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Abstract(s)
Grasping all mechanisms of entry mode decisions remains a puzzle to strategists. Although well researched in established industries and cross-border settings, literature exploring nascent industry expansion remains scarce. Entering such emerging industries bears particular challenges to managers as they juggle between exponential growth and enormous uncertainty in their governance choice formulation. While gaining great importance, literature fails to provide clear evidence on potential implications on entry mode decisions.
This study addresses this gap. Precisely, it investigates how firms’ entry mode choices (among acquisitions and non-equity alliances) differ between nascent and non-nascent industries. To test this phenomenon, this study chooses the eSports business as empirical context, fulfilling numerous characteristics of emerging industries, and contrasts it to traditional sports as established counterpart. Combining two leading deal databases with manual data collection, this paper builds a dataset of 520 eSports and sports deals between 2015 and 2020.
By running logistic regression, it becomes evident that entering nascent industries has a significant negative effect on acquisition probability. Vice versa, firms choose non-equity alliances more frequently in such novel contexts. The negative effect increases further when moderating the relationship with acquirer-target relatedness and diversification level.
The results provide rich evidence that entry mode mechanisms differ in the presence of nascent industries, incrementing the likelihood of choosing non-equity alliances as governance. Among others, this paper identifies increased uncertainty and acquirers’ limited need for nascent resources and capabilities as potential reasons. Overall, this paper calls for additional research on nascent industries from a strategy perspective.
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Keywords
Nascent industries Entry modes eSports Corporate diversification Non-equity alliances Acquisitions Strategy