Reactive contractual entry modes are usually responses to attempts by the government of the host

country either to restrict the volume of imports from a particular country or to slow down the
growth of its own exports. If a country feels that its own industry needs some type of protection to
develop (the "infant industry" argument, usually used by the developing countries) or to revitalize
itself (an argument used by the U.S. car manufacturers ), it will attempt to limit imports either by
increasing the cost of selling the foreign product in its market (tariff barriers) or by imposing or
negotiating voluntary quantitative restrictions on the absolute amount of imports ( quotas or other
nontariff barriers ). When this situation arises (or before it arises, if management is being proactive),
a firm, in order not to lose the revenue it has been deriving from the exports, will enter into one or a
combination of the nine contractual modes listed in Figure 2.2. 2.4.3 PHASE C: INVESTMENT ENTRY
MODES Available under Creative Commons-ShareAlike 4.0 International License (http://
creativecommons.org/licenses/by-sa/4.0/). Looking at an organization as an open system, one can
easily see some of the reasons why a firm might decide to go international by investing in the stock
of a company in another country, by buying up that company, or even by building a brand new
company from scratch (the so-called Greenfield approach). The international market is part of a
domestic company's external business environment. Although there are mutual effects, the company
does not have as much control over the external environment as it would like to have. A company
may decide to invest in another company's assets merely to learn more about this environment—
knowledge is the best surrogate for control. Or a company may invest in another company's assets
because it desires to influence the other company's managerial decisions. Through investment a
company can eliminate the risk of being deprived of the opportunity to secure needed material
(inputs), secure access to new technology (processes), and secure access to the market (outputs). Of
course, the degree of control assumed by the investing company increases along with the investment
commitment. Sole, or 100%, ownership is the type of direct foreign investment preferred by most
U.S. companies. IBM, one of the world's most successful and best-managed companies, is notorious
for its refusal to engage in anything but wholly owned ventures.