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Effect of Resource Variation and Firm Experience on Market Entry Decisions: Evidence from U.S. Telecommunication Firms' International Expansion Decisions

Johnson Graduate School of Management, Cornell University, Ithaca, New York 14851
Goizueta Business School, Emory University, Atlanta, Georgia 30322
gwd39{at}cornell.edu
bradley_killaly{at}bus.emory.edu

We consider the role that resource variation plays in affecting a firm's market entry decision. Resource variation, represented by amplitude, frequency, and unpredictability of change in market demand, has been shown to affect organizations' decisions and life chances, but there is little evidence of the effect of variation on entry decisions. We hypothesize that resource variation in a market reduces entry but that not all firms are equally deterred by variation. In particular, firm experience with entry in general and with the target market specifically moderate the overall effect of market variation on entry. Our analysis of foreign market entry by U.S. telecommunications firms from 1985 to 2000 indicates that variation does deter entry and that experience moderates this effect, though not all dimensions of variation have significant effects. These results inform our understanding of the effect of uncertainty on firms' behaviors, as well as factors impacting market entry decisions and how these decisions are affected by experience.

Key Words: market entry; environmental variation; international telecommunications