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AbstractIn this paper, I review Transaction Theory and Competitive Strategic Theory from the viewpoint of Foreign Market Entry Research Approach and point out the problems and limitations of both theories. According to Transaction Theory, when the external uncertainty is high, a company prefers to form a subsidiary to a joint venture, because a company wants to prevent opportunism. Transaction cost analysis, with its emphasis on opportunism, bounded rationality and transaction efficiencies, is useful to understand problems in bilateral bargaining related to individual markets. According to Competitive Strategic Theory, companies prefer joint venture and alliance to forming a subsidiary because they can improve strategic position even in high external uncertainty. Strategic analysis provides an approach to examine integration in the light of competitive postures required in individual markets to make the interdependent operations of the firm across markets more effective. Market position and integration strategies deal with the broad strategic aims of creating barriers to entry for other competitors and establishing pre-emptive presence in foreign markets in order to attain synergies in global operations. I stress the need to complement the efficiency considerations of the transaction cost model with strategic issues concerning governance modes, for it is argued that firms may be willing to sacrifice the cost advantages of different levels of integration in order to improve their competitive position vis-a-vis rival firms.