Entry into Transition Economies: Beyond Markets and Hierarchies

The paper analyses empirically the determinants of international entry modes for the case of five transition economies in Central and East Europe. Four modes of entry are distinguished: trade, contracts, joint-ventures and direct investments. According to Hennart [1993], these modes should exhibit different degrees of internalization of the business transaction. This paper therefore, compares an ordered and a multinomial dependent variable model, and shows that the former disguises the richness of entry mode choices. Specific strategic objectives and environmental conditions require specific organizational forms, which make cooperative modes often the first choice.The results furthermore show that the conditions of the international business environment, and specific allythe transition economies, have major impact on the selection of entry modes. Environmental variables are more important than firm-specific variables in the empirical analysis