How to enter the fintech industry in Southeast Asia: The choice between alliance and acquisition

The financial technology (i.e., fintech) industry in Southeast Asia has proliferated over the past two decades, attracting many firms from around the world to this business sector in the region. As such, it is crucial to investigate which entry mode (alliance or acquisition) is more appropriate for foreign firms to enter this industrial and geographical area. Surprisingly, although the alliance-versus-acquisition choice has been a popular research topic in international business literature, prior studies have shed little light on this research context. Drawing on the capability-based perspective, we identify a set of determinants critical to foreign firms’ choice of entry strategy into the Southeast Asian fintech industry and propose a holistic conceptual framework, tested on a sample of 132 overseas expansions into this industrial and geographical region by firms from 24 countries. Our empirical findings confirm that these firms preferred acquisitions over alliances when they practiced horizontal expansion, possessed institutional knowledge about local environments, and encountered smaller governance distance between the home and host countries, of which the impact of the last factor is not fully supported. Overall, this study has advanced international business research and Southeast Asia studies, and has also offered useful insights to managers in charge of foreign expansion for their firms.