Market Entry Modes in A Multipolar World: Untangling the Moderating Effect of the Political Environment

We review the extant literature on market entry modes to explain the multi-levels of the political environment that can have a moderating effect on transnational corporations’ (TNC) market entry processes. Based on a systematic review of the Uppsala model, transaction cost analysis, real options, eclectic paradigm, industrial network, and institutional approaches, we show that the market entry modes literature has largely excluded some aspects of the political environment from market entry mode decisions. Consequently, we continue to struggle with the question of how TNCs can factor the political environment into their foreign market entry processes. We suggest a more detailed analysis of the political environment may enable future research to address this challenge using corporate political activity literature and institutional theory. In particular, a distinction between macro and micro levels of analysis can explain how the moderating effect of the political environment on market entry mode decisions can be untangled.