Entry modes and performance in Asian markets – what is the role of experience?
MSc Business Administration – International Management
Name: Bob J.W. ter Horst
Student number: 10122966
Supervisor: Dr. Vittoria Scalera
Statement of Originality
This document is written by Bob ter Horst, who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Abstract
Moving towards foreign markets involves entry modes and entry strategies. The choice of market entry mode is one of the critical decisions in a firm’s internationalization process. It has considerable consequences and implications since foreign market entry modes differ in the degree of risk they present, the control and commitment of the resources they require and the return on investment they present. Moreover, it holds significant implications for the performance of the firm. There are two overarching types of market entry: equity and non-equity modes.
This research considers the impact of equity and non-equity modes of market entry on the market performance of a foreign subsidiary and how this relationship is influenced by experience. It addresses the research gap within the concept of experience and distinguishes between the general concept of international experience and the more specific region specific experience. The research is conducted based on a longitudinal quantitative research. To examine the impact of region specific and international experience on the relationship between entry modes and market performance in Asian markets, data on the Asian beer market is used.
The findings suggest that region specific experience positively moderates the relationship between market entry modes and performance, whereas international experience does not. Furthermore, the results indicate that entering a market with equity entry modes of market entry has a positive effect on market share as an indicator of performance, whereas non-equity modes of market entry do not have this effect. This implies that a stronger focus on region specific experience would benefit business foreign business operations.
Keywords: experience, modes of market entry, entry mode theory, intangible assets, MNE
TABLE OF CONTENTS
1. INTRODUCTION 4
2. LITERATURE REVIEW 8
2.1 Asian Economies and Strategy Research 9
2.2 Entry mode theories 10
2.3 Experience and intangible assets 17
2.4 Market performance 21
2.5 Research question and research gap 23
3. HYPOTHESIS DEVELOPMENT 24
4. RESEARCH METHODS 29
4.1 Empirical context 29
4.2 Data sample 30
4.3 Independent and dependent variable 31
4.4 Moderator variables 33
4.5 Control variables 34
4.6 Method of analysis 35
5. RESULTS AND ANALYSIS 37
5.1 Descriptive statistical analysis and correlation test 37
5.2 Regression analysis 39
5.2.1 Dependent variable Market Share 40
5.2.2 Dependent variable Hectoliters 42
6. DISCUSSION 44
6.1 Findings 45
6.2 Theoretical implication 46
6.3 Practical implications 47
6.4 Limitations and future research 48
7. CONCLUSIONS 49
1. Introduction
Growth through foreign market expansion has become increasingly popular since previously closed foreign markets open and economies around the world increasingly globalize (Rasheed, 2005). As globalization increases the prominence of emerging markets increases as well. Emerging markets are low-income, rapid-growth countries using economic liberalization as their primary engine of growth (Hoskisson et al, 2000). The rise of emerging markets is a defining feature of the globalized economy of this century. Emerging markets will grow almost three times faster than developed economies leading to 65% of global economic growth expected to take place in emerging economies by 2020 (Euromonitor, 2014). The engine of globalization has shifted from developed to emerging markets – particularly to markets in Asia. Since most of the world’s population lives in emerging markets, this means that the world population is moving from the basic needs era to a more consumption oriented era. This tendency creates an environment for new consumers of products and services across emerging markets transforming them into consumption hubs and thus interesting markets for multinational enterprises (MNEs). MNEs from advanced market economies are looking at such developments as opportunities to capitalize on and tend to move operations to these markets which are traditionally considered to be of lower quality production or assembly centers (Khan, 2016).
The entry of a foreign market involves so-called entry modes and entry strategies. The choice of a market entry mode is one of the most critical decisions in a firm’s internationalization process (Anderson and Gatignon, 1986; Brouthers and Hennart, 2007; Hill, Hwang and Kim, 1990). The choice of entry mode has considerable consequences and implications since foreign market entry modes differ in the degree of risk they present, the control and commitment of the resources they require and the return on investment they present (McDonald et al. 2002). Moreover, this holds significant implications for the performance of
the firm (Brouthers, 2007). Once an entry mode is determined, further corrections or changes are difficult to make and imply negative consequences that impact the firm’s future performance (Nakos and Brouthers, 2002).
There are two overarching types of market entry: equity and non-equity modes. As the name implies, equity modes of market entry suggest monetary investments or capital by a firm to set up a foreign subsidiary. Non-equity modes of market suggest the contrary. More specifically do non-equity modes of market entry include exports (E) and contractual agreements (CA). Equity modes of market entry include Joint Ventures (JV) and Wholly Owned Subsidiaries (WOS).
The choice and consequences of market entry are widely researched by multiple authors from different points of view. Two main views exist in the literature. According to the first stream of literature, entry modes can be arranged along a continuum of increasing resource commitment, amount of control and the level of risk involved (Brouthers and Hennart, 2007). Based on this premise, authors have offered various typologies of entry mode types (Anderson and Gatignon, 1986; Erramilli and Rao, 1990). The second stream of literature classifies modes of market entry in two distinct categories, equity and non-equity modes of market entry (Hennart, 1988, 1989). Contrary to the continuum scale mentioned in the first stream of literature, Hennart (1988, 1989) classifies entry modes on the bases of the method to pay input providers. Equity providers are paid after the profits of the firm are collected (ex-post). Non-equity ventures specify payments before (ex-ante).
Pan, Li and Tse (2000) incorporate both streams of literature in their hierarchal model. The relationship between market entry mode, performance, risk and involvement with and within a subsidiary is researched by Pan, Li and Tse (2000) and by Pan and Tse (2000). Lu and Beamish (2001) research the general topic of performance of foreign subsidiaries, whereas Delios and Beamish (2001) explore the role of experience and the concept of performance and
their relationship. Their research evaluated two distinct performance outcomes – survival and profitability. For the sake of this research, performance will be related to profitability since this research involves for-profit organizations. Moreover, this research divides market entry into equity modes of market entry and non-equity modes of market entry based on the model of Pan and Tse (2000) – as this is the main division within market entry modes.
Literature suggests that the relationship between market entry mode and performance is moderated by experience (Barkema, Bell and Pennings, 1996). International experience is a well-established construct in the literature. International experience is defined as an intangible organizational resource, as it provides an organization with experiential knowledge on how to organize and manage the organization in an international environment. International experience is therefore an important factor (Barkema, Bell and Pennings, 1996). Erramilli (1991) indicates that, as experience increases, and becomes more geographically diversified, service firms tend to choose markets that are culturally less similar to their home country. Delios and Beamish (2001) contribute to this by arguing that an MNE’s experience generates new capabilities that help offset the so-called liabilities of foreignness (LOF), i.e. the costs that firms operating outside their home countries experience above those incurred by local firms (Nachum, 2015). Secondly, Delios and Beamish (2001) argue that experience contributes to the adaptation of existing intangible assets to improve a foreign subsidiary’s host market competitiveness. International experience manifests itself in multiple forms and shapes. Firms can have country experience in a host county, entry mode experience with a particular entry mode, or experience with a certain mode of governance for example. Whereas general experience is a well-established construct in literature of international business, this paper distinguishes international and region specific experience. Specifically, international experience and Asian regional experience. International experience occurs, when a firm
operates outside of their home country. Region specific experience occurs when a company operates in specific region.
Considering the research done on regionalization and performance by Ghemawat (2007), Ghemawat and Pisani (2014) and Kim and Aguilera (2015) this paper elaborates on the role and importance of region specific experience and its relationship with international experience. Research on choice of entry mode research is abundant in existing literature on international business. However, there has been little research into the relationship between market entry mode and subsidiary performance and the influence of an MNEs international and regional experience on this, other than the literature afore mentioned – particularly in the context of the Asian market on which this research will focus. This paper aims to contribute to this field of research since the concept of regionalism and experience are under researched, whilst the broader theme of cultural differences is moving forward and indicate that cultural and regional differences are more important, as data indicates that the world is just a fraction as integrated as often is assumed (Ghemawat, 1995).
Secondly, the effects of international experience and regional experience will be compared in this research to further demarcate region specific experience within the broader concept of international experience. On this basis, the following research question will be answered in this thesis:
What is the impact of entry mode choice on subsidiary market performance in Asian economies? How is this relationship influenced by international and regional experience?
The research question is answered based on three hypotheses. The hypotheses are tested in a quantitative research based on a longitudinal dataset on the Asian beer market. To examine the
impact of regional and international experience on the relationship between entry modes and market performance in Asian markets, this research uses a dataset on the Asian beer market. A dataset is compiled detailing the specific beer brands in the Asian market. The data set includes 4650 records of brands active in the Asian market. This dataset comprehends data over a period of 10 years. Specifically, the period ranging from 2006 to 2015 is used and researched. This way, panel data with the same cross-sectional data observed during 10 years is obtained.
This research adds to the concept of experience within the broader research theme of international management. It specifically adds to the literature on experience in relation to subsidiary performance by specifying the concept and the implications. This research specifies the concept of experience and distinguishes the experience into region specific experience and the more general international experience. In contributes to the literature by specifying the role of experience, in relation to the mode of market entry. The results of the research imply that the region-specific experience has a positive effect on subsidiary performance. The effect of region-specific experience is stronger when a market is entered with equity modes of market entry, compared to non-equity modes of market entry.
This thesis is organized as follows. In the following section the theories and literature on the topic are reviewed to present an up-to-date representation of the field. Secondly, the gap in existing literature and research is identified. The third part will elaborate on the research design and the work plan. Subsequently, the data is analyzed and the conclusions are drawn based on the results.
2. Literature review
2.1 Asian economies and strategy research
The Asian market consist of emerging market and developed market. Developed markets are defined as markets that are most developed in terms of economy and capital markets. The
countries are high income and are open to foreign ownership and capital movement and have efficient market institutions. The term developed market is contrasted by the term emerging markets. The term Emerging Markets (EM) was first coined by the deputy director of the International Finance Corporation of the World Bank Antoine Van Agtmael in 1981. Initially, the definition applied to stock markets in countries with a cut-off at $10.000 yearly income per capita. The numerical references faded and the term emerging markets became synonymous with emerging economies and did not rely on any statistical measure. Emerging economies are low-income, fast growth countries using economic liberalization as their primary engine of growth. Hoskisson et al. (2000) divide emerging economies into two groups: developing countries in Asia, Latin America, Africa and the Middle East and transition economies in the former Soviet Union and China. Emerging countries have gone through political and economic liberalizations, which have lead from closed economies to open market economies (Harustakova, 2012). Changes strengthening markets and the liberalization of markets spur the opportunities for investment. Over 4 billion people live in mostly low- and middle-income emerging markets (Harustakova, 2012). Due to the saturation of the markets in developed countries multinational enterprises (MNEs) increasingly focus on these emerging markets, most notably on the so-called BRIC or BRICS countries – Brazil, Russia, India, China and South-Africa.
MNEs need to develop unique strategies to cope with the broad scope and rapidity of economic change and the general difference between developed and emerging markets and among emerging markets. Multiple studies review MNEs strategy in emerging markets. Most notably Hoskisson et al. (2000) research strategies of MNEs in emerging economies. This research explores private and public enterprises developing strategies to cope with the broad scope and rapidity of economic and political change in emerging economies. The strategies researched are formulated in several different regional settings from three primary theoretical
perspectives: the institutional theory, transaction cost economics and the research-based view of the firm (Hoskisson et al., 2000). Pan, Li and Tse (2000) follow this by researching the order (to which location a MNE moves first, second, etc.) and mode of market entry on profitability and market share of MNEs in China.
Meyer et al., (2009) build further on this research and investigate the impact of market-supporting institutions on business strategies by analyzing the entry strategies of MNEs in emerging economies. The research applies and advances the institution-based view of strategy and integrates it with the resource-based view. Resource-seeking strategies are explored within different institutional contexts. The different modes of entry – exports, licensing, wholly owned subsidiaries and joint ventures – allow firms to overcome different kind of market inefficiencies are related to the characteristics of the institutional context and the characteristics of the resources (Meyer et al., 2009). The following part elaborates on these theories and the different modes of market entry.
2.2 Entry mode theories
The literature concerning entry mode theories is well researched and broad. This is mainly due to the idea that entry modes have a considerable impact on firm or subsidiary performance (Brouthers, 2002; Chen and Hu, 2002). Although much research and literature on the topic is contradictory or failed to show a significant association between the mode of market entry and performance, there is growing evidence that there is indeed a relationship. Brouthers (2002) found that firms using market entry modes predicted by the transaction cost theory perform significantly better, than firms using an entry mode not predicted by the transaction cost theory. Chen and Hu (2002) add to this that the transaction cost explanation of entry mode decisions significantly predicts future performance. The decision on how to enter a foreign market therefore must be made carefully, since it holds great strategic and future implications.
Welch et al. (2007) devise two main groups of approaches within the theories of entry modes. The first group refers to learning and decision making and the second group is based on the economic and strategic approach to business behavior (Welch et al., 2007). This group relates to the internalization process perspective and the network approach. Knowledge in this respect is ‘fuzzy’, especially for companies without international experience wherein the learning process is disrupted which leads to uncertainty about cross-border expansions (Welch et al., 2007).
The second group of theories is based on the economic and strategic approach to business behavior. It assumes that the decision makers are partly rational although it recognizes bounded rationality. This group involves the theories of market imperfections, transaction costs, the internalization theory and the OLI paradigm. The resource-based view and the institution-based view are supportive of each other in this respect (Welch et al., 2007).
The choice an MNE has when it enters is of great strategic importance to an organization. Market entry modes differ in the degree of risk they present, the control and comments over resources they require and the return on investment they promise (McDonald et al., 2002). Pan and Tse (2000) make a division of entry modes based on their equity or non-equity nature. Non-equity modes of entering a market consist of export and contractual agreements. Exports could be direct exports abroad, or indirect exports, via an agent. Contractual agreements are mostly licensing or research and development contracts. Equity modes of market entry consist of equity joint ventures and wholly owned subsidiaries. Market entry via wholly owned subsidiary is divided into greenfield market entry and the (full) acquisitions of a foreign subsidiary (Pan and Tse, 2000). The Pan and Tse (2000) hierarchical model divides in non-equity and non-equity modes of market entry. Non-non-equity modes are perceived to hold less risk, but also less involve less commitment and less control compared to equity modes of market entry. The modes of market entry increasingly have more commitment, control and risk. Starting at
the exports entry mode with the least amount of commitment, control and risk, followed by contractual agreements, equity joint ventures and ultimately wholly owned subsidiaries as a mode of market entry with the most commitment, control and risk.
Kogut and Singh (1988) classify the modes of market entry into three types of entry: greenfield, acquisition and joint venture. Joint ventures and acquisitions tap into the resources held by local firms and joint ventures partially integrating selection local resources from a local partner and acquisitions integrating all the resources. A greenfield project does not tap into these resources but instead it allows the entrant to buy or contract resources available on the local markets such as labor and real estate (Meyer et al., 2009).
In theory, the three models are distinct and serve different objectives. However, research suggests that in practice the choices are sequential and bimodal: on the one hand, joint ventures versus acquisitions and greenfield (Anderson and Gatignon, 1986; Hennart, 1988) and on the other hand acquisitions versus greenfield (Hennart and Park, 1993; Meyer et al., 2009). The model suggests that ownership and entry mode can be viewed as sequential decisions, with firms first deciding partial ownership with a joint venture versus full ownership with an acquisition or greenfield entry.
Even though the work on foreign entry mode is wide and extant, there is a lack of research into the mode of entry and the subsequent performance of the subsidiary in one or more emerging economies.
2.2.1 Transaction cost theory
The classical work of Coase (1937) states that market exchange accompanied with imperfect information produces higher transaction cost, than trade within an organization. This relation between transaction costs and the internalization process has been pervasive in the literature and studied by multiple scholars and has been related to strategies of MNEs (Williamson, 1979;
Teece, 1986). The internalization and transaction cost theory have been dominant paradigms in relations to modes of market entry as well. The transaction cost theory is trying to address and determine the entry mode based on the firms’ boundaries and the firms’ capabilities. The transaction cost theory refers to the costs of market transactions. According to the transaction cost theory, firms select the international mode of entry that provides them with the expected most efficient form of governance, wherein transaction costs are the lowest. According to the transaction cost theory these variables influence the performance of subsidiary. Brouthers, Brouthers and Werner (2003) find that firms selecting ‘transaction cost-enhanced international entry modes’ perform better than firms using other modes of entry. The so-called ‘enhanced’ transaction cost theory appears to be normative as well as descriptive with respect to the decisions regarding international entry mode of MNEs (Brouthers, Brouthers and Werner, 2003; Brouthers and Nakos, 2004). The finding that firms using the transactions cost theory to select modes of entry are more successful than those whose modes are selected otherwise is underscored by Chen and Hu (2002).
Dunning (1980; 1988) emphasizes the location choice of foreign direct investment (FDI) in the ‘eclectic theory’ or OLI paradigm. The theory emphasizes the importance of three advantages: ownership, location and internalization. Ownership advantages refer to the competitive advantage of enterprises seeking to engage in FDI. Ownership advantages such as technology or brand name are usually intangible and can be transferred within the MNE at low cost. The advantage gives rise to either lower costs and/or higher revenues that can offset the cost of operating in a foreign location (Dunning, 1988). Location advantages refer to alternative locations to undertake value adding activities of MNEs. Locational advantages of different countries are crucial for determining the host country of an MNE. Country specific advantages of a location can be divided into three classes. Economic advantages such as factors of
production, scope and size of a market; political advantages such as favorable government policies aimed at attracting FDI; social/cultural advantages such as the cultural distance between home and host country. Internalization advantages refer to the organization, creation and exploitation of the firms’ core competencies (Dunning, 2000). These three elements are based on the transaction cost theory and are interdependent of each other and influence the market entry choice of an organization based.
2.2.2 The institutional theory
The transaction cost theory is closely related to the institutional theory since the costs of transactions arise due to the existence of institutions. The institutional theory considers the importance of the institutional environment for international business. Understanding the institutional environment is challenging as there are multiple institutions. For example, the institutional environment entails both formal and informal institutions (Holmes, et al. 2013) Peng (2006) and North (1990) approach the choice of entry mode from this institutional perspective wherein the environment, and factors such as culture and political risk are emphasized in the choice of entry mode made by an organization. Peng (2006) and North (1990) argue that institutions are the formal and informal ‘’rules of the game’’. Organizations such as MNEs must be aware of these rules and obey them. This is of interest when going across the border of developed countries, whose market and institutions are generally more stable and efficient compared to developing countries and emerging markets. Peng et al. (2008) state that the institutional based view is of importance in emerging markets since developed countries have stable institutions compared to emerging economies (Peng, 2008). The relationship between formal and informal ‘rules of the game’ in emerging countries is researched by London et al. (2004) stating that in comparison to developed countries, social institutions dominate in emerging countries as formal institutions.
2.2.3 The resource based view
The resource based view (RBV) uses the resources and capabilities controlled by a firm as its primary unit of analysis (Barney, 1991). The RBV is perceives resources as key to superior firm performance. The RBV suggests that it is valuable, rare, inimitable and non-substitutable resources that a firm control that provide it with a competitive advantage to outperform competitors in the market. Resources are defined by Barney (1991, p101) as all resources including assets, capabilities, organizational processes, firm attributes, information, knowledge etc. controlled by a firm that enable the firm to conceive of and implement strategies that improve efficiency and effectiveness. The RBV is an approach to achieving competitive advantage. Organizations should have a look within the organization to find tangible and intangible resources to achieve a competitive advantage, as opposed to look at their environment (Barney, 1991) When a firm enters a market, it may not have the necessary resources. If firms lack resources, they could solve this problem by acquiring assets, or relying on partners for complementary assets (Kamal, 2011). Kamal states that evidence does not support that most firms entering a country lack the necessary resources. Contrarily, it is often the abundance of resources that attracts international ventures (Kamal, 2011). Strategy and performance are thus affected by the specific resources a firm owns and controls (Barney, 1991). Hill (Hill et al. 1990) adds to this that different entry modes require different resources – joint ventures for example are often geared towards gaining intangible assets from a local partner.
2.2.4 Cultural distance
Related to both transaction cost theory, the resource based view and the institutional perspective is the concept of cultural distance. Cultural distance is the difference between national cultures and is an important determinant of organizational actions and performance. It
is therefore considered to be an important factor in the mode of entry choice by authors such as Erramilli (1991) and in the reasoning of mode of entry choice by other authors, such as Pan and Tse’s (2000) hierarchical model and Kogut and Singh’s classification mode of market entry. Generally, the distinction is made between culturally similar and culturally different countries. Research indicates that firms are less likely to conduct direct investment in culturally distant markets (Davidson, 1980). The effect of culture and of cultural distance is however more wide-ranging than an MNE mode of market entry. Zeng et al (2013) argue that an MNEs learning ability are eroded by cultural differences, leading to incorrect inferences and learning. Resulting from this, the authors find evidence that a low level of experience dissimilar countries is more likely to lead to subsidiary mortality. International experience weakens this correlation (Zeng et al. 2013). The Uppsala process model developed by Johanson and Vahlne (1977) reasons on this basis the progressive expansion of firms from home countries to host countries with gradually increasing cultural differences. The OLI paradigm of Dunning (1988) however argues that greater cultural distance can motivate firms to engage in FDI in order to overcome transactional and market failures. Whereas a body of literature indicates that cultural distance is an important determinant of mode of entry choice, another body of literature produced conflicting results. Tihanyi, Griffith and Russel (2005) find in their meta-analysis no statistical evidence of a significant relationship between cultural distance and entry mode choice, international diversification and MNE performance.
Brouthers and Brouthers (2001) explain this paradox wherein past studies have found conflicting results in the relationship between cultural distance and mode of entry choice. Their research finds that investment risk moderates the relationship between cultural distance and entry mode choice – entry mode decisions appear to be influenced by cultural distance as well as target market investment risk perception.
2.2.5 Institutional distance
Kostova (1999) and Kostova and Zaheer (1999) highlight the importance of institutional distance. Compared to cultural distance, institutional distance captures the broader complexity of cross-country differences. Rooted in the institutional theory, institutional distance refers to the differences between formal institutions such as the normative, regulatory and cognitive institutions between countries (Kostova and Zaheer, 1999). When institutional distance is high, the effective transfer of strategic routines from parent firm to subsidiaries and achievement of legitimacy in new foreign markets are more challenging (Kostova, 1999; Kostova and Zaheer, 1999). A high institutional distance implies a lower familiarity with the new environment which increases the liability of foreignness and therefore the cost of doing business abroad (Henisz, 2000). Whereas institutional distance tends to reduce bilateral FDI, strong institutions almost always increased the FDI received in a country (Benassy-Quere et al. 2007)
Institutional distance influences firms’ foreign market entry modes. Non-equity modes are therefore preferred over equity modes of foreign market entry when firms’ enter countries with a large institutional distance to their home country (Brouthers and Nakos, 2004).
Building on the mentioned transaction cost theory, the resource-based view, institutional-based view and the concepts of cultural and institutional distance this paper will analyze the relationship between the market performance of subsidiaries and their market entry modes and how the concept of international experience and regional experience influences this relation. The following section elaborate on experience and intangible assets.
2.3 Intangible assets, regional and international experience
This research considers the relationship between market entry mode and subsidiary performance and the moderating effect of regional experience and international experience. Furthermore, the relationship between international experience and regional experience will be
researched. This section focusses on the expected moderators of the relationship between market entry mode and performance – international and regional experience, and on intangible assets.
Intangible assets are the foundation of a firm’s motivation to expand internationally into new markets (Dunning, 1993). Intangible assets are the foundation of the competitive advantage a company has, that could be exploited in foreign markets. Intangible assets are a motivation for firms to geographic diversification since growth into new markets does not depreciate the value of information sensitive assets in the home market (Morck and Yeung, 1998). Intangible assets are defined as public goods that can be applied in new markets with proportionally smaller incremental costs. These economies of scale and scope in the application of intangible assets is the main explanation for the positive relationship between an MNEs profitability and the extent of the geographic scope of an MNE (Delios and Beamish, 1999). Intangible assets are a means by which a MNE can strengthen its position in a host country, despite having a disadvantage due to the liability of foreignness (Hymer, 1976). The core of liability of foreignness and the disadvantage in which this results compared to local firms is experience. This disadvantage can by overcome by gaining capabilities that are applicable to the host country environment (Chang, 1995). If an MNE already has experience in a host country this results in host country experience. Experience occurs on several levels. Whereas the previous host country experience is significant factor in influencing an MNE’s success or failure in a certain market on a country level, there is also regional experience on a regional level and international experience on a global level. International experience significantly influences how an MNE makes strategic decisions. To expand business internationally, local knowledge and cultural differences should be considered in taking strategic decisions. International and regional experience are defined based on research by Kim and Aguilera (2015). This research argues that firms operate in a semi-globalized world. By expanding
across borders, firms may gain access to new markets and achieve economies of scale and scope (Porter, 1986) engage in learning opportunities and utilize low-cost factor inputs. Yet, firms must overcome the liability of foreignness by modifying their capabilities to the demands of foreign markets (Zaheer, 1995). Kim and Aguilera make the distinction between intra-regionalization expansion and interregional expansion. Related to this, this paper will define regional experience as experience within a MNE’s certain region. The Dutch beer brand Heineken, for example, has experience in the Asian region, since they have operated there for many years. International experience is a broader concept. If for example a German beer brand solely operates in Germany and the United States, it has international experience. It does however not have regional experience in the Asian region.
2.3.1 Intangible assets
Expanding across borders is influenced by the intangible assets a firm has. Intangible assets are the foundation of firm foreign expansion (Dunning, 1993). Intangible assets generate the initial advantage in a home country a company could exploit in another country. Intangible assets advantages are a means by which a firm can achieve a strong position in a local market despite having local knowledge disadvantages compared to local firms (Hymer, 1976). This MNE disadvantage can be overcome by gaining capabilities applicable to the host country – these capabilities are comprised within the concept of experience (Chang, 1995). A firms’ experience within a host country contributes to the development of new knowledge and capabilities. This development influences a firm’s strategy and subsequent performance (Barkema, Bell and Pennings. 1996). However, knowledge and capabilities tend to be country specific. Knowledge and capabilities created in one context is therefore less valuable in other countries (Barkema, Bell and Pennings. 1996).
2.3.2 Experience
The concept of general international experience is an established construct in the literature on choice of entry mode – this section distinguishes experience in the general process of how to learn and manage a foreign subsidiary and culture specific experience.
Gatignon and Anderson (1988) initially related international experience to transaction cost economics followed by multiple other authors such as Brouthers and Brouthers (2001), Hennart and Larimo (1998) and Lu (2002). Barkema, Bell and Pennings (1996) perceive international experience as an intangible organizational resource, as it provides an organization with experiential knowledge on how to organize and manage the organization in international environments. This knowledge is tied semi-permanently to the organization in the form of employees’ human capital (Carpenter, Sanders and Gregersen, 2001). In both views, international experience is perceived as an indicator of internal uncertainty. More international experience is generally related to less uncertainty. International experience is also used a predictor variable related to international entry mode within the Uppsala model of internationalization (Johanson and Vahlne, 1977; Johanson and Wiedersheim-Paul, 1975).
Experience is a relevant factor to the choice of entry mode since it has the potential to reduce the cost and increase the effectiveness of the monitoring of agents (Dow and Larimo, 2007). This reduces the risk and therefore makes the cost of a lower control mode relatively more attractive (Dow and Larimo, 2007). This makes international experience a valuable asset to an organization, since it enables organizations to anticipate and respond to foreign markets and customers (Lages, Jap and Griffith, 2008).
Experience in this respect is a diverse concept. However, the literature on incorporating international experience as a predictor variable for the choice of entry mode mainly uses overall international experience, typically measured in number of years, number of countries or percentage of assets abroad as the sole indicator (Gatignon and Anderson, 1988; Hermann and
Datta, 2006; Dow and Larimo, 2007). International experience is measured as a firm’s experience in the general process of learning how to manage foreign and distant subsidiary.
Other authors use the variable of experience to indicate prior experience with the same host country and thus take a broader approach (Arregle, Herbert and Beamish 2006; Hennart, 1991). This approach to the variable implies a different type of international experience and discusses the learning capabilities of a firm on how to effectively operate in a specific environment. This host country experience in this respect is dubbed ‘’culture-specific experience’’ by Dow and Larimo (2007) This includes learning to cope with a possibly wide array of cultural differences such as languages, religion or institutions. An MNE gains experience by being present in a foreign environment. Greater experience in one or more of these aspects could reduce the monitoring cost of and agent as experience in the process of how to manage an agent in a distant country. Most of this knowledge and experience is tacit and thus intangible and not codified, which makes it difficult and time consuming to acquire since it is mostly tied to the organization in the form of human capital (Johanson and Vahlne, 1977). When acquired, this experiential knowledge could be of value in other foreign environments – particularly in environments with similar cultural or economic conditions. Valuable knowledge may lead to an improved market performance. The next paragraph defines and expands further the concept.
2.4 Market performance
The success or failure of international expansion has long been a topic of interest in the literature of international business and strategic management literature (Delios and Beamish, 2001). Most studies have two approaches to explore the issue. The first approach evaluates financial performance. Arguing from the perspective that a firm’s motive and success in international expansion are derived from its intangible assets (Caves, 1996). Authors such as
Delios and Beamish (1999) and Hitt, Hoskisson and Kim (1997) have found a positive association between a firm’s level of multinationality and its performance. The second approach focusses on a subsidiaries longevity. Longevity is perceived as survival, and thus success. The argument is that a MNE needs to overcome its competitive disadvantages, it has compared to local competitors (Hymer, 1976).
The mode of market entry plays a significant role in this. The market entry mode choice and firm performance are related. Evidence supports the idea that entering foreign markets, regardless of mode of entry, significantly increases returns on sales and assets (Daniels and Bracker, 1989). Research has compared the financial performance between and within modes of entry. Tang and Yu’s (1990) revenue maximization model concludes that wholly owned subsidiary is the optimal strategy since it generates the highest level of financial profit and maximizes control of critical knowledge. Woodcock, Beamish and Makino (1994) however, found that direct investments perform better that joint ventures, which in turn, perform better that direct investments through acquisitions. In line with this, Lu and Beamish (2001) argue that both equity and non-equity based modes have a positive effect whilst exporting has a negative effect on financial performance. Brouthers (2002) examines both financial and non-financial performance measures. The question ‘’does the entry mode a firm uses in a foreign market affect the performance of the firm’’ is asked yet unanswered. The study of Brouthers does however provide additional support for the scholars who suggested that the explanatory power of the transaction cost models of entry mode choice could be improved by including aspects of both the institutional and the cultural context (Brouthers, 2002).
Little research is looking specifically at market entries in the Asian and the effect on market performance. Existing studies look at one individual country and at a single mode of entry, such as the research done by Isobe et al (2000) for example. This study considers Japanese joint ventures into China and describes the negative relationship between a foreign
firms’ control over a joint venture and early entry and a positive relationship between early market entry and performance (Kamal, 2011). Delios and Beamish (2001) also consider Japanese firms and their subsidiaries. They conduct an extensive research on the role of experience and intangible assets in foreign subsidiary performance. Their research finds that host country experience has a direct effect on survival but a contingent effect with profitability.
Other studies examining market entry modes and subsidiary performance were conducted in European countries. Brouthers (2002) established that firms whose market entry mode was predicted based on transaction cost model outperformed those whose mode of market entry was not predicted.
In addition to looking at the performance of an MNEs subsidiary, the research of Li (1995) consider the survival of subsidiaries as in indicator of high performance and exit of a subsidiary as an indication of low performance. This research indicates that foreign acquisitions and joint ventures have a higher exit rate than subsidiaries established through greenfield investments. This paper adapts the definition to the definition of Li (1995) and considers market survival as a positive performance and market exit as negative performance. Additionally, and more specifically, market share is taking into consideration as well. Since the available data holds information on the market share over a period of 10 years – increasing market share is perceived as positive performance, a decreasing market share is perceived as a negative market performance.
2.5 Research question and research gap
What is the impact of entry mode choice on subsidiary market performance in Asian economies? How is this relationship influenced by international and regional experience?
The research question addresses two gaps in the literature. The effect of international experience on the relationship between market entry modes and market performance is researched. This is the first research gap that this research aims to contributes to. Secondly, this research aims to add literature to the concept of regional experience in relation to international management and the interaction between international experience and regional experience. Semi-globalization and regionalism are well-established constructs in the literature of international business – regional experience is however under researched.
3. Hypothesis development
The choice an MNE has when it enters a market is of great strategic importance to an organization. Market entry modes differ in the degree of risk they present, the control and comments over resources they require and the return on investment they promise (McDonald et al., 2002). Pan and Tse (2000) distinguish two categories of market entry modes: equity and non-equity market entry. The two categories market entry are considerably different about investment, commitment, control. Equity modes (joint-ventures, wholly owned subsidiaries and acquisitions for example) of market entry require higher levels of control from an MNE’s headquarters, due to relatively large commitment in investment and the risks this holds. In turn they promise a higher return on investment than non-equity modes of market entry. Non-equity modes of market entry (contractual agreements or exports for example) require lower levels of control since they hold less risk and commitment (Pan and Tse, 2000). Hill, Hwang and Kim (1990) point out that when country risk is high, an MNC will prefer lower resource
commitment entry modes, the non-equity modes of market entry. Normative decisions marking theory suggest that the choice for a market entry mode should be made based of the trade-offs between risks and returns (Anderson and Gatignon, 1986). An MNE is expected to choose the mode of entry that offers the highest risk-adjusted return on investment (Hennart, 1989). The MNEs in this case operate in the beer market in Asia as this study uses this market for its analytical setting. There are multiple possible market entry modes.
The internationalization strategy of a firm focusses on the various entry strategies that are available. Research indicates that great importance is attached to the first international experience of firms. Chan et al. (2011) argue that first market entry shapes the future performance of a firm. The choice of entry modes has been attributed to several country-specific, firm-specific and industry-specific factors. Kumar and Subramanian (1997: 53-72) identify these factors as ‘’key factors’’ that influence the choice of managers at each level of the hierarchy. The hierarchical model of Pan and Tse (2000), as previously stated, takes into account that mangers evaluate entry modes at the same time in a multi-level model in which a set of evaluation criteria helps managers to define which entry mode suits their company needs best (Kumar and Subramanian, 1997; Pan and Tse, 2000). Relevant in this model is the resource commitment of companies which view market knowledge and experience as important elements of success in a foreign market. Country- and region-specific factors play an important role, as the selection of an entry mode is influenced by country-specific factors such as governmental intervention, property rights protection and environmental uncertainty.
Many Asian countries are characterized by frequent changes in the regulatory
framework and by direct interference from various governmental authorities. Intellectual and industrial property rights are often not well protected. Moreover, various components in society are highly dynamic, subject to change and difficult to predict (Luo, 1997). Industry specific factors such as sales growth, asset intensity and growth in number of firms have an influence
on the choice of market entry. Despite improvements, the industrial structure in EMECs remains one of the problems hampering economic growth (Roman, 1986; Luo, 2001). There is a difference in sales growth across industries due to government interference and policies which allow some sectors to be privatized whilst others remain state owned enterprises (SOEs). Higher asset intense industries are therefore subject to greater government interference in emerging economies (Rawski, 1994; Luo, 2001). The entry mode of choice is also associated with knowledge protection, global integration and the international, global or country experience a company has with this. Dynamic host country environments require local responsiveness and knowledge – if there is limited protection of intellectual property rights, this necessitates knowledge protection by firms themselves, which requires a different approach (Luo, 2001). These dynamic and uncertain characteristics that characterize many Asian markets require relatively high levels of control from an MNE’s headquarters, as control mitigates uncertainty. Equity modes require a higher level of control (versus non-equity) from an MNE’s headquarters, due to the relatively large commitment in investment and the risks this hold. Consequently, equity modes of market entry promise a higher return on investment compared to non-equity modes of market entry (Pan and Tse, 2000). Equity modes of market entry are therefore expected to have a stronger positive relationship on market performance than non-equity modes of market entry have on performance. This leads to the following hypothesis:
H1: There is a positive relationship between equity modes (vs. non-equity modes) and performance
Experience in- and familiarity with operating in foreign countries are an important competitive edge which reduces an MNEs liability of foreignness and enhances its ability to
analyze and scan the external environment it operates in (Luo and Peng, 1999). Cyert and March (1963) state that a relevant factor in the decision on market entry modes is the managerial perception in the decision making. The managerial perception may be different due to variations in experience, country specific knowledge and individual biases. International experience influences the perception of managers involved in making market entry mode decisions. Since this reduces an MNEs liability of foreignness and enhances its ability to analyze and scan the external environment it is expected that international experience moderates the relationship between entry modes and market performance. This results in the following hypothesis:
H2: International experience positively moderates the relationship between equity, non-equity entry modes and market performance
Based on the logic of Pan and Tse (2000) and the hierarchical model, region specific experience is expected to reduce the liability of foreignness as well, and stronger than international experience, due to the specificity of regional experience. Regional specific experience therefore deemed more valuable. An MNE has more knowledge and information of a foreign country when it has experience in the specific region wherein a country is based, as opposed to having the more general international experience. This knowledge and information enhances its ability to analyze and scan the external environment, thus making it more valuable. Consequently, this is expected to have a stronger effect on reducing the liability of foreignness than international experience. Region specific experience is therefore expected to result in more equity modes of market entry and rather result in more risk, more commitment and more control modes of market entry, such as equity market entry modes. This results in the following hypothesis:
H3: Regional experience positively moderates the relationship between equity, non-equity entry modes and market performance.
To test the relationship between regional experience and international experience in their moderation of the relationship between market entry and performance, both moderators will be compared with each other. It is expected that both regional experience and international experience have a positively moderating effect on the relationship between market entry and performance. However, it is expected that regional experience has a stronger positive effect on reducing the liability of foreignness that international experience, due to the more specific nature of the experience, implying that regional experience is more valuable. This results in the fourth hypothesis:
H4.: Regional experience has a stronger positively moderating effect on the relationship between market entry and performance than international experience.
This results in the following conceptual model of the research, illustrated in Figure 1.
Figure 1 – Conceptual Model
(H1) +
Equity modes of ME Market performance
(vs. non-equity modes of ME) + International experience (H2)
COMPARISON (H4)
4. Research Methods
This section provides details on the research methods that will be used in the paper. This research conducts a longitudinal quantitative research based on the Asian beer market. Based on a dataset on this topic and based on additional secondary data on this topic, this research primarily aims to identify the relationship between the mode of market and subsidiary performance and investigate the role regional and international experience on this relationship. The research is conducted based on a quantitative data analysis of secondary data. An analysis of secondary data analyses data that could include any data that is examined to answer a research question other that the question(s) for which the data was initially collected (Varangian, 2010, p.3). The analysis of secondary data may have disadvantages, such as that the data may not facilitate a research question or that the data may lack depth, these disadvantages do however not apply on this research. On the contrary, the advantages of a secondary data analysis, such as that the data may be of higher quality and that datasets often contain considerable breadth, are applicable (Varangian, 2010). This research is conducted by formulating and testing multiple hypotheses on the bases of an analysis of the available dataset on the beer market in Asia and of additional secondary data on the mode of market entry, since the modes of market entry are not present in the existing dataset. This section addresses the empirical context, data sample, research design, describes the variables involved and the data collection process.
4.1 Empirical context
The Asian beer market is a growing industry. Asia is the largest beer-producing region in the world and China is the world’s largest beer producing country. A recent report indicates that the Asian beer market is projected to grow to US$202.4bn by 2020, registering a compound annual growth rate of 7.3% from 2014-2020. This rise is mainly due a rise in disposable income
for the emerging middle classes and ‘’an adoption of Western culture’’ in China and India – which fueled the demand for premium beer. Moreover, market growth is fueled by more female beer consumers (APAC, 2015). Female beer consumers accelerated the consumption of light beers. Whereas China accounted for the highest revenue generating region, India was the most profitable market in terms of growth (APAC, 2015).
The Asian market is due to its size and growth numbers an important region for brewers. Although the Asian region is not renowned for making beer, increasing amount of beer are being drunk in Asia. Per head of the population beer consumption is considerably lower than the Western world. Whereas the Czech Republic is top of the Euromonitor list of per capita drinking nations – with 174 liters per person of legal drinking age, followed by eight European countries. Japan is the first Asian country on the list in the 41st place (Syed, 2012). Moreover, whereas developed markets are predicted to stagnate, Euromonitor forecasts strong growth in Asia. A research analyst from Standard Chartered states that ‘’beer has a clear correlation with strong economic growth – People tend to drink beer in times of growth. They drink spirits when times are good and when times are bad." (Syed, 2012).
4.2 Data sample
To examine the impact of regional and international experience on the relationship between entry modes and market performance in Asian markets, this research uses a dataset on the Asian beer market. A dataset is compiled detailing the specific beer brands in the Asian market. The data set includes 4650 records of brands active in Asia. The market consists of the combined markets of China, Hong Kong, India, Indonesia, Japan, Kazakhstan, Korea, Malaysia, Pakistan, the Philippines, Singapore, Taiwan, Uzbekistan and Vietnam. The dataset is longitudinal. To have a comprehensive set of data, 10 years of data is selected. Specifically,
the period ranging from 2006 to 2015 is used and researched. This way, panel data with the same cross-sectional data observed during 10 years is obtained.
The data sample holds information on the host country, one of the mentioned markets. The brand is named and the brands are divided into brand types, consisting of regional, global and local brands based on secondary information found in the Orbis database (2017). The company owning the brand is mentioned and the owner’s country of origin, the home country, is specified. Furthermore, the market share, the number of hectoliters produced and the market size are included.
The initial dataset is provided by the thesis supervisor. The primary source of the data is however Passport from Euromonitor International. Passport is a global market research database that provides data on industries, economies and consumers worldwide, providing help analyzing market conditions within different industries (Euromonitor International, 2017). Euromonitor International was established in 1972 as an independent organization providing unmatched detail and unbiased content for every region, country and industry. (Euromonitor International, 2017). Other sources of the data are the Orbis database and the World Bank database. The data sample consists of the initial dataset, supplemented with secondary data on market entry modes, found on the company’s websites.
4.3 Variables
This section describes the variables that are used to conduct the research. The variables are presented and their relationship with the theory is mentioned. Subsequently, the variables are presented in table 1, 2 and 3.
4.3.1 The dependent variable
The dependent variable (DV) of this research is the performance of subsidiaries. Performance is measured with two indicators of performance. Firstly, market share, the share a company has in a specific market (Robinson, 1990). Secondly, hectoliters, the quantity of sold beer in a specific market (Sellers-Rubio, 2010). The dataset consists of information over the course of ten years in the period between 2006 and 2015. Since all MNEs in the beer market are for profit firms - a positive change in market share is perceived as good performance, whereas a negative change in market share is perceived as a bad performance (Pan, Li and Tse, 2000). Similarly, an increasing number of hectoliters is perceived as a positive performance, whereas a declining number of hectoliters is perceived as a negative performance. The data underlying the dependent variable is in the original dataset, and therefore originates in Passport from Euromonitor International.
4.3.2 The independent variable
The independent variable (IV) is the mode of market entry (Pan, Li and Tse, 2000). MNEs can enter the market with export, contractual agreements, equity joint ventures or with wholly owned subsidiaries based on the hierarchical model of entry mode choices by Pan and Tse (2000). For the sake of this research, the independent variable will be dyadic – market entry modes will be either equity modes of market entry or non-equity modes of market entry. Equity modes of market entry have the value 1 in the analysis, non-equity modes or market entry the value of ‘0’. The data underlying the IV is in the original dataset, and therefore originates in Passport from Euromonitor International. This data had however to be supplemented with data from Orbis to identify whether market entry took place, and whether it was via equity, or non-equity modes of market entry.
4.4 Moderator variables
Barkema, Bell and Pennings (1996) define international experience as an intangible organizational resource, as it provides an organization with experiential knowledge on how to organize and manage the organization in international environments. Experience generates capabilities that help offset the liability of foreignness. Furthermore, experience contributes to the adaption of existing intangible assets to improve a foreign subsidiary’s host market competitiveness – and thus performance (Delios and Beamish, 2001). To look deeper into the role of experience as an intangible asset, the distinction between international experience and regional experience is made. This research hypothesizes that region-specific experience offsets the liability of foreignness more that general international experience does and relates this to modes of market entry. Moreover, the effects of international experience and regional experience will be compared, to assess their moderation in hypothesis 4.
The moderator variables (M1 and M2) in this research are international experience (M1) and regional experience (M2). This research distinguishes experience in the general process of how to learn and manage a foreign subsidiary and culture specific experience. Culture specific experience (Dow and Larimo, 2007) is therefore divided into two forms of experience – international experience and regional experience. Experience is an indicator of the ability of reducing uncertainty and reducing the liability of foreignness. More experience is related to less uncertainty since experience mitigates the liability of foreignness. More specific experience is related to stronger mitigating the liability of foreignness. Region specific experience is therefore deemed more valuable than the more generic international experience. Based on existing data in the dataset, and based on data in the Orbis database the level of experience is divided in three categories: international experience, regional experience and local experience. As there are two moderator variables, experience is divided into the three categories of experience to make use of dummy variables. In table 3 the moderator variables
are transformed into the dummies international experience, regional experience and local
experience. The dummy local experience is used as a reference; the two other dummies regional
experience and international experience are put in the model. In the tables 4 and 5 the interaction variables EntryXRegional and EntryXInternational derivate from these dummy variables.
Experience in the Asian region indicates region specific experience in a region, and thus indicates a relatively high and specific level of experience. International experience signifies the more general experience.
4.5 Control variables
In addition to the IV and the DV this research uses control variables to hold other influences constant (Saunders, Lewis & Thornhill, 2012). This study uses four control variables on different levels of analysis. The first control variable is the gross domestic product (GDP) at purchasing power parity (PPP) measured in 2017 US Dollar (Worldbank, 2017). The second control variable is the annual percentage of population growth (Worldbank, 2017) The third control variable is the OECD’s country risk classification. The fourth variable is the organizations turnover.
The GDP at PPP is a relevant variable as it accounts for the value of all final good and services produced in a country in each year, in this case the years divided by the average population of a country in the same year. The GDP per capita (PPP based) is the GDP of a country converted to so called international dollars. An international dollar has the same purchasing power over GDP as a US dollar has in the United States. The GDP at PPP indicates the purchasing power per capita of people living in a certain country, expressed in international dollars. This provides an indication of wealth, accounting for differences in currencies. A higher GDP at PPP generally makes a market more attractive for entrants since consumers have
more money to spend on consumer products – such as beer. A higher GDP would therefore positively impact the DV, market performance (Knack and Keefer, 1995).
The second control variable is the annual percentage of population growth. This variable is relevant since a countries population growth is an indicator of the attractiveness. A strong growth in population is related to a more attractive market since it indicates a larger future population. (Ehrlich and Holdren, 1971). A larger future population indicates growth potential for beer consumption and would thus also positively impact the DV.
The third control variable is a countries risk classification. The country risk classifications are meant to reflect country risk and serve as a parameter of institutional quality, accountability and regulatory quality. Country risk encompasses transfer and convertibility risk (i.e. the risk a government imposes capital or exchange controls that prevent an entity from converting local currency into foreign currency and/or transferring funds to creditors located outside the country) and cases of force majeure (e.g. war, expropriation, revolution, civil disturbance, floods, earthquakes) (OECD, 2017) (Agarwal and Ramaswami, 1992). A higher risk makes a country less attractive and would therefore be negatively related to the DV.
The fourth control variable, the organizations revenue, controls for the size of the organizations measured with their respective revenue in a year. This data was retrieved from the Orbis database (Orbis, 2017). A high turnover is positively related to the DV, based on the literature (Subramanian and Gopalakrishna, 2001).
4.6 Method of analysis
This study contains one dependent and one independent variable. The relationship between the dependent variable (market performance) and the independent variable (market entry mode) with a potential moderating influence of two moderators, (international experience and regional
experience) will be measured using a linear regression analysis This relationship can be described as:
𝑌 = 𝛽0 + 𝛽1𝑋1 + 𝛽2𝑋2+ 𝛽3𝑋3+ 𝛽4𝑋4+ 𝛽5X5 + 𝛽6𝑋6 + 𝛽7𝑋7 + 𝛽6*X6𝑋5 + 𝛽7*X7𝑋5 + 𝜀
Here Y is the dependent variable, 𝛽1X1, 𝛽2X2, 𝛽3X3 and 𝛽4X4 are the control variables. 𝛽5X5 represents the independent variable in the equations, 𝛽6X6 and 𝛽7X7 the moderator variables and 𝛽6*X6X5 and 𝛽6*X7X5 the interaction terms. The error term corrects for the variations in the value of the dependent variables that are included in the model (Sekaran and Bougie, 2009). Table 1 represents the various combinations of variables that are used to test the hypotheses. The table illustrates the approach that is used. The four control variables are firstly included with the moderator variables, followed by the independent variable and the interaction terms.
To test the hypothesized correlation between market entry modes and market performance a linear regression is used. The dependent variable, market performance consists of two continuous variables, as it measures the number of hectolitres beer produced and the market share in a specific country.
Before applying the regression, both the dependent and independent variables were positively skewed. These variables were transformed using a log function, to minimize the distribution of values deviating from the normal deviation. To determine if different performance indicators, hectolitres and market share have different outcomes, different models are created. In table 1 and 2 the regression models are presented.
There are two moderators, regional experience and international experience. The moderator is a derivate from three categories of experience available in the dataset. The dataset holds information on regional, international and local experience. Local and regional experience are perceived as region specific experience, and international experience is
