Why Do Firms Enter a New Product Market? A Two-Dimensional Framework for Market Entry Motivation and Behavior* Namwoon Kim, Sungwook Min, and Seoil Chaiy What are the energetic forces that induce established firms to enter new product markets? While most previous research has explained the economic profits expected from a new product market as firms’ distinctive motivation for market entry, some recent studies also emphasize interfirm competition and benchmarking activities as another important factor that motivates firms’ new market entry. To explain the established firms’ diverse new product market entry behaviors, this study presents a two-dimensional scheme of entry motivation in terms of the degrees of target market profit focus and competitor focus. The first dimension captures the economic motivation of firms’ new market entry that ranges from focusing on the direct expected profits from the target market to considering more strategic/indirect benefit incentives. The second dimension captures the degree of firms’ external motivation for entry affected by competitors that ranges from independent entry decisions to fully competitor-oriented entry decisions. Using multiple-industry survey data, the current study empirically verifies that these two entry motivation dimensions explain a great portion of actual firms’ new product market entry behaviors and that they are independent of each other. Subsequently, this study validates that firms’ operational size and their environmental factors like perceived techno- logical uncertainty and competitive intensity upon new market entry affect the degrees of the two dimensions of firms’ new product market entry motivation. More specifically, large firms less emphasize target-market profits than small firms, and when perceived technological uncertainty is high, potential market entrants become less target market profit focused but more competitor focused. Under a highly competitive new market condition, firms focus on both target- market profits and competitors. Based on the analysis of new market entry motivation dimensions, the current study proposes a new typology of established firms’ market entry behaviors. The suggested typology represents the four different types of new product market entrants and examines specific characteristics and entry strategies for each type of potential entrants. This entry-motivation framework should provide a deeper understanding of the backgrounds of entry behaviors and assist firms in developing appropriate entry strategies and in advantageously responding to rival firms’ actions with regard to entry. Introduction W hile studies on firms’ market entry resources/ capabilities are well incorporated into the entry barriers and pioneer advantages frame- work (e.g., Day, 1986; Han, Kim, and Kim, 2001; Karakaya and Stahl, 1989; Kerin, Mahajan, and Varadarajan, 1990; Kerin, Varadarajan, and Peterson, 1992), research outcomes on entry motivation (i.e., “why do firms enter a new product market?”) have yet to be theoretically assorted or conceptually integrated into explainable dimensions. Previous studies on established firms’ new product market entry normally explained their entry behaviors in terms of the firms’ profit-seeking moti- vation. For example, the economics literature on norma- tive firm behaviors underscores the expected economic return from a new market as a major motivation for market entry (e.g., Dixit, 1980; Geroski, 1995; Gort and Klepper, 1982; Penrose, 1959; Spence, 1977). However, some other studies also argue that firms do not necessarily enter a new product market just for short-term, direct profit- seeking but for indirect, long-term profit motives such as using existing firm resources (Helfat and Lieberman, Address correspondence to: Namwoon Kim, Department of Manage- ment and Marketing, Faculty of Business, Hong Kong Polytechnic Univer- sity, Hung Hom, Kowloon, Hong Kong. E-mail: namwoon.kim@ polyu.edu.hk. Tel: 852-2766-7141. Fax: 852-2765-0611. * The authors thank Alan Dubinsky, Ashish Sinha, Mark Uncles, Jack Cadeaux, and the seminar participants at the University of New South Wales, Hong Kong Polytechnic University, and Singapore Management University for their helpful comments. The first author acknowledges the research support of the Hong Kong Polytechnic University’s Central Research Grant (G-YJ49). J PROD INNOV MANAG 2014;••(••):••–•• © 2014 Product Development & Management Association DOI: 10.1111/jpim.12223