Technological capabilities and cost efficiency as antecedents of foreign market entry

F. Cesaroni, Marco S. Giarratana & Ester Martínez-Ros


This work explores which factors increase firms' propensity to enter into international markets. The study draws on the resource-based view and assesses the effect played by firms' technological capabilities and cost structures on entry. While many research papers consider those two factors to be independent one from the other, this study focuses on their interactive effect. Empirical analysis covers the whole population of Spanish pharmaceutical firms over the period 1995-2004. By using data on trademarks filed at the United States Patent and Trademark Office (USPTO), the study identifies those firms that have entered the US market with branded products. Then, the study uses a hazard model to empirically estimate which firms' resources and capabilities affect the probability of entry. Results show that firms can maximize the likelihood of entry in foreign markets by pursuing hybrid competitive strategies that combine together scope economies and cost efficiency.

Keywords: Innovation and R&D; Patents; Trademarks; Competitive Advantage; Firm-Specific Advantages; Foreign Market Entry.

JEL Classification: F2, M16, O30

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