Whose Culture Matters? Near-Market Knowledge and Its Impact on Foreign Market Entry Timing

TLDR

Market entry decisions are among a firm’s most critical strategic choices, yet prior research has not examined how a firm’s operations in culturally and economically similar markets influence subsequent entry decisions. This study introduces the concept of near‑market knowledge—knowledge gained by operating in similar markets—to assess its effect on foreign market entry timing. Using data on 19 multinational firms and 722 foreign market entries, the authors apply a hazard model to evaluate dynamic near‑market knowledge measures alongside economic and cultural variables. The analysis shows that cultural distance is not significant, while near‑market cultural and economic knowledge and several other economic variables significantly affect entry timing, offering implications for research and practice.

Abstract

Market entry decisions are some of a firm's most important strategic choices. Although some recent studies have begun to consider the impact of learning and experience on foreign market entry, no study has examined the impact of a firm's own operations in similar markets on subsequent entry decisions. In this study, the authors introduce the concept of near-market knowledge to reflect the knowledge firms generate by operating in markets that are culturally and economically similar. The authors compile extensive data on the complete foreign market entries of 19 multinational firms. They use a hazard model on 722 entry observations to evaluate the impact of the dynamic near-market knowledge measures and other economic and cultural variables on foreign market entry timing. In contrast with much previous research, the authors find that cultural distance from the domestic market is not a significant factor. However, the authors find significant effects for the new measures of near-market cultural and economic knowledge and for several other economic variables as well. The authors discuss the implications of these findings for further research and management practice.