Selecting Foreign Entry-Mode for Manufacturing SMEs : The Role of Trust in Conjunction with, Transaction Cost, Resource-Based and Eclectic Theories

Due to globalization and the fast-changing international business environment, manufacturer SMEs have difficulties finding a well-fitting entry mode for themselves. In this study, we have used resource-based, transaction cost, and eclectic theories to explain how we can create a new entry mode by grouping Manufacturer SMEs (MSME) with the moderating effect of trust. Trust is one of the main issues that organizations face when they try to internationalize. Every entry mode has advantages and disadvantages; however, regardless of the magnitude, they all have one common barrier that is very difficult to overcome: Trust. Trust and transaction cost are very much related, they have a negative significant relationship, and transaction cost also directly affects the firms' performance and the dynamic competitive advantage. It is challenging to create an entry mode that does not require a trusting relationship; however, in this study, we proposed an entry mode that MSMEs has an interweaving relationship among the group which bonds them together, where the reliability to each other strengthens the trust while keeping the extreme flexibility of the relationship with a minimal sunken cost. As an MSME, to achieve a dynamic competitive advantage, grouping strategy has an important role. Groups need to be heterogeneous; therefore, decomposing the resources and capabilities is essential for building a more substantial non-overlapping group. The interweaving process strengthens the group and gives flexibility to the group. Since the group is organically connected, trust among the group members increases. Having utilized resources and capabilities and a high trusting relationship inside the group leads to a dynamic competitive advantage