MODES OF ENTRY SUBSTITUTION PATTERNS USED BY U.S. MANUFACTURING FIRMS IN WESTERN EUROPE

The patterns used by international firms to substitute modes of entry in foreign product markets could be incremental in the chain from exporting to investment (incremental pattern) or could be haphazard and unpredictable (non‐incremental pattern). This study develops models representing the substitution patterns then tests them using data on exporting, licensing and investments flows of U.S. manufacturing firms to Western Europe during the 1980–88 period. The findings suggest that U.S. manufacturing firms at the aggregate level used the non‐incremental pattern.