Once Bitten, Not Necessarily Shy? Organisational Learning Prior Experience Effects on Foreign Market Re-entry Commitment Decisions

This study examines foreign market re-entry mode commitment, namely the changes in the modes of operation undertaken by multinational enterprises (MNEs) as they return to foreign markets from which they had previously exited. From an analysis of 1,020 re-entry events between 1980 and 2016, we find that operation mode prior to exit is a strong predictor of subsequent re-entry mode. Contrary to the predictions of learning theory, no support is found for the effect of host experience accumulated during the initial market endeavour on re-entry commitment. The results reveal that when favourable host institutional changes occur during the time-out period re-entrants escalate commitment but do not necessarily de-escalate commitment following unfavourable institutional change. Market exit motives significantly impact the decision to re-enter via a different commitment mode. Re-entrants do not replicate unsuccessful commitment strategies and tend not to return to previously existed markets via the same commitment if they had previously underperformed in the market.

Keywords
foreign market exit and re-entry, organisational learning, institutional change, commitment
escalation, commitment de-escalation, operation modes

JEL Classifications
M1