Navigating Market Re-entry Decision: The Role of Firms’ International Experience

What the paper says

Purpose – International business scholars have increasingly focused on firms’ re-entry strategies in global expansion. Building upon organizational learning theory, this study examines how firms’ past experiences influence foreign market re-entry decisions, focusing on two dimensions of experience: general international experience and country-specific experience. We further explore how the reasons for a firm’s previous exit, particularly those driven by external factors, shape the effects of these experience types on re-entry decisions. Design/Methodology – We investigated U.S. multinational enterprises listed in the Fortune 500. For international activity data were manually collected from company websites and online news articles through a multi-step process. Other data were gathered from multiple sources, including Compustat, the World Bank, the Heritage Foundation, and The Culture Factor. The proposed hypotheses were tested using a probit model. To address sample selection bias and potential endogeneity, we employed a Heckman two- stage model. Findings – Our findings reveal that firms with diverse internationalization activities, contributing to general international experience, are more likely to consider re-entering the market region from which they previously withdrew. Conversely, firms with substantial country-specific experience in the exited market exhibit a reduced inclination to re-enter. Moreover, this negative effect is stronger when the prior exit is associated with external factors. Originality/Value – This study contributes to the internationalization literature by highlighting the differing roles of prior experiences and by providing new theoretical and empirical insights into international re-entry decisions. Overall, it offers meaningful insights into the dynamic and nonlinear nature of firms’ internationalization trajectories.