2014 International Symposium on Technology Management and Emerging Technologies (ISTMET 2014), May 27 - 29, 2014,

Bandung, Indonesia

Using PLS-SEM Technique to Model Malaysian

Construction Firms’ Entry Timing Decisions in
International Market Expansion
1
Che Maznah Mat Isa, 2Hamidah Mohd Saman and 4
Aini Jaapar
3
Siti Rashidah Mohd Nasir 4
Faculty of Architecture, Planning and Surveying
Institute of Infrastructure and Sustainability Management, Universiti Teknologi MARA
Faculty of Civil Engineering, Universiti Teknologi MARA, Shah Alam, Selangor, Malaysia
Shah Alam, Selangor, Malaysia
chema982@salam.uitm.edu.my

Abstract— Market entry timing decision is among the most through effective strategies. Various researchers argued that in
critical strategies made by a firm to expand internationally. In a consideration of the early and late entry timing, the EMAs and
dynamic and competitive international environment, the entry LMAs issues such as “liabilities of foreignness” and
timing decision involves the need to balance the early entry risks opportunity to “free ride” related to performance in terms of
and the problems in losing opportunities as a result of late entry. growth and profits are still questionable [2]. It is contended
This study proposes a theoretical framework to investigate the that these issues are still debatable whether first movers have
influence of advantages and disadvantages [dis (advantages)] on enduring advantages over late movers in terms of long-term
entry timing decisions of Malaysian construction firms in their overall performance [3]. Hence, this study identifies the most
international market expansion. Survey questionnaires were sent
important advantages and disadvantages [dis(advantages)]
to 115 Malaysian construction firms listed under the
influencing the construction firms’ decision in to enter early or
Construction Industry Development Board of Malaysia (CIDB)
with 44.7 percent response rate. A total of twenty four (24) (dis) late in international market. This study focuses on one hundred
advantages were identified and confirmed using SMART PLS- and fifteen (115) Malaysian firms which have expanded into
SEM (partial least square structural equation modeling) to test fifty one (51) countries exporting their services in various
the model and finally established the findings. The results with β fields based on the Construction Industry Development Board
coefficient of 0.538 and t-value of 2.805 indicate that the early (CIDB, 2013) Malaysia record. Thus, understanding the entry
mover disadvantages have significantly influenced the entry timing dis (advantages) is crucial for the Malaysian
timing decision of the Malaysian construction firms into construction firms to perform and sustain in the international
international market. Hence, this study illustrates the firms’ market.
acquirement of the (dis) advantages based on their late timing of
entry into international market. It is hoped that the findings II. LITERATURE REVIEW
would offer valuable information to Malaysian construction
firms with the intention to internationalize either as the early or In a dynamic and competitive environment, entry timing
late movers. decision involves the need to balance the early entry risks and
the problems in losing opportunities as a result of late entry
Keywords- advantages and disadvantage; entry timing choices; into a new market. A growing body of empirical literature has
Malaysian construction firms; international market; PLS-SEM investigated the “order-of-entry” or known as “first-mover
model versus late-mover” effects ([3],[4]). As shown in many
previous studies, the order of entry represents an ordinal
I. INTRODUCTION ranking that assesses market entry in terms of first entrant,
second entrants (early followers), and late entrants [4], early
Globalization and liberalization have huge implications and
mover or late mover [3]. An early mover is defined by
bring along potentials to the new world economies which have
Lieberman and Montgomery [4] as the first firm or the first few
become integrated widely in the past few decades. It is reported
firms to enter a new market when the market lead time that
by Guler and Guillen [1] that, venture capital firms have
separates them is insignificant to enter a new product category,
increasingly turned to foreign countries in search of investment
while, Cleff and Rennings [5] defined the early mover as the
opportunities. This situation is also evident for construction-
very first firms to bring innovative products or services to
related firms as international construction is not a new
market.
phenomenon. Hence, in the current borderless world, no
market is ever safe from foreign competition and it can no In order to analyze the entry timing decisions, relevant
longer be seen as a localized industry. entry timing theories such as the first mover advantages
(FMAs) and late mover advantages (LMAs) theories were
Issues on the early mover advantages (EMAs) and late
reviewed. Early mover advantages (EMAs) or sometimes
mover advantages (LMAs) have drawn more attention of the
referred to as the first-mover advantages (FMAs) are the
developing countries hoping to achieve the economic success

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advantages associated with entering a market early. FMA entry timing and their firms’ entry timing decisions into
theory states that the first mover or early mover advantages international market. Moreover, most of these entry timing
arise from three primary sources namely: technological studies focused on non-related construction business in the
leadership, preemption of assets, and buyer switching costs [4]. international market. In addition, there is a limited literature on
Even though, Lieberman and Montgomery [2] observed that the international construction market penetration focusing on
the early mover disadvantages (EMDs) can also be the entry timing strategy, especially on the dis (advantages) for
advantages of the late movers, Lilien and Yoon [6] contended both early and late movers.
that the tradeoff between the advantages and disadvantages of
A preliminary research by the authors based on mean
being the early mover or the late mover is the major issue for
ranking revealed that the most significant advantage for the late
this entry strategic decision. Nevertheless, these benefits might
mover was the “risk reduction through the “wait-and-see”
be counterbalanced by various first-mover disadvantages where
strategy and for the early mover advantages were the “ability to
early entrant normally entails pioneering costs, bears foreigner
gain higher market shares and profitability and “attainment of
liability and has a low probability of survival. On the other
benefits in terms of recognition and reputation” [9]. However,
hand, Lieberman and Montgomery [2] also acknowledged
this study adds on more factors for the dis (advantages) of the
some of the late mover advantages such as the ability to “free
early and late movers using structural equation modeling to
ride” on first-mover investments, resolution of technological
further contribute empirically in international business body of
and market uncertainty, technological discontinuities, and
knowledge.
various types of “incumbent inertia”.
Table I shows 24 items listed under the early mover
Late mover advantages (LMAs) have been integrated by
advantages (EMAs), early mover disadvantages (EMDs), late
Wu (2004) with the secondary innovation theory for the late
mover advantages (LMAs) and late mover disadvantages
movers to achieve a quick catch-up. Being as late movers, it is
(LMDs) consolidated from the established previous research in
very important to maximize the late mover advantages. As
which some have been discussed in the literature review
technology and knowledge play a much important role in the
section.
society, the accumulation of technology and knowledge should
be the top priorities for the late movers [7]. In addition, Kerin
[8] hold the view that late mover advantages can manifest from III. METHODOLOGY
lower innovation costs, rapid reverse engineering, and market This section explains in detail on the methodology related
knowledge of consumers already being familiar with their the conceptual framework, target population, design of survey
products, cost savings from reproduction, and even scope questionnaire as the primary data-collection tool and the
economies that arise from experience. Hence, Guler and various methods of analysis adopted in this study.
Guillen [1] affirmed that as firms accumulate international
experience, they develop dynamic capabilities for foreign A. Research Model
market entry for surmounting various obstacles and constraints Various early mover (dis) advantages (EMAs and EMDs)
exist in the foreign countries. In other words, the experience and late mover (dis) advantages (LMAs and LMDs) related to
may enable firms to overcome the liability of foreignness if it the entry timing decisions identified from the literature reviews
leads to an upgrading of their firms’ resources and capabilities. have been used as a basis to develop the conceptual framework
A pioneer research has been carried out to study the for this study. Fig. 1 shows the entry timing decisions as the
mechanisms that convened the advantages and disadvantages variables of primary interest (dependent variables), the
[dis (advantages)] on first-mover of manufacturing firms ([3], variances in which are attempted to be explained by the dis
[6]). The findings support that the first-mover advantages (advantages) as the independent variables.
theory based on the technological leadership, preemption of
assets, and buyer switching costs. SMART PLS path modeling Logistic Regression Analysis
From the reviews, hypotheses were formed in this study to
examine the relationship between the dis (advantages) and the
entry timing decisions made by the construction firms in their Early Mover Advantages Entry Timing Decisions
international market expansion. Late Mover Disadvantages Early Mover
Late Mover Advantages Late Mover
H1: There is a significant relationship between early mover Late Mover Disadvantages
advantages (EMAs) and entry timing decision.
H2: There is a significant relationship between the early Figure 1. Conceptual framework on the dis (advantages) influencing entry
mover disadvantages (EMDs) and entry timing decision. timing decisions

H3: There is a significant relationship between the late The PLS-SEM was used in this study to confirm the
mover advantages (LMAs) and entry timing decision. prediction model and explain the variance of the key construct
(entry timing decisions) by different explanatory constructs
H4: There is a significant relationship between the late (EMAs, EMDs, LMAs and LMDs) as shown in Fig. 2. The
mover disadvantages (LMDs) and entry timing decision. PLS-SEM is suitable to address the relatively small sample size
([10]. Moreover, the formatively measured construct (entry
So far, not many of the previous research conducted
timing decision) is particularly useful for the explanatory
focuses on the relationship between (dis)advantages of the
constructs.

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 Class G7 and Class A categories with operations in more than
TABLE I. DIS (ADVANTAGES) OF THE LATE MOVERS
50 countries. The sampling units were the directors, managers
AND EARLY MOVERS IN INTERNATIONAL MARKET and executives in these firms. Their involvements in
international projects countries include various sectors such as
No. Advantages and Disadvantages (Dis(advantages)) of the Late buildings, infrastructures, branches of engineering, mechanical
Movers and Early Movers
EMA1 Acquisition of superior resources and capabilities where early and electrical, power transmission. Fifty-one (51)
mover preempt competitors in the physical, technological, or questionnaires were received and used for the data analysis
consumer perceptual space which translates to 44.3% response rate.
EMA2 Early movers achieve higher market shares and profitability
EMA3 Early movers attain benefits in terms of recognition and B. Questionnaires Design and Data Collection
reputation
EMA4 Technology leadership stemming from proprietary knowledge, A questionnaire using a five-point Likert scale was used to
where learning creates substantial entry barriers for the late gather data for each construct of the research model. The
movers
EMA5 Early movers attain industries characterized by large scale and respondents were requested to evaluate twenty four (24)
scope statements based on the level of agreement (1: Strongly
EMD1 Early movers entails pioneering costs with higher market Disagree; 2: Disagree; 3: Agree; 4: Much Agree; and 5:
investment and higher operation risks Strongly Agree). All instruments were adapted from previous
EMD2 Early movers bear “liabilities of foreignness” with low
probability of survival literatures and were modified to measure the dis (advantages)
EMD3 Early movers bear higher costs for “infrastructure related” of the entry timing decisions. The entry timing decision as the
market development dependent variable was measured using the logistic regression
EMD4 Early movers face risks of advances in technology
EMD5 Early movers face risks of uncertainty about further market
analysis and a majority of the firms were found to be the late
development movers. However, the results on the logistic regression
EMD6 Greater efforts are required by the early movers to convince new analysis will not be discussed in this paper. The next section
potential clients presents the assessment of the goodness of measure of these
EMD7 Increase of failure risk due to lacking of critical resources which
prevent the early movers from incorporating a satisfactory level
constructs in terms of their validity and reliability within the
of understanding of practices. research framework.
LMA1 Late movers have the opportunity to “free ride” on early mover
investments
LMA2 Late movers face more resolution of market uncertainty IV. METHOD OF ANALYSIS AND RESUTS
LMA3 Late movers have more opportunity to introduce technological
innovation
In order to determine the most significant factors affecting
LMA4 Late movers bear lower innovation costs and rapid reverse the entry timing decisions by the firms in international market
engineering due to of lower R&D expenditure expansion, structural equation modeling using SMART PLS
LMA5 Risk reduction through “wait-and-see” strategy for late movers to was adopted in this study. The purpose of each analysis, the
assess market development
LMA6 Late movers accumulate advanced technology and market results and discussion are outlined in the following sections.
knowledge
LMA7 Late movers acquired cost savings from reproduction
A. Measurement
LMA8 Late movers gain scope of economies that arise from experience
of early movers
The findings in this paper are presented based only on two
LMA9 Late movers have the ability to influence customer preferences parts of the questionnaires. The Part A enquires on the
LMD1 Late movers are less able to respond to environmental changes respondents’ name, designation, firms’ international
and competitors threats construction experience, international business locations (s),
LMD2 Late movers shows lower performance in major aspects of
operations
and their preferred entry timing decision either as late movers
LMD3 Late movers have shorter survival period as compared to the or early movers in the international market expansion. In order
early mover competitors to justify their choices, Part B solicits their opinions on the dis
(advantages) influencing their entry timing decisions.
B. Assessment of goodness of measure
The two main criteria used for testing goodness of
measures are validity and reliability. Reliability is a test of how
consistently a measuring instrument measures concept it is
measuring, whereas validity is a test of how well an instrument
that is developed measures the particular concept it is intended
to measure [11].
C. Construct Validity
Construct validity testifies to how well the results obtained
Figure 2. Research model using PLS path modeling from the use of the measure fit the theories around which the
test is designed [11]. In order to determine that the instrument
A. Target Population and Respondents adopts the concept as theorized, an assessment through
The sampling frame consists of the Malaysian construction convergent and discriminant validity was carried out. First, the
firms listed under CIDB Malaysia's directory in 2012/13 respective loadings and cross loadings from Table II are
comprises of 115 firms registered as global players under the examined if there are problems with any particular items. A

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cut-off value for loadings at 0.5 as significant [10] is used in LMA9 0.687
which, if any items has a loading of higher than 0.5 on two or Late Mover LMD1 0.859 0.881 0.712
Disadvantages LMD2 0.912
more factors, they are deemed to have significant cross LMD3 0.752
loadings. a
Composite reliability (CR) = (square of the summation of the factor loadings)/{(square of
the summation of the factor loadings) + (square of the summation of the error variances)}
b
Average variance extracted (AVE) = (summation of the square of the factor
TABLE II. DIS (ADVANTAGES) OF THE LATE MOVERS AND EARLY loadings)/{(summation of the square of the factor loadings) + (summation of the error
MOVERS IN INTERNATIONAL MARKET variances)}

Early Mover Early Mover Late Mover Late Mover As suggested by Hair et al. [10], the extracted factor
Advantages Disadvantages Advantages Disadvantages loadings, composite reliability and average variance were the
(EMA) (EMD) (LMA) (LMD) indicators to assess convergence validity. Table III depicts
EMA1 0.816 0.537 0.088 -0.121
EMA2 0.915 0.625 0.276 -0.066
loadings for all items exceeded the recommended value of 0.5
EMA3 0.917 0.679 0.336 0.006 [10]. While, the composite reliability (CR) values which depict
EMA4 0.853 0.659 0.168 -0.027 the degree to which the construct indicators indicate the latent
EMA5 0.890 0.666 0.187 -0.159
EMD1 0.696 0.714 0.303 -0.160
construct range from 0.864 to 0.944, which exceed the
EMD2 0.538 0.714 0.294 -0.044 recommended value of 0.5 [10]. The average variance
EMD3 0.516 0.703 0.270 -0.020 extracted (AVE) measures the variance captured by the
EMD5 0.538 0.588 0.147 0.004
EMD6 0.468 0.760 0.235 0.036
indicators relative to measurement error, and it should be
EMD7 0.510 0.810 0.411 0.129 greater than 0.50 to justify using a construct (Barclay et al.
LMA1 0.291 0.422 0.731 0.341 1995). The results for the extracted average variance were in
LMA2 0.156 0.295 0.707 0.373 the range of 0.516 and 0.772. Table IV summarizes the results
LMA3 0.082 0.169 0.759 0.368
LMA4 0.134 0.197 0.771 0.384 of the measurement model. The results show that all the four
LMA5 0.117 0.415 0.813 0.357 (4) constructs, early mover advantages, early mover
LMA6 0.222 0.190 0.784 0.514 disadvantages, late mover advantages and late mover
LMA7 0.205 0.190 0.768 0.548
LMA8 0.442 0.461 0.785 0.277
disadvantages are all valid measures of their respective
LMA9 0.169 0.201 0.687 0.492 constructs based on their parameter estimates and statistical
LMD1 -0.118 -0.082 0.307 0.859 significance [12].
LMD2 0.024 0.071 0.589 0.912
LMD3 -0.123 -0.008 0.408 0.752
TABLE IV. SUMMARY RESULTS OF THE MODEL CONSTRUCTS
It can be seen from Table II that all the items measuring a Model Construct Measurement Standardized t-value
particular construct loaded highly on that construct and loaded Item estimate
lower on the other constructs thus confirming construct Early Mover EMA1 0.816 6.686**
validity. The highlighted and bold values are loadings for items Advantages EMA2 0.915 7.824**
EMA3 0.917 9.970**
which are above the recommended value of 0.5. EMA4 0.853 6.814**
EMA5 0.890 8.486**
D. Convergent validity Early Mover EMD1 0.714 5.451**
Disadvantages EMD2 0.714 3.585**
Next, the convergent validity was tested, to ensure the EMD3 0.703 3.010**
degree to which multiple items to measure the same concept EMD5 0.588 2.038*
are in agreement. EMD6 0.760 5.170**
EMD7 0.810 5.993**
Late Mover LMA1 0.731 4.503**
TABLE III. RESULTS OF MEASUREMENT MODEL Advantages LMA2 0.707 3.400**
LMA3 0.759 4.654**
Model Measurement Loading CRa AVEb LMA4 0.771 4.377**
Construct Item LMA5 0.813 5.418**
Early Mover EMA1 0.816 0.944 0.772 LMA6 0.784 4.459**
Advantages EMA2 0.915 LMA7 0.768 4.001**
EMA3 0.917 LMA8 0.785 6.597**
EMA4 0.853 LMA9 0.687 3.972**
EMA5 0.890 Late Mover LMD1 0.859 4.188**
Early Mover EMD1 0.714 0.864 0.516 Disadvantages LMD2 0.912 5.650**
Disadvantages EMD2 0.714 LMD3 0.752 2.827**
EMD3 0.703 T-values >1.96*(p<0.05); t-values>2.58**(p<0.01)
EMD5 0.588
EMD6 0.760 E. Discriminant validity
EMD7 0.810
Late Mover LMA1 0.731 0.923 0.573 The discriminant validity is the extent to which the
Advantages LMA2 0.707 measures do not reflect other variables and it is indicated by
LMA3 0.759
LMA4 0.771
low correlations between the measure of interest and the
LMA5 0.813 measures of other constructs [13]. Hence, it measures the
LMA6 0.784 degree to which items differentiate among constructs or
LMA7 0.768
LMA8 0.785
measure distinct concepts. The items should load more strongly
on their own constructs in the model, and the average variance

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shared between each construct and its measures should be fit” (GoF) against the empirically obtained manifest items. R2
greater than the variance shared between the construct and is a normalized term that can assume values between 0 and 1
other constructs [14]. As shown in Table V, the correlations for where the larger the value, the larger the percentage of variance
each construct are less than the squared average variance explained. Figure 2 shows an R2 value of 0.218 which suggests
extracted by the indicators measuring that construct indicating that 21.8% of the variance in extent of entry timing decision as
adequate discriminant validity. In total, the measurement late mover can be explained by early mover advantages, early
model demonstrated adequate convergent validity and mover disadvantages, late mover advantages and late mover
discriminant validity. disadvantages. The R2 values of 0.02, 0.13 and 0.26 indicate
the endogenous latent variables’ weak, moderate or substantial
TABLE V. DISCRIMINANT VALIDITY OF CONSTRUCTS influence on the particular latent exogenous variable [17].
Advantages and Disadvantages 1 2 3 4

Early Mover Advantages 0.879

Early Mover Disadvantages 0.729 0.718
Late Mover Advantages 0.265 0.402 0.757
Late Mover Disadvantages -0.067 0.001 0.526 0.844
Diagonals (in bold) represent the square root of the AVE (variance extracted) while the
off-diagonals represent the correlations

F. Reliability test
In this study, the Cronbach’s alpha (α) values to assess the
inter item consistency in the measurement were also measured.
Table VI summarizes the loadings the “α” values and the
number of items. The results for all “α” values are above 0.6 as
suggested by Nunnally and Berstein [15]. In addition, the
composite reliability values also range from 0.864 to 0.944
with values greater than 0.70 or greater are considered Figure 3 The structural model with results of the path analysis
acceptable [16]. Hence, the measurements are found reliable.
2) A goodness-of-fit (GoF)
GoF was used to judge the overall fit of the PLS model. It
TABLE VI. RESULT OF RELIABILITY TEST is the geometric mean of the average communality (outer
Constructs Measurement Cronbach's Loading a
Number measurement model) and the average R2 of endogenous latent
Items α values range of items variables, which represents an index for validating the PLS
Early mover EMA1, EMA2, 0.928 0.816 - 5(5) model globally to look for a compromise between the
advantages EMA3, EMA4, 0.917 performance of the measurement and structural model,
EMA5
Early mover EMD1, EMD2, 0.839 0.588 - 6(7) respectively. It is normed between 0 and 1, where the higher
disadvantages EMD3, EMD5, 0.810 value represents better path model estimations. On the basis of
EMD6, EMD7 the results, the GoF value of 0.374 (R2 was 0.218) for the
Late mover LMA1, LMA2, 0.909 0.687 - 9(9)
advantages LMA3, LMA4, 0.813
research model was obtained, which exceeds the cut-off value
LMA5, LMA6, of 0.36 for large R2. Hence, it has confirmed the adequate
LMA7, LMA8, support to validate the PLS model globally [18].
LMA9
Late mover LMD1, LMD2, 0.802 0.752 - 3(3)
disadvantages LMD3 0.912 TABLE VII. PATH COEFFICIENTS AND HYPOTHESIS TESTING
a
Final items numbers (initial numbers)
Hypo- Relationships Beta SE t-value Decision
G. Hypotheses testing thesis coefficient
H1 EMAs -> Entry - 0.178 0.146 1.222 Not
The path analysis to test the four hypotheses generated Timing Decision supported
earlier in the literature review section is shown in Figure 3 and H2 EMDs-> Entry 0.538 0.192 2.805** Supported
Table VII results. Figure 3 demonstrates the loading for each timing decision
H3 LMAs -> Entry 0.014 0.193 0.071 Not
item under the constructs; early mover advantages, early mover timing decision supported
disadvantages, late mover advantages and late mover H4 LMDs- > Entry 0.180 0.175 0.912 Not
disadvantages with beta coefficients shown in Table VII for the timing decision supported
studied variables. t-values >2.33** p<0.01; t-values>1.64* p<0.05
2
1) Determination of coefficient R Table VII shows the results for the path coefficient for
A non-parametrical test was applied to evaluate the each hypothesis. A closer look on shows that H2 which
structural model’s quality, where a logical metric for judging investigates the relationship between the early mover
the structural (inner) model is the endogenous variables’ disadvantages and entry timing decisions was found to be
determination coefficient (R2). The determination of R2 reflects significant (β = 0.534, p<0.01) and t values of 2.805. This
the level or share of the latent construct’s explained variance concludes that only H2 is supported and others are not.
and therefore measures the regression function’s “goodness-of-

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 V. DISCUSSION that this study assists the construction firms in their
The research explores the impacts of the dis (advantages) international market entry timing decisions and indicates that
of the early and late movers on the Malaysian construction late mover advantages can be achieved from the early mover
firms’ entry timing decisions into international market. The disadvantages.
findings indicate that only one of the four constructs of dis
(advantages) demonstrated a significant positive relationship ACKNOWLEDGMENT
with the entry timing decision. The early mover We would like to thank the Institute of Infrastructure and
disadvantages’ construct was found to influence the entry Sustainability Management (IIESM), Faculty of Civil
timing decision, given by the β coefficient (0.538) and t-value Engineering, UiTM, for giving support and to the Research
(2.805). The detail results based on the ranked loadings for Management Institute, UiTM, Malaysia (600-RMI/DANA
early mover disadvantages are as follows; “EMD7 : Increase of 5/3/RIF (76/2012)) for the financial support. We are also
failure risk due to lacking of critical resources which prevent grateful to the professionals and managers from Malaysian
the early movers from incorporating a satisfactory level of construction firms, CIDB Malaysia and other institutions
understanding of practices” with loading of 0.810, “EMD6: participated in this research.
greater efforts are required by the early movers to convince
new potential clients” with loading of 0.760, “EMD1: Entails
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