Client following revisited : A study of transnational advertising agencies in China

Client following is considered the major motivation of professional businesses for entering a foreign market. However, client following alone cannot explain why a company chooses foreign direct investment (FDI) rather than other entry modes, such as exporting or franchising. It cannot explain how a transnational advertising agency (TNAA) can compete with local firms in an unfamiliar environment. This paper applies the ownership-location- internalisation (OLI) model to gain a more thorough understanding of the motives of TNAAs for entering China. The results support the notion that the presence of clients (i.e. client following) is the major motive, but only part of the story: it is the most important advantage of location. On the other hand, 'competent personnel' is the key advantage of ownership, while 'ensuring quality control' is the principal advantage of internalisation. Internalising their operations in China was seen as a better economic choice for foreign agencies, rather than merely exporting of establishing a franchise. Surprisingly, neither the importance of avoiding the dissipation of tactical knowledge as an advantage of internalisation nor the importance of company size as an ownership advantage was supported by the TNAAs. © 2008 Advertising Association.