Market Entry Under Institutional Fragmentation Strategic Responses from the Swedish Nicotine Pouch Industry

Abstract

The rapid rise in popularity for nicotine pouches across the European Union has outpaced regulatory development, creating a fragmented institutional landscape. Given its novelty and the perceived harmful nature, firms face significant uncertainties related to unharmonized regulations and societal acceptance. Our study explores how nicotine pouch firms navigate challenges and strategically manage market entry in dynamic contexts, shaped by both formal and informal institutional pressures. Drawing on a multiple case study with six Swedish nicotine pouch companies, the research reveals that firms turn to non-equity entry modes, minimizing risk and resource commitment. It further demonstrates how digitalization enables firms to use e-commerce as a strategic loophole, facilitating cross-border operations without physical presence and allowing them to bypass regulatory inconsistencies through regulatory arbitrage. Contrary to traditional approaches, firms do not merely adapt to institutional conditions, rather they actively shape their environments by leveraging market gaps. Along with formal institutions, informal pressures also shape the institutional environment where local adaptation proves critical in achieving legitimacy and consumer acceptance. This study contributes to the international business field by extending understandings of market entry strategies in unharmonized regulatory contexts. The findings provide insights for firms facing similar uncertainties in rapidly evolving global industries.