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J PROD INNOV MANAG 2015;32(2):263–278

© 2014 Product Development & Management Association


DOI: 10.1111/jpim.12223

Why Do Firms Enter a New Product Market?


A Two-Dimensional Framework for Market Entry Motivation
and Behavior*
Namwoon Kim, Sungwook Min, and Seoil Chaiy

What are the energetic forces that induce established firms to enter new product markets? While most previous research
has explained the economic profits expected from a new product market as firms’ distinctive motivation for market
entry, some recent studies also emphasize interfirm competition and benchmarking activities as another important
factor that motivates firms’ new market entry. To explain the established firms’ diverse new product market entry
behaviors, this study presents a two-dimensional scheme of entry motivation in terms of the degrees of target market
profit focus and competitor focus. The first dimension captures the economic motivation of firms’ new market entry that
ranges from focusing on the direct expected profits from the target market to considering more strategic/indirect benefit
incentives. The second dimension captures the degree of firms’ external motivation for entry affected by competitors
that ranges from independent entry decisions to fully competitor-oriented entry decisions.
Using multiple-industry survey data, the current study empirically verifies that these two entry motivation dimensions
explain a great portion of actual firms’ new product market entry behaviors and that they are independent of each other.
Subsequently, this study validates that firms’ operational size and their environmental factors like perceived techno-
logical uncertainty and competitive intensity upon new market entry affect the degrees of the two dimensions of firms’
new product market entry motivation. More specifically, large firms less emphasize target-market profits than small
firms, and when perceived technological uncertainty is high, potential market entrants become less target market profit
focused but more competitor focused. Under a highly competitive new market condition, firms focus on both target-
market profits and competitors.
Based on the analysis of new market entry motivation dimensions, the current study proposes a new typology of
established firms’ market entry behaviors. The suggested typology represents the four different types of new product
market entrants and examines specific characteristics and entry strategies for each type of potential entrants. This
entry-motivation framework should provide a deeper understanding of the backgrounds of entry behaviors and assist
firms in developing appropriate entry strategies and in advantageously responding to rival firms’ actions with regard
to entry.

Introduction Varadarajan, 1990; Kerin, Varadarajan, and Peterson,


1992), research outcomes on entry motivation (i.e., “why

W
hile studies on firms’ market entry resources/ do firms enter a new product market?”) have yet to be
capabilities are well incorporated into the theoretically assorted or conceptually integrated into
entry barriers and pioneer advantages frame- explainable dimensions. Previous studies on established
work (e.g., Day, 1986; Han, Kim, and Kim, 2001; firms’ new product market entry normally explained their
Karakaya and Stahl, 1989; Kerin, Mahajan, and entry behaviors in terms of the firms’ profit-seeking moti-
vation. For example, the economics literature on norma-
tive firm behaviors underscores the expected economic
Address correspondence to: Namwoon Kim, Department of Manage-
ment and Marketing, Faculty of Business, Hong Kong Polytechnic Univer-
return from a new market as a major motivation for market
sity, Hung Hom, Kowloon, Hong Kong. E-mail: namwoon.kim@ entry (e.g., Dixit, 1980; Geroski, 1995; Gort and Klepper,
polyu.edu.hk. Tel: 852-2766-7141. Fax: 852-2765-0611. 1982; Penrose, 1959; Spence, 1977). However, some
* The authors thank Alan Dubinsky, Ashish Sinha, Mark Uncles, Jack
Cadeaux, and the seminar participants at the University of New South other studies also argue that firms do not necessarily enter
Wales, Hong Kong Polytechnic University, and Singapore Management a new product market just for short-term, direct profit-
University for their helpful comments. The first author acknowledges the
research support of the Hong Kong Polytechnic University’s Central seeking but for indirect, long-term profit motives such as
Research Grant (G-YJ49). using existing firm resources (Helfat and Lieberman,
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2015;32(2):263–278

2002; King and Tucci, 2002; R. Mitchell, 1989; W. explain the established firms’ diverse entry behaviors.
Mitchell, 1989) or complementing/substituting for exist- This study presents a two-dimensional framework con-
ing product lines (Chen and MacMillan, 1992; Lee, sisting of two continua, one of which is the degree to
Smith, and Grimm, 2003). In all, most previous research which the entry decision is motivated by a target market
has explained firms’ new market entries in terms of one profit focus, and the other of which is the degree to which
major dimension, which is economic profit motivation, it is motivated by a competitor focus. The first dimension
although the degree to which firms seek direct versus less is supposed to capture the economic motivation of firms’
direct profits from a new product market may vary. new market entry that ranges from focusing on the direct
On the other hand, recent studies on firms’ strategic expected profits from the target market to considering
movement began to emphasize another dimension of more strategic/indirect benefit incentives. The second
new market entry based on the concept of interfirm com- dimension captures the degree of firms’ external motiva-
petition and benchmarking activities. For example, tion for entry affected by competitors that ranges from
Lieberman and Asaba (2006) argue that a direct competi- independent entry decisions to fully competitor-oriented
tor’s entry or prospective entry into a given market can entry decisions.
trigger an established firm’s entry into that market. Or a In addition to this integrative entry-motivation
firm may want to enter a new market using a newly scheme, our current study provides three other contribu-
developed technology before its competitors use the same tions to the new product market entry literature. First, this
technology to make its current product obsolete. In this study empirically shows that these two dimensions
context, an established firm may also interpret a direct explain a great portion of actual entry behaviors and that
competitor’s entry into a new market as signaling the they are independent of each other using a broad
existence of promising market benefits, and thus be multiple-industry survey. This characterization of entry-
prompted to enter that market as well (Debruyne and motivation dimensions validated by empirical analyses
Reibstein, 2005). suggests a unified theoretical framework and conceptual
Along this line, the purpose of this paper is to suggest scheme that is useful for improving our understanding of
a conceptual framework of entry motivation that can help established firms’ new product market entry behaviors.
Second, based on previous market strategy research
(e.g., Lichtenthaler, 2009; Porter, 1980), the current study
BIOGRAPHICAL SKETCHES
argues that firms’ operational size and their environmen-
Dr. Namwoon Kim is professor of marketing in the Department of tal factors like perceived technological uncertainty and
Management and Marketing at Hong Kong Polytechnic University,
Hong Kong. He received his Ph.D. from the University of Texas at competitive intensity upon new market entry affect their
Austin. His research interests include marketing and innovation strategy, new product market entry motivation. This study devel-
new product market entry strategy, channel knowledge management, ops hypotheses and empirically tests them to examine the
and international services marketing. His research has appeared in
impact of these internal (i.e., size) and external (i.e.,
Journal of Product Innovation Management, Journal of Marketing,
Management Science, International Journal of Research in Marketing, environment) factors on the firms’ new product market
Journal of the Academy of Marketing Science, Journal of Service entry motivations.
Research, Industrial Marketing Management, Journal of Management, Third, the current study proposes a new typology of
Marketing Letters, Journal of Business Research, and other journals.
established firms’ market entry behaviors based on our
Dr. Sungwook Min is professor of marketing in the Department of analysis of new market entry motivation dimensions.
Marketing at California State University, Long Beach. He received his
Ph.D. from Purdue University. His research interests include survival of
Although prior research on firms’ market entry capabili-
market pioneers and early followers, marketing strategies for new ser- ties has usually differentiated market entrants on the basis
vices, and motivations and practices of corporate social responsibility. of their industry experience (e.g., industry incumbents
His research has appeared in Journal of Marketing, Journal of Marketing versus start-ups) and accompanying resource advantage
Research, Journal of Management, and Journal of Business Research.
for entry (Bayus and Agarwal, 2007; Chandy and Tellis,
Dr. Seoil Chaiy is professor of business administration at Korea Uni- 2000; Mitchell, 1991), it has also been noted that
versity, Seoul Korea. He earned his D.B.A. from Indiana University,
Bloomington, Indiana. His research interests include innovation, corpo-
entrants’ behaviors including entry timing cannot be duly
rate social responsibility, and business/marketing strategies. He served analyzed without understanding their entry motivations
as the chair of the Korean Academic Society of Business Administration (Cooper and Schendel, 1976; Kim and Min, 2012). Thus,
and also served as the chair of the Korean Marketing Association. His
this study presents four types of new product market
publications have appeared in many academic journals including
Psychometrica, Journal of Business Research, Journal of Services Mar- entry motivations and subsequently illustrates how entry
keting, Journal of Consumer Marketing, and others. behaviors can vary across these different entry motivation
types. This entry-motivation typology should help
NEW PRODUCT–MARKET ENTRY MOTIVATION J PROD INNOV MANAG 265
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explain entry behaviors and assist firms in developing Investment theory also suggests that a firm should enter a
appropriate entry strategies and in advantageously new market when net present value (NPV) of cash flow
responding to rival firms’ actions with regard to entry. from an entry equals or exceeds zero.
However, despite this pervasive presumption of the
Established Firms’ New Product Market expected profits in entry decisions, Geroski’s (1995)
Entry Motivation survey of empirical findings reveals only a small or
insignificant impact of expected profits on new market
The existing literature on market entry has not clearly entry. These inconsistent results of expected profits as a
conceptualized entry motivation but has used the term major entry motivation may be partly because most
rather flexibly. For the purposes of this paper, the current profits variance is observed across different industries,
study adopts a concept of motivation from the organiza- whereas entry rates variance between firms is more
tional behavior discipline. Following Steers and Porter’s clearly captured within the same industry (Geroski,
(1991) review of the theories of motivation, this study 1995, p. 428). At any rate, these results imply that not a
defines the “motivation” of a firm as the energetic forces few firms in the same industry also consider noneco-
that prompt it to behave in certain ways and maintain or nomic return as a major market entry motivation (cf.
sustain the direction of its behavior. In this sense, firms’ Penrose, 1959, p. 29) and that when established firms
market entry motivations are the energetic forces that enter a new target market, direct profitability from the
explain reasons why firms enter a new market. Based on new market may not always be the most important pre-
the previous literature (e.g., Burgelman, Christensen, and dictor in explaining entries. Instead, it is noted that some
Wheelwright, 2004, pp. 4–6; Porter, 1980, pp. 7–14), this firms’ entry motivation is more likely for indirect, long-
study also uses the term “market entry by an established term profits that can contribute to overall corporate ben-
firm” to refer to the firm’s entry into a different (i.e., efits. Therefore, if pure target market/direct profit is the
new-to-the-firm) product market instead of its entry into a one end of the entry motivation continuum, then the
new geographical or international market for a product it other end could represent entry motivation for indirect,
already sells. Similarly, this study uses “new product long-term benefits.
market” and “new market” interchangeably throughout, The current study expects the continuum between these
with reference to a firm’s efforts to add another product two ends will contain different degrees of firms’ profit-
line to its business portfolio. The current study focuses on related entry motivations for new product markets. For
the entry motivations of established firms (also called example, some firms are motivated to enter a new market
industry incumbents or de alio entrants) and the related when they can enjoy entry advantages by using their
contextual factors that affect them, and leaves aside for existing resources and require relatively less additional
the moment any discussion of start-up firms’ entry moti- R&D or marketing resources (Geroski, 1995; King and
vations. Therefore, unless otherwise specified, the term Tucci, 2002; R. Mitchell, 1989; W. Mitchell, 1989; Teece,
“firm” as discussed in this paper indicates an established Pisano, and Shuen, 1997). Some others enter a new
firm. market for the purpose of introducing a new product or
product line that will improve their product portfolio. On
The Target Market Profit Focus the other hand, the possibility that a new product will be a
Motivation Continuum substitute for the firm’s existing products may decrease
entry motivation because the substitutable new product
Many studies in business assume profit motivation by a might cannibalize sales of existing product lines (Chandy
firm to understand different aspects of firm behaviors. and Tellis, 1998). Other groups of firms may enter new
Penrose (1959) notes “the growth of firms can best be product markets to learn new technologies or obtain great
explained if we can assume that investment decisions are technological spillovers (Cohen and Levinthal, 1990) or
guided by opportunities to make money” (p. 27). Simi- just to sustain the current company business based on a
larly, the economics and management literatures tend to new business model (Gambardella and McGahan, 2010;
explain new market entry as a profit-seeking firm behav- Zott and Amit, 2010). Finally, some firms even enter a
ior (e.g., Dixit, 1980; Gort and Klepper, 1982; Spence, new product market in order to attain legitimacy in con-
1977). Many game-theoretic analyses on new product formity with the social norms such as corporate social
market entry (e.g., Conner, 1995; Narasimhan and Zhang, responsibility (Hannan and Carroll, 1992). These types of
2000) assume that each specific entry decision is driven firms’ entry motivations will be located close to the end
by the entrant’s profit motivation from the new market. of “indirect, long-term benefits” and far from the end of
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Target Market Profit Focus Dimension


HIGH
(Solely Motivated by Immediate/Direct Target Market Profits)

Competitor Focus
Dimension

LOW HIGH
(Little Regard for (Fully Motivated by Competitors’
Competitors’ Actions) Observed/Anticipated Actions)

Type III Type IV

LOW
(Motivated by Indirect Profits for Overall Corporate Benefits)

Figure 1. Two Dimensions of New Product Market Entry Motivation

“solely motivated for direct profits” along the target entry motivations lie between these two extremes. The
market profit focus motivation continuum. difference between the two ends of this spectrum is
With this background, the current study suggests a analogous to Riesman, Glazer, and Denney’s (1950)
dimension called degree of target market profit focus, the distinction between other-directedness and inner-
relative degree to which entry into a new target market is directedness. The other-directed, or competitor-focused,
motivated by the desire for direct economic outcomes firm is flexibly responsive to peer groups, tuned in to the
from that market, to explain this interfirm variance. The forces shaping other firms’ actions and plans regarding
one extreme on this continuum is market entry maximally new product market entries. The inner-directed, or inde-
motivated by the desire for high expected profits from the pendent, market entrant, on the other hand, responds to a
new market; and the other extreme is entry motivated, not set of values within itself.
by the quest for immediate profits from the new market, When a market entry is independently motivated, that
but by the desire to maximize indirect, overall corporate is, when the firm has a low degree of competitor focus,
benefits. Motivation on this continuum varies indepen- the implicit assumption is that competitors’ entries into a
dently of and not to the exclusion of motivation on the specific new market will not seriously affect the results of
competitor-focused continuum, which will be addressed the focal company’s entry into the same market. Gener-
below. Figure 1 depicts the target market profit-focused ally, this type of market entry, if successful, tends to be
and competitor-focused entry motivation continua with characteristic of customer-oriented firms, which make
real data of firm entries plotted on them. independent entry decisions based on their own readings
of customer preferences and attempt to create products or
The Competitor-Focused Motivation Continuum services for which they expect a limited number of direct
competitors (Kim and Mauborgne, 1999, 2004). Also,
The second of our proposed dimensions of market entry having few competitors to benchmark, pioneers or early
motivation pertains to the degree to which the focal firm’s entrants in new product markets tend to rely on their own
market entry is affected by competing firms’ entry deci- independent entry schemes and commit themselves to
sions or behaviors. The current study refers to this as the lengthy processes of developing and commercializing
competitor-focused continuum, on which the highest new products (Cooper, 1984; Cooper and Kleinschmidt,
value indicates that a firm’s market entry decision is 1986). This new product development process prior to
maximally affected by competing firms’ observed or making a new market entry decision includes idea gen-
anticipated entries, and the lowest value indicates that the eration, concept screening, demand analysis, and
entry decision is made on the basis of the firm’s own precommercialization analysis, all of which are related to
business analysis and intentions, entirely independent of providing new customer value and securing reasonable
competitors’ observed or anticipated entries. Most firms’ market demand (Calantone and Di Benedetto, 1988;
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Harmancioglu, McNally, Calantone, and Durmusoglu, entry dimensions, which are normally considered to
2007). be the firms’ size (internal driver—Chandy and Tellis,
On the other hand, when an established firm’s new 2000; Kim and Atuahene-Gima, 2010; Porter, 1980;
product market entry is mostly motivated by its competi- Schumpeter, 1942) and their perceived environmental
tors, such market entry is considered as a competitive factors (external driver—Homburg and Pflesser, 2000;
response to peer industry incumbents’ strategic move- Lichtenthaler, 2009). Regarding environmental factors,
ment (Chen and MacMillan, 1992; MacMillan, previous research has suggested analyzing competitive
McCaffery, and van Wijk, 1985). When follow-up intensity (De Luca and Atuahene-Gima, 2007; Jaworski
entrants’ market entries are obviously driven by a preced- and Kohli, 1993) and technological uncertainty (Grewal
ing competitor’s new market entry behavior, some inno- and Tansuhaj, 2001; Han, Kim, and Srivastava, 1998;
vators’ new product market entry decisions may also be Jaworski and Kohli, 1993) in relation to new product
motivated by competitors’ observed or anticipated market entry decision. While there should be many other
actions of new product development. This is because factors that may influence the incumbent firms’ new
development periods are lengthy for many new products, product market entry motivation, these variables are most
and during this time even an innovator faces the threat of frequently discussed in the new product strategy literature
potential competitors that are racing to enter the same (Robinson, Fornell, and Sullivan, 1992; Schoenecker and
market (Lee et al., 2003). Cooper, 1998).
In summary, based on our discussions above regarding
the proposed two-dimensional new market entry motiva- Firm Size and Entry Motivation Dimensions
tion scheme, it is posited that:
Firm size reflects the firm’s resource diversity or
H1: The target market profit-focused entry motivation
knowledge-based variety that enables its multiproduct
dimension and the competitor-focused entry motivation
market entries and leads to scale and scope economies
dimension explain a large portion of different new
(Han et al., 2001; Karakaya and Stahl, 1989; Kim and
product market entry motivations.
Atuahene-Gima, 2010; Lichtenthaler, 2009). Compared
Also, as noted earlier, this study argues that estab- to small firms, large firms normally have more embedded
lished firms’ target market profit-focused entry decisions assets that already have been irrevocably invested. This
and competitor-focused entry decisions are conceptually large investment made on firm assets can be an efficient
independent of each other. For example, highly profit- and easy-to-access resource when the firm enters a new
motivated firms for a new target market may have to market (Helfat and Lieberman, 2002; R. Mitchell, 1989;
choose either to enter with their own, lengthy new W. Mitchell, 1989; Penrose, 1959; Porter, 1980). There-
product development process for differentiation or to fore, with such assets a large firm’s entry motivation for
benchmark the pioneer or other competitors for early a new product market will be closely related to utilizing
market entry (Cooper and Kleinschmidt, 1986; Riesman its excess capacity from these irrevocable assets, which
et al., 1950). Similarly, even the established firms that may not be based on direct profits from the new target
look for a new target market with a long-term vision of market but on overall corporate benefits perspective.
learning new technologies still need to consider whether Also, large firms, based on their diverse resource and
their competitors have similar vision or not (Chen and product knowledge basis, have broader product portfolios
MacMillan, 1992; MacMillan et al., 1985). Therefore, it and markets that should be taken into account when
is posited that: entering a new market (Kim and Atuahene-Gima, 2010;
Lichtenthaler, 2009). A new product might be a substitute
H2: The target market profit-focused entry motivation
for or a complement to the existing core product lines.
dimension and the competitor-focused entry motivation
dimension are independent of each other. Therefore, these multiproduct market relationships
provide more complex entry backgrounds for large firms,
rendering their profit-focused entry motivation relatively
Variables Affecting Entry Motivation less distinctive.
Dimensions Regarding the impact of size on competitor-focused
entry motivation, a positive relation may arise because of
After identifying the scheme of two basic entry motiva- a tendency that large firms often have to perform more
tion dimensions as above, the current study pays its atten- comprehensive information search than small firms do, in
tion to the variables that may affect firms’ focus on these order to deal with the diverse potential competitors that
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produce similar products in multimarket domains (Baum to pay more attention to economic benefits based on close
and Korn, 1996). Furthermore, because a large firm’s control of profits and costs (Dobni and Luffman, 2003).
new product market entry compared to that of a small This is because such basic economic performance is a
firm’s tends to provoke more sensitive reactions from prerequisite to success in a highly competitive market
potential competitors (Aboulnasr, Narasimhan, Blair, and (Slater and Narver, 1995). In this sense, meeting current
Chandy, 2008; Kim and Min, 2012), these expected customer needs with the new products of competitive
rivalry reactions or imitations from potential competitors prices and reasonable costs will lead to more financially
will cause the large firm to be more competitor focused in focused market entry motivation in a highly competitive
its new market entry decision. market.
H3: The greater a firm’s size upon entry into the new
Under a highly competitive new product market, com-
product market, (a) the lesser the target market profit- peting firms’ movements or their market-related signals
focused entry motivation and (b) the greater the constitute important sources of information with which
competitor-focused entry motivation. the focal firm makes a new strategic movement and wins
over competition (Lieberman and Asaba, 2006). At the
Technological Uncertainty and Entry same time, a competitive market condition requires the
Motivation Dimensions focal firm to be more alert to proactive as well as reactive
behaviors of its competing firms, which leads to more
Firms facing highly uncertain technological environ- learning efforts regarding the financial or technological
ments may not be able to expect stable cash flows and/or benchmarks set by the competing firms for new market
monetary profits because of the constantly required R&D entry (Cooper and Smith, 1992; MacMillan et al., 1985).
investments and related costs to adapt to dynamically In relation to this, some firms even tend to mimic actions
changing environments (McGrath, 2001). Instead, it is of competitors to respond to the benchmarks in a more
more likely that they enter the new product market with efficient way (Day and Wensley, 1988). Consequently, to
relatively less profit-focused motivation such as learning make a prompt move in this highly competitive market,
new technologies or sustaining business in the existing the focal firm’s market entry decision needs to be more
market by extending their product portfolio. competitor focused. Formally put:
On the other hand, in a technologically uncertain H5: The greater the perceived competitive intensity in the
market where new product-related information is hardly new product market, (a) the greater the target market
established, rival firms’ market entry could be a reliable profit-focused entry motivation and (b) the greater the
signal that this new product market is worth entering competitor-focused entry motivation.
(Cohen and Levinthal, 1990; Haunschild and Miner,
1997; Lee et al., 2003). This signaling effect will be more Empirical Validation
distinctive as the uncertainty in the new market increases,
making potential entrants more competitor focused. This study tests hypotheses by empirically analyzing entry
Indeed, the literature on strategic adoption suggests that motivation of established firms for a new product market
as the number of firms adopting a certain practice (e.g., with a sample of 182 new market entry cases from well-
new product market entry) grows, that specific practice established Korean manufacturing firms. Korean indus-
comes to be taken for granted by the remaining firms, and tries were selected for this study primarily because of the
they tend to follow it (Abrahamson and Rosenkopf, 1993; country’s status as a newly industrialized one in which
Debruyne and Reibstein, 2005; Zucker, 1977). Based on large established firms are rapidly globalizing and increas-
the discussions above, it is hypothesized that: ingly involved in innovation and new product introduc-
H4: The greater the perceived technological uncertainty tions of late. The dynamic rather than stable nature of the
in the new product market, (a) the lesser the target Korean economy (Han et al., 2001; Weinberg, 1997) pro-
market profit-focused entry motivation and (b) the vides a consummate opportunity to observe different entry
greater the competitor-focused entry motivation. motivations, which should help to validate the suggested
entry motivation framework suggested in this study.
Competitive Intensity and Entry
Motivation Dimensions Data Collection

In relation to the profit-focused entry motivation, a com- A survey questionnaire was developed for our entry moti-
petitively intense market condition requires management vation study. For questionnaire items, the current study
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adopted related concepts from the existing literature, minus cost) (Montoya-Weiss and Calantone, 1994). For
modified them into our study context, and incorporated overall corporate benefits entry motivation, researchers
academic professionals’ comments on these items. looked at the various aspects mentioned earlier based on
Researchers then performed two sessions of pretests 11 items following the previous literature. Table 1 pro-
using a small sample of Korean manufacturing compa- vides the descriptive statistics on target market perfor-
nies and incorporated any necessary changes based on the mance and overall corporate benefits entry motivation
respondents’ comments, ending up with a final version of items. It also shows which overall corporate benefit
the survey. motivation is perceived to be most important for entry
For a full survey, all manufacturing firms whose stocks decision-making.
are publicly traded in the stock market of South Korea
were identified, and their contact information obtained Measures and Validation of the Two Entry
through public information sources. Managers at the Motivation Dimensions
director level or higher at each manufacturing firm were
contacted by telephone. After confirming their willing- After researchers surveyed the contents of target market
ness to participate, researchers sent the questionnaires by performance and overall corporate benefits entry motiva-
mail to the respondent at each company, who carried tions as in Table 1, they asked each respondent to provide
different titles depending on the company situation, the relative importance of each of the target market per-
including strategy and planning director, marketing vice formance motivations compared to overall corporate ben-
president, general manager, and new product develop- efits motivations in a 7-point Likert-type scale (1: overall
ment section director, among others. The respondent at corporate benefits are much more important, 7: target
each company was asked to fill in the questionnaire items market profit/ROI/market share/sales is much more
regarding the various entry motivations for a specific new important). The current study adopted this concept of the
product market based on a new product that had been relative importance of two extreme entry reasons from
recently commercialized by the firm. the previous studies by Geroski (1995) and Gort and
The response rate was as high as 48.8% (number of Klepper (1982) and applied it to measure the degree of
completed questionnaires returned = 191; total number target market performance focus for our study. For the
of questionnaires sent = 391) based on four rounds of measure of competitor-focused entry motivation, this
follow-up calls and e-mails as well as some company study took a macro/comprehensive concept of competi-
visits. After removing the questionnaire results that tive entry, including proactive and reactive imitations as
included too many missing values in their data, the well as competitor intelligence utilizations (Chen and
current study ended up with 182 usable samples for our MacMillan, 1992; Haunschild and Miner, 1997;
final data set. The sample includes most large companies Lieberman and Asaba, 2006). Each respondent was also
in South Korea from various industries including asked to evaluate seven items in a 7-point Likert-type
electronics, automobiles, energy, telecommunications, scale (1: not at all, 7: very much so). After dropping an
chemicals, pharmaceuticals, cosmetics, foods, etc. The item with low factor loading, the nine items were used to
majority of new products referred to in the sample were measure two dimensions of new market entry motivation
introduced in the last two years. Researchers also asked (see Table 2 for the measures).
each respondent whether he/she considered the selected To validate the existence of two entry motivation
new product a success or not and found that 58% of the dimensions, a principal component analysis was per-
new products in the sample were considered successful formed on the 12 items in Table 2. According to the scree
by the respondents. test criterion of minimum eigenvalue of one, two factors
Researchers first surveyed the contents of target were confirmed where the eigenvalue of the first factor
market profit entry motivation and overall corporate ben- (FACTOR 1) is 2.29 and that of the second factor
efits entry motivation, respectively, using 7-point Likert- (FACTOR 2) is 1.28. The eigenvalues of the remaining
type scale items with one being “not at all” and seven factors were .064 and .041, showing a significant reduc-
“very much.” For target market performance motivation, tion in magnitude to below one. FACTOR 1 and
four different aspects of the comprehensive concept of FACTOR 2 explain 60.4% and 31.5%, respectively, of the
profit were captured, which reflects the firm’s emphasis total variance of the measure items in Table 2, which
on the expected financial outcomes of the new target validates the existence of the suggested two significant
market, such as return on investment (ROI), sales, factors that can jointly explain a great portion of the total
market share, and narrowly defined profit (i.e., revenue entry motivation variance.
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Table 1. Items of Target-Market Profit-Focused Entry Motivation and Overall Corporate-Benefits Entry Motivation
(n = 182)
Target-Market Profit-Focused Entry Motivation Mean Standard Deviation Minimum Maximum

We entered the new product market


Because of its great profit (revenue-cost) potential 5.07 1.57 1.00 7.00
Because of its great return on investment potential 4.62 1.43 1.00 7.00
Because of its great market-share potential 5.38 1.33 1.00 7.00
Because of its great sales potential 5.76 1.09 2.00 7.00

Standard Most Important Overall


Overall Corporate Benefits Entry Motivation Mean Deviation Corporate Benefits Motivation

We entered the new product market


1. To maximize our existing resources and capabilities 5.10 1.37 12% (n = 22)
2. Because we can use our owned technology 5.06 1.52 3% (n = 6)
3. Because the new-market products and services may substitute for the existing core 4.72 1.78 20% (n = 37)
products and services of the current market
4. Because the new-market products and services may complement our existing core 4.95 1.64 11% (n = 20)
products and services
5. To have an opportunity to learn a new product market 4.28 1.64 5% (n = 9)
6. Because of new technology learning from participating in the new market 4.18 1.70 3% (n= 6)
7. To expand the firm’s product–market boundary 4.96 1.42 9% (n = 16)
8. Because the entry may help us survive in our core existing market 5.43 1.21 21% (n = 38)
9. Because the entry helped improve the image of the firm 5.12 1.34 4% (n = 8)
10. Because the participation in the new market was socially desirable 4.66 1.41 1% (n = 1)
11. Because of other motivation (Specifya_________) N.A. N.A. 10% (n = 19)
a
Other motivations include “because our customers asked for new market entry, to differentiate from the existing product markets, to pioneer a new product
market, to lead in new technologies and preempt the market, etc.”

More importantly, the measure items showed a clearly factor loading on FACTOR 1 (.08, .05, .17). The six items
distinctive pattern of loading between the two factors. for competitor focused had high factor loading on
The three items for target market profit focus had high FACTOR 1 (.55, .61, .67, .43, .75, .75) but had low factor
factor loading on FACTOR 2 (.77, .75, .51) and had low loading on FACTOR 2 (−.06, −.03, −.17, .07, −.05, −.02).

Table 2. Confirmatory Factor Analysis of Target-Market Profit-Focused and Competitor-Focused Entry Motivation
Measures
SFLa t-Value (p-Level)

Target-Market Profit-Focused Entry Motivation Dimension (α = .75b)


1. Importance of target-market profit (revenue minus cost) vis-à-vis the overall corporate benefits .86 —
2. Importance of target-market ROI vis-à-vis the overall corporate benefits .77 6.48 (p < .01)
3. Importance of target-market sales vis-à-vis the overall corporate benefits .51 5.50 (p < .01)
Competitor-Focused Entry Motivation Dimension (α = .84)
1. Rival firms’ new-market entry or possibility of entry was extensively evaluated before our own began .53 —
2. We built the marketing strategy of the new product considering competition .83 6.90 (p < .01)
3. We entered the new market mainly because other firms in our industry had entered or signaled entry .54 5.39 (p < .01)
to the new market
4. Competitors’ new-market entry was underscored .73 6.51 (p < .01)
5. We planned new-product development considering competition .79 6.72 (p < .01)
6. We decided on the timing of new-product launch considering competitors .72 6.37 (p < .01)
7. Most of new product ideas came from other firms’ productsc
Model fit indexes: χ2 = 56.25 (df = 26), GFI = .94, CFI = .95, RMSEA = .06
a
Standardized factor loading from confirmatory factor analysis.
b
Cronbach’s alpha.
c
Item dropped.
CFI, comparative fit index; df, degrees of freedom; GFI, goodness-of-fit index; RMSEA, root mean square error of approximation; SFL, standardized factor
loading.
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These results provide supporting evidence for H1 (the independence between the two latent entry motivation
existence of two entry motivation dimensions and the factors, the intercorrelation between the two was esti-
great explanatory power of the two dimensions). Specifi- mated based on CFA. The converged estimation
cally, based on the factor-loading pattern on each of the results showed that the correlation between the two
measure items, it was empirically demonstrated that latent entry motivation dimensions is ρ = −.00915
FACTOR 1 represents the competitor-focused dimension (p > .1). These results confirm the statistical indepen-
and FACTOR 2 the target market profit-focused dence between the target market profit-focused dimen-
dimension. sion and the competitor-focused dimension, supporting
To confirm the unidimensionality and convergent H2.
validity and reliability of the measurement instruments of The location of each firm entry on the two entry moti-
these two entry motivation dimensions, a confirmatory vation dimensions was measured based on the estimated
factor analysis (CFA) was performed, following the pro- value of the corresponding latent entry motivation factors
cedure recommended by Anderson and Gerbing (1988). (FACTOR 1 is the competitor-focused dimension, and
The CFA results in Table 2 provide a reasonable fit of FACTOR 2 is the target market profit-focused dimen-
measurement model to data (χ2[26] = 56.25, p < .01; sion). As five entries had at least one missing value for the
goodness-of-fit index [GFI] = .94; comparative fit index entry measurement items of Table 2, the current study
[CFI] = .95; root mean square error of approximation ended up with 177 (=182−5) actual market entry cases for
[RMSEA] = .06), demonstrating the unidimensionality of locating relative values on the two-latent factor space.
each entry motivation dimension (Anderson and Gerbing, The 177 actual entry locations were plotted based on
1988; Browne and Cudeck, 1993). The significant factor these two entry dimensions as provided in Figure 1. The
loadings (p < .01) for all of the measure items in Table 2 plot shows that entries are widely spread along the
provide evidence of convergent validity of the measure competitor-focused dimension (FACTOR 1; value vari-
(Bagozzi, Yi, and Phillips, 1991). Again, all measurement ance = .81) as well as along the target market profit-
items except three (one from the target market profit- focused dimension (FACTOR 2; value variance = .73),
focused and two from the competitor-focused entry implying that these two dimensions are contributive to
dimension) highly loaded (> .5) onto the corresponding classifying new product market entry behaviors reason-
subject dimensions. ably well.
In addition, discriminant validity was tested based on
the average variance extracted (AVE), following Fornell Empirical Analysis of the Variables Affecting Two
and Larcker (1981). The AVE value for the target Entry Motivation Dimensions
market profit-focused entry dimension and that for the
competitor-focused entry dimension are .53 and .50, For the two multi-item constructs—perceived technologi-
respectively, which are larger than the squared correlation cal uncertainty and perceived competitive intensity—that
between these two dimensions (r2 = .0001 based on the affect two entry motivation dimensions, the measurement
averaged items values; .000084 based on the latent scales developed by the existing literature were adapted
factor correlation), showing that discriminant validity is to our study context (Table 3). Validity and reliability
obtained. In all, these results suggest construct validity tests for these multi-item constructs were performed fol-
and unidimensionality for the measurement instruments lowing Anderson and Gerbing (1988), as previously done
of the two entry motivation dimensions. The Cronbach’s for the two entry motivation dimensions. The Cronbach’s
alpha values for the two entry dimensions were .75 and alpha values for the two constructs were .84 and .70,
.84, respectively, showing the reliability of the measure- respectively, showing a reliability of the measurement
ment items for these two dimensions. items.
To test H2 (independence of the two entry motivation Again, confirmatory measurement models were esti-
dimensions), an exploratory factor analysis was per- mated. The model fit results are χ2[62] = 129.45, p < .01;
formed using the PROMAX rotation method, which GFI = .90; CFI = .91; RMSEA = .07, demonstrating a
allows diverse rotation angles to test the independence/ reasonable fit to data according to Anderson and Gerbing
dependence between the latent axes of rotation (Hair, (1988) and Browne and Cudeck (1993), and thereby the
Black, Babin, Anderson, and Tatham, 2006). An initial unidimensionality of each of the three constructs. The
estimation result on the correlation between the two factor loadings for all of the measure items in Table 3 are
extracted reference axes was ρ = −.03, which shows a shown to be significant at p < .01, providing a convergent
very low intercorrelation. For a more stringent test of validity of the measure.
272 J PROD INNOV MANAG N. KIM ET AL.
2015;32(2):263–278

Table 3. Measurement Scales of the Variables that in Table 4, showing that discriminant validity is obtained.
Affect Two Entry Motivation Dimensions These results show that the antecedent variables have
Technological Uncertainty (New Product Market)
construct validity and unidimensionality for their mea-
sures. The correlations among the two entry motivation
(De Luca and Atuahene-Gima, 2007; Jaworski and Kohli, 1993; dimensions—target market profit focused and competitor
α = .84a)
In the new product market:
focused—and the three antecedent variables hypoth-
1. It is very difficult to forecast technology developments. (.71b) esized to affect the two motivation dimensions (firm size,
2. Technology environment is highly uncertain. (.79; t = 8.95c) technological uncertainty, and competitive intensity) are
3. Technological developments are highly unpredictable. (.80; presented in Table 4. Firm size was measured by the
t = 9.02) number of employees of the core business as of the year
4. Technologically, this product market is a very complex
environment. (.68; t = 7.95)
2008. This study also included another individual firm
characteristic—firm age (cf. Henderson, 1999) as mea-
Competitive intensity (new product market) sured by the duration that the core business has been
(Grewal and Tansuhaj, 2001; Han et al., 1998; Jaworski and Kohli, active in the current market; and the product life-cycle
1993; α = .70) stages of the entered market as control variables.
In the new product market: Firm age and size data are collected from publicly
1. Competition in this product market is cutthroat. (.54)
reported sources and then used as the base for a natural
2. There are many promotion wars in this product market. (.66;
t = 5.70 logarithm because of a possible decreasing marginal
3. One hears of a new competitive move almost every day. (.84; effect for some large extreme values. For the measure of
t = 5.77) product life cycle, the current study examines whether the
4. Price competition is a hallmark of this product market. (.45; new product market at the time of entry was in the intro-
t = 4.37)
ductory, growth, mature, or decline stage as in Table 3.
Product life cycle Three dummy variables are used for the impact of
(Anderson and Zeithaml, 1984; Day, 1981)
product life cycle with the decline stage as the base.
The stage of product life cycle when the product was introduced: To examine the impact of these antecedent variables
_____(1) introduction, _____(2)growth, ____(3) mature, _____(4) on the two entry motivation dimensions, regression
decline analyses were performed and the estimation results were
a
Cronbach’s alpha. provided in Table 5. Based on the regression results in
b
Standardized factor loading from confirmatory factor analysis. Table 5, discussion of the impact of each of the anteced-
c
t-value.
ent variables follows.
First, our empirical test results show that large firms
The AVE values for the technological uncertainty and (in terms of the number of employees) emphasize target
competitive intensity constructs are .56 and .41, respec- market profit less than do small firms when they enter a
tively, which are larger than the squared correlation new product market (β = −.11, p < .05). However, empiri-
between each of these constructs and the other constructs cal results show that the impact of firm size on the degree

Table 4. Descriptive Statistics and Correlations (n = 182)


1 2 3 4 5 6 7 8 9 10
a
1. Target market profit focus .73
2. Competitor focus .01 .71
3. Ln age −.16** −.09 —
4. Ln number of employees −.21** .06 .18** —
5. Technological uncertainty −.12** .31*** −.18** .07 .75
6. Competitive intensity .08 .35*** −.11 .08 .21*** .64
7. Introduction stage .03 −.06 .03 −.09 .09 −.17** —
8. Growth stage −.03 .23*** −.05 −.07 .08 .01 −.44*** —
9. Mature stage −.05 −.08 .08 .07 −.10 .20*** −.44*** −.38*** —
10. Decline stage .05 −.14* .02 .09 −.19*** −.09 −.22*** −.20*** −.20*** —
Mean standard deviation 3.79 4.55 3.28 6.66 3.76 4.64 .33 .27 .27 .09
1.10 1.10 .86 1.86 1.22 1.18 .47 .45 .45 .29
a
Diagonal elements in bold represent the square roots of average variance extracted (SRAVE) for multi-item constructs.
*** p < .01; ** p < .05; * p < .10.
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Table 5. Regression Analysis Results for Target-Market technologies so that they might be more motivated to
Profit-Focused and Competitor-Focused Entry enter a new market to learn new technologies. Also, older
Motivations (n = 182) firms may enter a new product market to learn about new
Target-Market business and related market opportunities. As their busi-
Profit-Focused Competitor-Focused nesses are normally in old industries, they enter a new
Entry Motivation Entry Motivation product market not for short-term profit gains but for the
Intercept 5.25*** 2.01*** long-term benefits of the firm based on new businesses
(8.61) (3.44) with different products. Furthermore, compared to
Ln age −.17* .04 younger firms, older firms have more different types of
(−1.66) (.40) interest groups within the firm that have diverse nonprofit
Ln number of employees −.11** .01
entry motivations, which can affect the firm’s new
(−2.46) (.21)
Technological uncertainty −.14* .24*** product market entry decisions.
(−1.96) (3.54)
Competitive intensity .12* .31*** Product life cycle. From Table 5, product life cycle is
(1.66) (4.31) related to competitor-focused entry motivation but not to
PLC: Introduction stage −.14 .08 target market profit-focused entry motivation. The
(-.48) (.30)
PLC: Growth stage −.28 .50*
dummy variable coefficient estimated for the impact of
(−.95) (1.78) Growth stage on the competitor-focused entry motivation
PLC: Mature stage −.32 −.12 is marginally significant (β = .50, p < .10). This indicates
(−1.09) (−.42) that competitor-focused entry is greater in the growth
R square .10 .24 stage than in the baseline stage, i.e., the decline stage. The
*** p < .01; ** p < .05; * p < .1. growth stage normally features a dramatic increase in
PLC, product life cycle. demand and competitive entries as well as sizable market
exits of incapable firms (i.e., shake outs) (Day, 1986;
of competitor-focused entry motivation is not significant Kerin et al., 1990). Our empirical results show that in this
(β = .01, NS) although the direction of the impact is con- turbulent period of time, potential market entrants are
sistent with our hypothesis. These results support H3a but likely to rely on competing firms’ market entries for their
not H3b. own market entry decisions, which is consistent with the
Second, Table 5 demonstrates that high perceived competitor focus under turbulent market conditions, such
technological uncertainty in a new product market relates as technological uncertainty and competitive intensity,
to low target market profit-focused (β = −.14, p < .10) discussed above. It is noted that firms entering in the
and high competitor-focused (β = .24, p < .01) entry introduction stage of a new product market tend to be
motivations for potential entrants. Thus, H4a is margin- motivated to become market leaders (Kerin et al., 1992).
ally supported and H4b is fully supported. Third, it is Although they also consider other firms’ possible future
empirically shown that firms will have both greater target entries, the entrants in this introduction stage could be
market profit-focused and competitor-focused entry moti- rather independent decision-makers. Markets at the matu-
vations when perceived competitive intensity is high for rity or decline stages are relatively more predictable than
the new product market (β = .12, p < .10; β = .31, p < .01, those at the introduction or growth stages of a product life
respectively). Thus, H5a is marginally supported, and cycle, which makes the importance of other firms’ entry
H5b is fully supported. behaviors as a source of information relatively less
distinctive.
Empirical Implications of Control Variables
Discussion: Four Types of Market
Age of firm. The empirical results indicate that older Entry Behaviors
firms tend to have less profit-focused entry motivation
than younger firms when they enter a new product market The two dimensions of market entry motivation lead to
(β = −.17, p < .10). Why then are older firms less moti- four types of entry behaviors as in Figure 1: Type I (high
vated by profit purposes than are younger firms? The target market profit focused and low competitor focused),
literature is silent on this matter, but the reasons may be Type II (high target market profit focused and high com-
found in the general characteristics of older firms. Com- petitor focused), Type III (low target market profit
pared to younger firms, older firms tend to have outdated focused and low competitor focused), and Type IV (low
274 J PROD INNOV MANAG N. KIM ET AL.
2015;32(2):263–278

target market profit focused and high competitor often conduct extensive market tests before entering a
focused). When this study categorizes new market entries market.
based on the middle point of the latent factor value (i.e., The timing of a Type I entry mainly depends on the
zero), it notes that 43 firms out of 177 (24.3%) are clas- firm’s product development schedule since the entry
sified as Type I, 46 (26%) as Type II, 43 (24.3%) as Type motivation is relatively independent of other firms’ deci-
III, and 45 (25.4%) as Type IV, representing a relatively sions. The typical product development process starts
balanced distribution among the four different entry with idea generation and proceeds to the idea evaluation
types. While conventional wisdom presumed indepen- and screening processes (Cooper and Kleinschmidt,
dent and profit-focused entry motivations would lead to a 1986). Less peer or competitor focused than other types
major pattern of firms’ entry behaviors (Gort and of entries, most, if not all, Type I entries tend to empha-
Klepper, 1982; Penrose, 1959), this study shows that new size niche market advantages and the fulfillment of unmet
product market entries are almost equally diversified in product market demand (Lieberman and Montgomery,
terms of the two entry motivation dimensions. Based on 1988).
ANOVA, the values of target market profit-focused and A Type II entry occurs when an established firm is
competitor-focused entry dimensions are significantly motivated by expectations of high profits from the new
different among the four categories of new product market but differs from a Type I entry in that, in terms of
market entrants (F = 106.47, p < .01 for target market the competitor-focused dimension, the decision is primar-
profit focused; F = 115.08, p < .01 for competitor ily driven by competing (or peer) firms’ entry behaviors
focused). Also, from the Tukey Grouping test, Type I and in that market. Type II firms tend to have a relatively
Type II groups have greater average target market profit- limited size of operations but perceive high competitive
focused values than Type III and Type IV groups, and intensity from the new market. Entrants exhibiting Type
Type II and Type IV groups have greater average II behavior rely on formal and informal organizational
competitor-focused value than Type I and Type III information sources, both internal and external, for intel-
groups. These results are consistent with both the con- ligence relating to new products that competitors
ceptual and empirical typology provided in Figure 1, develop, test, and commercialize. Such entrants closely
adding to the validity of our two-dimensional scheme of monitor industry competitors’ new product programs and
new product market entrants. strategies, and scrutinize customer acceptance and the
Based on strong empirical support of the two- financial performances of commercialized new products.
dimensional framework for entry motivation, the current Therefore, they often skip idea generation and go directly
study now discusses firms’ motivation and the related to business analysis of the new market if direct competi-
four types of new product market entry behaviors in terms tors have already generated a new product idea and ini-
of the approaches to new product development. tiated the new product development process. They
A Type I entry occurs when an established firm monitor the market responses to their competitor or com-
enters a new market mainly because of high expected petitors’ entries, examine the profitability of the new
financial outcomes from the market and the firm’s own product market, and then enter the market if the expected
assessment of its internal and external situations. Type I profit level is higher than their target ROIs.
entry is usually found when firms perceive less techno- In this sense, firms exhibiting Type II entry behaviors
logical uncertainty and have relatively limited size of do not usually pursue first-mover advantages. Instead,
operations upon new market entry. This type of they react to their competitors’ market entries or market
behavior corresponds to a conventional view of firm entry signals and consequently are often early followers,
entry that emphasizes expected profits from the market although a few do become market pioneers. Porter’s
over all other incentives (Cohen and Levinthal, 1990; (1980) competitive strategy based on product differentia-
Geroski, 1995; Gort and Klepper, 1982). Firms that tion and cost advantage also can be seen as representative
make Type I entry decisions will opt for entry as long as of the logic of Type II competitive entries. When entering
the expected financial reward from the new market is after a turbulent period of early market development,
greater than their target ROIs. In order to estimate the firms engaging in Type II entry often choose a differen-
expected profit and ensure that it will reach the desired tiation or cost leadership strategy as a profitable way to
level, entrants often develop carefully calculated entry compete against potential competitors in new product
plans, comprehensively forecasting demand and esti- markets (Bryce and Dyer, 2007).
mating costs of production and commercialization over A Type III entry occurs when an established firm is
at least the product introduction stage. Thus, they motivated to enter a new market mainly for overall cor-
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porate benefits rather than direct profits from the new and Hauser, 1996). For these reasons, such entries are
market, and when the entry decision is most driven by the more focused on overall corporate benefits than on target
entrant’s own market assessment. This entry type is more market profits. Thus, entry theories based on maximiza-
likely observed for the firms having a larger size and tion of resource use (e.g., King and Tucci, 2002; R.
operating under relatively less competitive business envi- Mitchell, 1989; W. Mitchell, 1989), which is a way of
ronments. Firms engaging in Type III entry behavior are increasing overall corporate benefits, are usually appli-
willing to enter a new product market as long as they cable to both path-deepening and path-breaking Type III
believe the entry will help increase the firm’s value, and entries since these entries are focused on precisely such
they tend to engage in market screening activities in order benefits.
to identify desirable new markets, entry into which will A Type IV entry occurs when high profits from the new
improve their knowledge base as well as overall firm market are not a major motivation, and the entry decision
status. In this connection, Karim and Mitchell (2000) at the same time heavily depends on other established
argue that established firms exhibit two kinds of long- firms’ entry behaviors. A reasonably extensive size of
term value-oriented market entries, path-deepening operations can be helpful for this type of firms, which
entries and path-breaking ones. perceive high technological uncertainty. The technologi-
Path-deepening entries are those that result when a cal innovation literature shows that even established firms
firm’s investment policies encourage entry into new are continuously threatened by waves of radical innova-
product markets in which the company has already accu- tions, with which it is rather difficult for established firms
mulated a certain level of knowledge. Chang (1996) dem- to cope (Christensen, 1997; Cooper and Schendel, 1976;
onstrates that path-deepening entry is a widely accepted Cooper and Smith, 1992). When this is the case, a firm
market-diversification method based on the firm’s current enters a new product market not because it expects great
resources, including owned technologies and acquired profits from the market, but because it wants to avoid being
market information. Helfat (1994) and Teece et al. (1997) replaced by the competitors that produce the new product
also argue that a firm’s current positional advantage in question and to remain competitive in the changing
defines its future path, reflecting the importance of the market context (Mitchell, 1991). In a conservative per-
path-deepening rationale for the product market entry spective, Type VI entry behavior may also be interpreted
decision. In this sense, Type III market entry behavior as a firm’s effort to keep pace with the competitors of
that is path deepening may be considered defensive similar industries in terms of updating technological
because it tends to place more emphasis on extension into development and exploring new business opportunities
existing markets than on the creation of new markets. (Lee et al., 2003). Such a firm’s motivation to enter will
On the other hand, some Type III entries are made by therefore increase as more firms—whether start-ups
firms that substantially expand their businesses in order to or established firms in existing markets—enter the
introduce new product categories when such expansion new product market (Debruyne and Reibstein, 2005;
offers reasonable opportunities for “path-breaking” inno- Sinapuelas and Robinson, 2009). Type IV entry decisions
vation rather than diversification into existing markets tend to be made quickly on the basis of rather optimistic
(Karim and Mitchell, 2000). Since they do not place expectations about demand in the new product market.
much emphasis on the immediate profits to be made in a They are not preceded by reasonable efforts to forecast
new product market, they may regard new market entry as demand and evaluate market entry costs because other
a type of long-term investment. Therefore, path-breaking firms are relied upon as sources for most such information.
entrants are often viewed as visionary leaders.
In a path-breaking Type III entry decision, less weight Conclusion
is given to new product sales forecasts and the costs of
serving markets for innovative products than in Type I or The existing literature clearly demonstrates the impact of
Type II decisions. Often becoming pioneers of radically interfirm differences in terms of firms’ market entry/
new products that must utilize new, yet-to-be-established barrier-building capabilities such as industry incumbency
technologies, firms exhibiting this kind of entry behavior (e.g., King and Tucci, 2002; R. Mitchell, 1989; W. Mitch-
find profit estimation quite an uncertain proposition ell, 1989) and order of entry (e.g., Robinson et al., 1992)
because the sales diffusion of a radically new product but has not explored firm-dependent entry motivation. In
requires a great deal of learning effort and time from an effort to probe entry behavior patterns, the current
customers, and hence market demand may not really take study raised the question, “Why do firms enter a new
off for a considerable period of time (Urban, Weinberg, product market?” which has led us to a typology of
276 J PROD INNOV MANAG N. KIM ET AL.
2015;32(2):263–278

market entry motivations encompassing four different technological uncertainty and competitive intensity as
types of product market entry behaviors, distinguished by driving forces for entry motivation, the impact of the
their relative levels of target market profit focus and com- newness (or radicality) of the new product market itself is
petitor focus. This categorization scheme has the poten- not clearly examined. A new study based on a contingency
tial to help new product managers build appropriate new model approach dealing with varying combinations of
product line extension strategies based on their firms’ entry motivation and product market newness will provide
current objectives (e.g., do we need to build a long-term more customized managerial implications for different
brand reputation from this new product line?) and industries (e.g., radical innovation-based industries versus
decision-making structures (e.g., does our chief executive incremental innovation-based industries).
officer usually consult the market research team regard-
ing competitors’ new product line introductions?). More-
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