The impact of market size on new market entry: a contingency approach

Sungwook Min, Namwoon Kim, Ge Zhan

    Research output: Contribution to journalArticlepeer-review

    13 Scopus citations

    Abstract

    Purpose: The purpose of this study is to offer explanations of the wide variation in the impact of market size on new market entry decisions – i.e. its positive impact lessens because of unreliable predictability of market size on post-entry profit and entry motivations other than post-entry profit. Design/methodology/approach: On the basis of the two explanations, this paper builds a contingency frame that the impact of market size on new market entry depends on entry-context-specific variables. It validates the contingency frame, empirically analyzing 219 parameter estimates of the impact of market size on market entry obtained from 41 existing empirical studies. Findings: The meta-analysis results reveal that the entry-context-specific variables used in this study – niche market entry, high-tech market entry, entry by industry incumbent firms and the year of market entry – notably moderate the impact of market size on new market entry decisions, as the research frame suggests. Research limitations/implications: This study examines the various literature and study outcomes in the areas of marketing, economics and strategy to elucidate whether and when market size is a critical driver of new market entry. In most cases, the greater the new market size, the greater is the propensity to enter the market. However, the contingency arguments stated in this paper suggest that firms may and do enter a new market even if the market size is not large at the time of entry. Originality/value: This paper enhances the understanding of the relative importance of market size in market entry decisions, which depend on various entry contexts. It clarifies the direction and magnitude of the impact of such entry contexts.

    Original languageBritish English
    Pages (from-to)2-22
    Number of pages21
    JournalEuropean Journal of Marketing
    Volume51
    Issue number1
    DOIs
    StatePublished - 2017

    Keywords

    • Market entry
    • Market size
    • Marketing strategy

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