Introduction. Past Research. The International Challenge. Transaction Cost Economics(TCE). TCE as a framework for IEE. Information Asymmetry.

Adverse Selection. Moral Hazard. The Hybrid Relationship. Survival. Conclusion.

The best opportunity for growth is often overseas, even for smaller entrepreneurial firms. Small entrepreneurial organization finds more difficult potentially, when entering the international environment. Partnership includes HYBRID Entry Strategies. They are, a) Export Agent. b) Licensing. c) Joint Ventures. d) Strategic Alliances. This article focuses completely on Foreign Export Agents. Export Agent is different from all the other three strategies. Transaction Cost Economics(TCE) plays a role of ideal lens.

The paper proceeds as follows, 1) A review of past research into entrepreneurial entry strategies. 2) Why firms are motivated to expand internationally. 3) Problems that firms face in international markets, and impacts of these problems in smaller businesses. 4) Agent theory, which is closely related to TCE. 5) Implication for the entrepreneur.

Researches are basically regarding the following, 1) Success factors. 2) Motivating Factors. 3) variation in behaviour.

International expansion involves risks which includes, a) Politically instability in target market expropriation, b) Social unrest, c) fluctuating exchange rates, d) poor infrastructure, e) host government regulations, g) Differing languages, h) Norms, i) Religion, j) Legal System. MNE have Strong n/w, and entrepreneur dont have the same.

Problems in getting ally with other parties are, 1) Information Discrepancy. 2) Information Asymmetry. TCE provides a framework on how entrepreneur should structure their expansion efforts.

It focuses on the structure for transactions between two parties. Market governance structure transaction in open market Hierarchy governance structure transaction within the firm

Primary Assumptions
People are opportunistic People are boundedly rational Asset specificity affects the nature of transaction. Asset Specificity the two parties involved in the transaction each possess some attribute that makes them valuable to the other in regards to an international entry strategy.

TCE used in studying international business. Whether the MNEs should directly enter the target market as wholly owned subsidiary or pursue some other entry strategy (Joint Venture, licensing). Basic decision of choosing joint venture over FDI Firms first entry into the country. Firm need to gain control of complementary inputs. The cultural distance between the firm and target country is high

 TCE

model fails to examine in small entrepreneurial firms. Hybrid entry modes with special emphasis on foreign export agents. TCE as a framework for international expansion Entrepreneur enter foreign markets by pure market and hierarchy (FDI) continuum. Pure market entry- entrepreneurs directly contacts foreign buyers and transaction based on the prevailing market price.

 Minimizes

costs and threat of opportunities. Entrepreneur assumes that they have access to the appropriate customers in target market, which is very tenuous. Hierarchy method is more suitable for small size entrepreneurs. Small entrepreneurial firms use the hybrid entry strategies. Using a Export agent. Short term - market end Longer perspective - pure hierarchy

Proposition 1: All else equal , a hybrid economic transaction relationship between parties headquartered in different countries is established when the parties have complementary resources that have an intermediate level of specificity. Proposition 2 : All else equal, the export agents greater bargaining position shifts more transaction costs to the entrepreneur. Proposition 3 : All else equal, opportunistic behavior on the part of either party is greater in an entrepreneur / export agent relationship than a MNE / export agent relationship.

Proposition 4a :All else equal , the prevalence of misrepresentation by the entrepreneur in international hybrid relationships is greater among entrepreneurial firms going international than among established MNEs.
Proposition 4b :All else equal , the prevalence of misrepresentation by the agents in international hybrid relationships is greater when agents are dealing with entrepreneurial firms versus established MNEs.

Proposition 5a: All else equal , entrepreneurial firms entering international hybrid relationships with export agents are more inclined to minimize ex ante costs than are MNEs. Proposition 5b All else equal , export agents entering international hybrid relationships with entrepreneurs are more inclined to incur ex ante costs to protect against moral hazard than when dealing with established MNEs.

Proposition 6 The prevalence of outcome based contracts in international hybrid relationships is greater among entrepreneurial firms going international than among established MNEs Proposition 7 The prevalence of behavior based contracts in international hybrid relationships is greater among entrepreneurial firms going international than among established MNEs

Proposition 8 Since entrepreneurs and agents have different contract desires , most contracts will include bonding stipulations which reconcile a behaviororiented contract with an outcome-oriented contract.