Entry Mode of Korean Construction SMEs in The African Market:

Abstract

Entry mode selection is a strategic decision of the firm, which has been a core topic in International Business Studies and Strategic Management Studies for the last decades. However, among other aspects of this vast research topic, the entry mode selection of construction industry companies has been less explored. The recent growing partnership between Korea and Africa is giving the opportunity to focus on Construction SMEs’ entry mode in emerging countries. This paper aims to address the entry mode selection of Korean Construction SMEs in the Africa Market under a combination of institutional theory and real option approach. Another purpose is to catch the influence of host country factors on the entry process and the entry adjustment. Entry mode cases were collected through interviews with construction SMEs’ leadership and analysis of extension archival. We proceeded to a comparative analysis of entry pattern into three countries: Algeria, Nigeria and Morocco. Interviewees were asked how they decided to enter African market, the entry mode selected and how the host country’s environment influenced the entry decision assessment. The data made it possible to build a comparative entry matrix per country. Some unique entry processes and combinations were also observable. Entry in a foreign market requires some resources that are not affordable for SMEs. To avoid the uncertainty related to entry into African market (financial, cultural, and regulatory), SMEs choose a contractual and mobile entry through sub-contractor agreement with other Korean MNCs. Therefore Sub-contractor stage which is not by definition considered as an entry represents for SMEs a full stage in the entry process and allows a market study and a local networking construction. Further active entry depends on host country safety and marketability. The higher the host country security level and marketability, the more SMEs are willing to enter on a mobile and permanent base. Therefore, Morocco with a more safety environment and a good marketability has more permanent and mobile entries from construction SMEs. Companies seem to apply a real option logic for the first entry selection in other to acquire a learning or develop expand, though institutional theory explains better the risk aversion of specialty contractors in overseas markets. Thus country factors, company and project factors affect the final or transitional entry decision of the firm. This study provides insights about the entry mode of construction companies from an international and strategic management perspective. Implications of the entry decision from a construction SME’s perspective are bringing new developments about the influence of host country factors. Practically, companies considering a move towards African market have some insights about country specificities and related strategies. Implications also can help politics to apply incentive strategies for SMEs interested in African Market.