suggestions on ways to advance
current research. Khanna, Palepu, and Sinha (2005) suggested that when companies match their strategies to each country's contexts (e.g. political
and social systems, openness, product markets, labour markets and capital markets), they can take advantage of a location's unique strengths.
Although MNEs cannot employ the same strategies in all developing countries, they can generate synergies by treating different markets as part of a
system.
Clearly a finetuned marketing strategy is essential for entering emerging markets. Luo (2007a) provided a unifying framework examining the shifting
regulatory and competitive parameters MNEs face in the emerging economy of China. The author analysed shifting dominant strategies MNEs used to
deal with changing environmental landscapes. The study indicated the need for international business scholars to extend and rethink current MNE
theories to explain the shifting parameters, prescriptions, and paradigms for MNEs in a foreign country.
17.2.6 Analytical Techniques in National and Cross National Research

Mainstream theories in the international marketing field were primarily based on the experience of Western (primarily US) firms. Despite the rising
number of studies on firms' global expansion, there has been a lack of theory development and contribution to the conceptual literature in the
international marketing field. Further, researchers should not ignore the substantial variation in attitudes and behaviour within countries (Douglas and
Craig 2006). It is essential to examine differences both within and among countries to account for intracountry heterogeneity. Our research tends to
suffer from the pitfalls and problems associated with extending the scope of research beyond the confines of a single country's borders (Douglas and
Craig 2006: 1). More attention needs to be paid to refining conceptual frameworks and units of analysis and uncovering issues and contextual
differences in multicountry marketing research. The same authors suggest the following resolutions:
1. Refining the conceptual framework
decentring the research perspective
assessing the role of context
identifying the mediators and moderators
identifying construct bias.
2. Refining the unit of analysis
alternative units
purposive selection
degree of cultural interpenetration.
3. Improving construct measurement
preliminary research and pretesting
unit of emic/etic instruments
use of parallel translation.
Douglas and Craig (2006) proposed two approaches to adjust for crosscountry research: the adapted etic and the linked emic approach. The etic
approach adapts the conceptual model developed in the base culture to other contexts, accounting for differences in the context being studied and
their implications for the research design; the linked emic approach starts with the local context, but takes input from multiple research sites and
incorporates them into the overall conceptual framework and research design.
Reynolds, Simintiras, and Diamantopoulos (2003) outlined theoretical issues that researchers need to consider when making sampling choices in an
international setting, for example, the need to balance withincountry representation with crossnational comparability. They present a framework for
sampling approach in international studies and indicate how different research objectives affect the desired sampling method and the desired sample
characteristics.
The two broad concerns within crossnational research are measurement and reliability and validity issues of the scales and measures used. These
two concerns are reflected in the research review as follows:
17.2.6.1 Measurement Issues

Singh (2004) contrasted classical test theory (CTT) and a more general item response theory (IRT) model and suggested that there are several issues
that differ significantly. The author stressed the importance of using the simplest but most appropriate measurement model for each situation.
Research was conducted to review, evaluate, and develop export performance measures (Katsikeas, Leonidou, and Morgan 2000). The same
authors showed that measurement of the export performance construct suffers from serious conceptual, methodological, and practical limitations
thereby hindering theory advancement in the field. The following efforts should be made:

adopting a contingency approach in selecting individual export performance measures
incorporating multiple measures to explore the multifaceted phenomenon of export performance
utilizing multidimensional conceptualizations and operationalizations of export performance and examining interrelationships among them
referencing multiple frames of reference to discover the impact of performance from different perspectives
combining primary data with secondary sources of information to explore export performance indicators.
Culture is a fuzzy concept that has raised definitional, conceptual, and operational obstacles for researchers. Soares, Farhangmehr, and Shoham
(2007) advocated several approaches to conceptualizing and operationalizing this multidimensional construct. They proposed a multimeasure
approach for cultural assessment using Regional Affiliation, Indirect Values, and Direct Value Inference. Their multimethod approach contributes to
current research toward capturing this elusive concept.
The traditional concept of using countries as the cultural unit of analysis or basis for market segmentation has been criticized since most countries are
already multicultural and growing ever more so. Furthermore, even within relatively homogeneous nations, individuals vary substantially in the extent to
which they identify with, adhere to, and practice cultural norms. An increasing number of researchers argue that increasing globalization is reducing the
heterogeneity of consumer behaviours within countries, while increasing commonalities across countries. Cleveland and Laroche (2007) developed
and validated a multifaceted scale for the measurement of acculturation to global consumer culture (AGCC) and proposed a research paradigm for
simultaneously assessing global and local cultural influences on consumption behaviours. As suggested by Ueltschy and Krampf (2001), consumer
satisfaction scales and service quality measures are culturally sensitive. That is, a measure that works well in one market may not function properly or
comparatively in a culturally diverse group in the same country or abroad.
17.2.6.2 Reliability and Validity Issues

Prior studies suggest that response styles can be a source of systematic measurement error and thus threaten the validity of conclusions drawn from
marketing research data (Bearden and Netemeyer 1999). The Baumgartner and Steenkamp (2001) study examined five forms of stylistic response:
acquiescence and disacquiescence response styles, extreme response style/response range, midpoint response, and noncontingent response. Their
study indicated that response styles can lead to nontrivial contamination of observed scores and substantial bias in observed correlations between
scales that are contaminated by stylistic variance. Further, when compared with the variation across scales, the variation across countries is small.
Their findings provided evidence for the robustness of response style effects across different countries, cultural settings, and languages.
In the same spirit, Murray et al. (2007) examined the crosscultural measurement invariance of the export market orientation (EMO) and export
performance (EP) scales, and tested the EMOEP relationships with a sample of Chinese and nonChinese export ventures. Their results provided
support for measurement invariance both for EMO and EP between Chinese and nonChinese firms. Without the evidence supporting the cross
national invariance of EMO measures in the emerging economy context, our understanding of the relative impact of EMO in explaining EP for firms from
developing nations visvis those from developed nations would be inaccurate.
A review of research methodologies in international business was conducted by Yang, Wang, and Su (2006). The study indicated that mail surveys
dominate empirical research. An over emphasis on empiricalquantitative research may bias researchers toward theory building. Accordingly, to
address the issue of survey method dominance, Nakata and Huang (2005) advocated comparative ethnography, historical or time series analyses,
and computer simulations as well as developing modules or workshops to enrich theory and construct development.
17.3 Critique and Directions for Future Research

Having surveyed the international marketing literature published since 2000, we have to ask if the research deficiencies identified in the last three
decades have been addressed. In the early 1990s, Douglas and Craig (1992) lamented that strategy issues were a sadly neglected area in
international marketing and that marketing's role in global strategy was largely ignored. Kotabe's (2001) review of the international marketing literature
published during the 19901999 period echoed the same concerns. These earlier literature reviews, among others, asserted that researchers in
international marketing continue to borrow concepts and theories from the management and strategy literature, and tend to relate them to market
performance.
Once seen as a trend over the last thirty years, however, such criticisms may have been illfounded. The survey of the recent literature as well as the
personal experience of the authors of this chapter points to a trend in which researchers trained in the marketing field have increasingly started
publishing their marketing strategyrelated work in some leading management journals, primarily in Strategic Management Journal. This trend rather
appears to suggest that the scope of research areas published in leading marketing journals have narrowed over time such that marketing strategy
researchers have found it easier and more impactful by publishing their work in strategy journals rather than in marketing journals. In a positive light,
international marketing researchers complement management and strategy researchers in subjecting supplyside theories to demandside
considerations.
Market segmentation and target marketing are two major concepts uniquely developed in the marketing literature with focus on the demand (customer)
side. Yet, studies in these areas continue to be scarce in both domestic and international marketing literature. This area of research promises to have
some profound impact on supplyside strategy research if sufficiently developed. In particular, benefit and intermarket segmentation concepts appear
promising for further development in the international marketing literature.
In the generic (domestic) context, marketing as a discipline has gradually migrated away from economic issues to behavioural issues. For example,
marketing was developed as a study of distribution channels and logistics at the dawn of the twentieth century. Today, logistics is not generally
considered as part of the marketing discipline. Even economics of new product development as well as marketing strategy is increasingly considered

outside the mainstream marketing field. On the other hand, behavioural research, as well as quantitative applications, in consumer behaviour,
promotion, and channel management has become mainstream. In the international area, the same forces have been at work. Consequently, there
have been an unproportionately large number of studies in consumer behaviour, modes of entry (particularly exporting), and channel performance.
The focal area of marketing is the marketing mix strategy, encompassing product, price, promotion, and distribution management. Studies that
address various aspects of the marketing mix were limited to the standardization versus adaptation issue. Part of the limited attention to each aspect
of the marketing mix is due to the difficulty of conducting empirical research. Product development has become so technically and technologically
complex that this area is increasingly better examined by researchers in the engineering fields, or jointly by those in engineering and marketing fields.
Pricing has always been one of the most difficult areas of research in marketing as firms are not willing to share pricing and cost information. Promotion
in particular, advertisingrelated research, such as advertising effectiveness and global advertisingas well as consumer behaviour has attracted
many marketing researchers. It is due mainly to the relative ease of collecting data and theory development from the psychology literature. Research in
distribution management is more or less limited to such behavioural issues as dyadic trust and power (control) relationships. Although global sourcing
issues (including procurement and supply chain management) are considered part of the broadly defined domain of marketing (Douglas and Craig
1992), studies in these areas, as stated earlier, appear to have gradually migrated into the strategy literature away from the contemporary domain of
marketing.
One area where marketing has genuine strength is research methodology. As the marketing discipline has evolved into a strongly psychologybased
behavioural discipline, researchers have paid serious attention to the reliability and validity of measurement issues. In the last decade, we have seen
the trickledown effect of an increased call for more methodological scrutiny in international marketing research. However, it should be noted that
international marketing research is faced with many more operational difficulties and pitfalls in conducting empirical research than is generic,
domesticbound research (Craig and Douglas 2000; Kotabe 2001). Consequently, international marketing researchers may not be able to address
those measurement and other methodological issues as effectively as would be possible in domestic research.
As stated at the beginning of this chapter, the current climate strongly affects the contextual nature of research in international marketing. One such
change that needs to be highlighted first is the recent rise of emerging economies. The dramatic institutional, cultural, and strategic transformations of
firms from the emerging markets of Eastern Europe and the rapidly reemerging markets of Southeast Asia have ramifications for the global economy
in the twentyfirst century. There is a significant demand for knowledge on interpreting firms operating in emerging economies.
Firms' strategic choices and performance are not only driven by industry conditions and firm capabilities but are also a reflection of the formal and
informal constraints of a particular institutional environment that firms have to conform to (Peng, Lee, and Wang 2005). It is therefore worthwhile to
consider the profound differences in institutional frameworks between emerging economies and developed countries in addition to examining industry
and resourcebased factors (Makino, Isobe, and Chan 2004) when interpreting MNEs' behaviour and performance. Consequently, institutional theory
could be included when probing into at emerging economies. Firms today are under constant competitive pressure to move forward both reactively
(responding to the changes in the market and competitive environments) and proactively (anticipating the change) with a sound evaluation of the
economic, cultural, political, and legal environments of the country markets they enter. The international marketing field also needs to incorporate
theories from social sciences, such as anthropology, sociology, and political science to produce new theories and perspectives (Nakata and Huang
2005).
Although we witnessed a significant increase in the percentages of comparative and global studies and a corresponding drop in single country
research, regional frameworks have received scant attention (Nakata and Huang 2005). With the increasingly crucial role of regional trade agreements
such as NAFTA, MERCOSUR, and the EU in the global economy, it is important that the debate between regional standardization and local adaptation
needs to be further focused on. Further, regionalization may have important effects on the use of international joint ventures. With the unified European
Union, low transaction costs may affect the entry strategy choices of European firms (Reus and Ritchie 2004).
Our recognition of the challenges inherent in conducting crosscultural research has not led to the debate on the adaptation of qualitative methods.
Some scholars suggest utilizing qualitative research methods to enhance crosscultural understanding and lessen potential problems of cultural bias
and ethnocentric assumptions (e.g. Osland and Osland 2001). Qualitative research can be particularly appropriate in developing countries where
secondary data collection is more difficult than in developed countries and where social, facetoface relations and trust relationship building are
valued (Harari and Beaty 1990; Kotabe, Parente, and Murray 2007). Researchers should take into consideration environmental characteristics,
resource constraints, and cultural traits in their international marketing research.
Further, most past research in international marketing has focused on large firms. It is increasingly important to understand the approaches adopted
by small and mediumsized enterprises (SMEs) that have successfully establish themselves in international markets.
Another profound change in the last decade has been the proliferation of the Internet and electronic commerce. The Internet opened the gates for
businesses to sell directtoconsumers across national borders. Further, advances in information technology and reductions in the cost of
communication are facilitating the shift of backroom operations to the developing world. The fast growing Internet and accompanying information
technology applications make it possible for firms to function as a network of interconnected responsibilities (Cavusgil 2002). As for marketing
research, the latest technology should enable scholars to create approaches to interpret behaviour in differing cultural contexts and to integrate
complex data from diverse sources and environments.
There is also a need for international marketing researchers to collaborate with scholars in emerging economies to obtain an inside perspective on
relevant marketing issues (Czinkota and Ronkainen 2002). It is time for researchers to develop new frameworks and theories to enhance our
understanding of businesses in different and diverse environments.
Marketing Journals

Advances in Consumer Research
European Journal of Marketing
Industrial Marketing Management
International Journal of Advertising
International Journal of Market Research
International Journal of Research in Marketing
International Marketing Review
International Journal of Research in Marketing
Journal of Advertising
Journal of Advertising Research
Journal of Business and Industrial Marketing
Journal of Consumer Behavior
Journal of Consumer Behaviour
Journal of Consumer Marketing
Journal of Consumer Research
Journal of International Consumer Marketing
Journal of International Marketing
Journal of Marketing
Journal of Marketing Research
Journal of Marketing Theory and Practice
Journal of Product and Brand Management
Journal of Retailing
Journal of the Academy of Marketing Science
Marketing Management
General Business Journals
Academy of Management Executive
Academy of Management Journal
Academy of Management Review
American Sociological Review
British Journal of Management
Business Horizons
California Management Review
Competitiveness Review
Decision Sciences
European Management Journal
Harvard Business Review
International Business Review
International Journal of Innovation Management
International Journal of Management
International Journal of Management Reviews
Journal of American Academy of Business
Journal of Business Ethics
Journal of Business Research
Journal of General Management
Journal of International Business Studies
Journal of International Management
Journal of Management
Journal of Management Studies
Journal of Managerial Issues
Journal of Small Business Management
Journal of World Business
Long Range Planning
Management Decision
Management Science
Management International Review
Multinational Business Review
Organization Studies
Oxford Review of Economic Policy
R&D Management
Sloan Management Review
Strategic Management Journal
Thunderbird International Business Review

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Masaaki Kotabe
Masaaki (Mike) Kotabe, Washburn Chair Professor of International Business, and Marketing, Fox Business School, Temple University.
Crystal X. Jiang
Crystal X. Jiang, Assistant Professor, Bryant University.

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