International Entry Decision for Design Firms

Abstract

International projects within the Architecture-Engineering-Construction (AEC) sector have increased both in number and in revenue during the past two decades. AEC companies seek projects outside of their home country at much higher rates than the past and the decision to enter into a new market is one of the most critical decisions AEC companies face in often volatile and competitive environments. There are few studies that investigate the important factors influencing international entry into a new market.

This dissertation developed a model investigating the influence of two company specific factors, international experience and embeddedness, and two country institutions, legal system and corruption, on the entry in a new international market using event history analysis. The focus of this study is to analyze the entry decision making for firms that are working in the Architecture and Engineering sector of the construction industry. In this dissertation these companies are classified as Design Firms. The logit regression model was developed to understand the influence of four dependent variables on the entry decision of design firms. The model controls for GDP per capita, market competition, and diversification level of companies.

The analysis was based on the longitudinal data from international design firms entering in the Central Eastern European countries since 1991 when the Soviet Union sphere of influence waned. The results of this study contribute to the body of knowledge by introducing a quantitative model that investigates the influence of company and country factors on the international entry of design firms. Practitioners can use the results of this study in their entry decision-making. The results may also help practitioners identify and collect important information and knowledge as they pursue international projects.