Foreign market re-entry strategies : the role of cognitive biases in decision-making

Exit is not an irreversible, “win or lose” event in the lifecycle of a multinational enterprise (MNE). Some firms decide to re-enter exited markets. Yet, our knowledge of MNEs’ re-entry strategies remains limited, and where re-entry is discussed, perspectives based predominantly on the rational exploitation of resources and experiential learning prove insufficient. This chapter proposes a behavioral lens for understanding complex decisions such as re-entry. Decisions such as re-entry depend on the manner in which the past experience (in this case, the exit) is framed and perceived by decision makers. Given the time-out period between exit and re-entry, re-entry choices may be influenced by the subjective and often outdated experiences of managers. International business (IB) strategy theory has largely ignored the influence of managerial own biases and memory in shaping managers’ perceptions of events. The chapter emphasizes the importance of different types of cognitive biases as theoretical concepts that complement rationality-based assumptions about the dynamic IB strategies of MNEs.