Foreign market entries,exits and re-entries: The role of knowledge,network relationships and decision-making logic

We focus on the following question: how are knowledge, network relationships and decision-making logic interrelated throughout the internationalization process – foreign market entries, exits and re-entries? We contribute to the internationalization literature, network approach and effectuation theory that have not examined these interrelationships during internationalization – especially de- and re-internationalization – in detail yet. Thereby, we provide a more complete view of internationalization. Based on a single punctuated longitudinal case study, we show that lack of knowledge results in mostly effectual (opportunity-driven) decision-making: finding customers via weak ties, trade fairs and unsolicited export orders and experiencing numerous market exits and re-entries due to “experimenting”. Knowledge acquisition leads to more causal (systematic, plan-driven) decision-making and stronger ties, but serendipitous (“by chance”) entries can still occur, and exiting and re-entering foreign markets may continue. We suggest that managers should network and acquire knowledge actively, use both decision-making logics and accept uncertainty as normal during internationalization.     

Knowledge acquisition for the internationalization of the smaller firm: Content and sources

Internationalization process research emphasizes accumulated experience and networks as sources of knowledge for internationalization. Our understanding, however, as to what this knowledge is in practice for smaller firms, the challenges they face in acquiring it, and how they address those challenges is limited. Integrating organizational learning concepts with our theoretical understanding of the small firm internationalization process, we develop a new framework for understanding knowledge acquisition processes, which are examined with a case study of 10 Scottish internationalizing firms. We find smaller firms may not have relevant experience or useful networks, and rely on sources rarely recognised before. Firms used recruitment, government advisors and consultants to acquire indirect experience. Recruitment is a source of market and technological knowledge and government advisors and consultants a source of internationalization knowledge. Accessing internal information is important for firms that have internationalized. Our integrated theoretical framework identifies knowledge content and sources that are critical for internationalization, but that may be absent.     

How does uncertainty impact opportunity development in internationalization?

The features of the internationalization of emerging market multinational companies (EMNCs) create a laboratory for extending theory. In this paper, we argue that a high level of asymmetry between prior knowledge and a non-incremental commitment, such as an acquisition, lies at the core of understanding these types of internationalization processes. Our proposed theoretical view is that while some uncertainties in opportunity development are known to the firms and can be managed by available knowledge, disruptive commitments can result in complexes of unstable and unilineal dynamics that bring about unexpected – and hence unforeseeable – uncertainties. These uncertainties may be a source of future unintended consequences that will have an impact on the firm as the internationalization process unfolds. This view is used for analysis of a longitudinal case study concerning the acquisition of a Swedish firm, Vargön Alloys, by the Turkish corporation Yildirim Group, focusing on the opportunity discovery and exploitation period between 2008 and 2013. By dividing uncertainty into two types (foreseeable and unforeseeable) and analysing the hidden problems that emerged after the sudden fusion of the two networks, the study nuances understanding of the emergent and non-orderly nature of the internationalization process as it unfolds. From a process point of view, the study may aid deeper understanding of complications when discovering and exploiting opportunities.     

Retrospective and prospective learning: Accelerating the internationalization process

This paper contributes theoretical understanding to the learning processes adopted by firms for successful internationalization. Drawing from the internationalization process and organizational learning research, our longitudinal case study examines a firm’s learning processes as it grows internationally. In different phases and in different areas the firm learned at different paces, gradual and steep, and by responding retrospectively to past failings, and prospectively to anticipated challenges. From case data we identify and develop four constructs of internationalization learning: Gradual Retrospective, Steep Retrospective, Gradual Prospective, and Steep Prospective learning. The appropriateness of each depends on the urgency towards addressing challenges, and the firm’s learning capabilities. Firms can develop and steepen retrospective learning capability, enabling rapid identification and response to internationalization problems. Firms can also employ prospective learning to plan the development of knowledge capabilities ahead of future internationalization activity, to accelerate their learning, and increase the speed and effectiveness of internationalization.     

The concept of learning in the Uppsala internationalization process model: a critical review

In behavioral models dealing with the internationalization process, such as the Uppsala Internationalization Process Model, knowledge and learning have a profound impact on how the firm is seen to approach foreign markets. In the light of recent work on learning in organizations, this paper addresses some issues related to how the process of learning is conceptualized in the Uppsala Model. It is argued that the model builders apply a more narrow interpretation of learning than that allowed by the literature, which limits the ability of the model to explain certain forms of internationalization behavior. It is also claimed that perceiving a firm to be a loosely coupled organization causes some problems in relation to the model’s possibility to predict the internationalization behavior. The consequences of the strong emphasis on individuals as the holders of market-specific knowledge are also discussed. The paper concludes with some remarks on the emergence of interesting research issues about the internationalization behavior if a broader concept of organizational learning is applied.     

Domestic Activity and Knowledge Development in the Internationalization Process of Firms

This paper is based on behavioral theory on internationalization, examining the effect of firms operations in the domestic market on experiential knowledge development in the internationalization of the firm. Five hypotheses are developed on the effects of business operations in the domestic market on: internationalization knowledge, business knowledge and institutional knowledge. The LISREL analysis of 206 firms shows that domestic operations effect the accumulation of experiential knowledge in internationalizing firms. We found that it is harder for a firm with long domestic experience to change their mental models and processes in the internationalization process.     

Dominant modes of economic coordination and varieties of firm internationalization support

International Business research has focused attention on the role of the home country in firm internationalization. While this has produced insights as to how home countries condition firm internationalization, significant gaps remain. We focus on two. First, research on how and why countries differ in their internationalization support is limited. Second, research on how countries differ in the extension of their internationalization support into host countries is scant. Addressing these gaps, we develop a conceptual paper and put forward nine propositions. We theorize how differences in the dominant mode of economic coordination in home countries – in market-, business-, and state-led economies – relate to variation in their internationalization support. Our framework is relevant to developed and emerging economies.     

Small firm internationalization through experiential learning: The moderating role of socialization tactics

The importance of experiential knowledge for small firm internationalization has been emphasized in the process model of internationalization, the international new venture or born-global frameworks and the management characteristics perspective in the exporting literature. However, none examines in detail under what conditions experiential learning is more important for internationalization. We borrow insights from the socialization tactics literature to theorize how the context, content and social aspects of a foreign sojourn offer different opportunities for the acquisition of experiential knowledge to support the internationalization of small firms. We suggest that socialization tactics moderate the relationship between individual international experiential knowledge and small firm internationalization. We propose that the opportunities for international experiential learning are superior when the socialization context is individual and formal (rather than collective and non-formal), the socialization content is sequential and fixed (rather than random and variable) and when socialization involves serial and investiture (rather than disjunctive and divestiture) social aspects.     

Upgrading from OEM to OBM through Reverse Acquisition in China’s Emerging Economy: The Case of Lacquer Craft Mfg

In this paper, we review how original equipment manufacturing (OEM) firms break the “lock in the global value chains” (GVCs) and upgrade to original/own brand manufacturing (OBM) through accelerated internationalization. We focus on investigating how Lacquer Craft Mfg (later referred to as Lacquer Craft), an OEM firm in southern China successfully upgraded to OBM through reverse acquisitions. By proactively utilizing the resources (including the mindset or perspectives formulated) generated from practicing OEM, Lacquer Craft developed the needed capabilities to build its own brand in an international setting. Lacquer Craft’s successful experiences show that in a globalized economy, the ability to identify and exploit opportunities to link with established players, and the ability to search, acquire, and integrate strategic assets from the developed world rather than replicating the entire previous technological trajectory greatly facilitate the OEM firm in climbing up the value-added ladder and upgrading to OBM. This is a more aggressive upgrading approach. Its experiences also reveal that a firm’s product and technological upgrading strategies are closely interwoven with its internationalization strategy.     

The effect of institutional isomorphic pressure on the internationalization of firms in an emerging economy: evidence from China

This study uses institutional theory to explore the driving force for internationalization of firms in emerging economies. It posits that the internationalization practices of firms are driven not only by efficiency consideration, but also by the desire to conform to institutional isomorphic pressures exerted by the social environment. The impact of three types of institutional isomorphic pressures – coercive pressure, mimetic pressure and normative pressure – on the intensity of internationalization is investigated. Analysis using survey data collected from 174 Chinese firms shows that all three institutional pressures have positive and significant effects on the intensity of internationalization. We also examine the interaction between institutional pressure and firm capability. Results suggest that firm capabilities enhance the effect of coercive pressure on internationalization, and weaken the effect of normative pressure on internationalization.     

Dynamic organizational learning: a narrative inquiry into the story of Huawei in China

In this paper, we apply a model derived from dynamic capability theory to analyse the evolution and development of Huawei as an emerging MNC that is also a dynamic learning organization. We show how this firm has evolved through four distinct eras, characterized in succession by imitation, improvement, integration and cross-disciplinary engagement. Each era has involved a sequence of steps, beginning with opportunities, and followed by path, position, processes and transformation. Through much of its history, Huawei drew heavily on outside expertise. By contrast, the contemporary Huawei has become self-sufficient, as progressive transformations have enabled the firm to acquire dynamic capability for developing unique client-driven solutions by combining knowledge from diverse internal expert communities.     

Decision mode,information and network attachment in the internationalization of SMEs: A configurational and contingency analysis

There has been limited attention to the internationalization of SMEs as a decision, and how the use of contrasting decision modes is associated with different information use and patterns of network attachment. This paper offers a new and systematic analysis of the likely associations between decision modes, information use, and network attachment among internationalizing SMEs. The analysis is subsequently contextualized in terms of two contingencies – the knowledge domain of the SME and the international experience of its key decision-maker. By focusing on the relation between a relatively neglected subject – decision modes – and other issues that have been more center-field, the paper contributes to an analytic synthesis in the field of SME internationalization research.     

Linking knowledge, entry timing and internationalization strategy

This paper contributes to the current internationalization theory by linking the characteristics of the firm's resource-base, its market-entry timing orientation and international growth orientation so as to shed more light on internationalization strategies. By employing multi-industry data, we find that the nature of the firm's knowledge, its entry timing orientation and international growth orientation are related to its internationalization strategy. Among other results, we find that the firm's accumulated expertise is positively related for both the international growth orientation and entry timing orientation. The international growth orientation, in turn, is related both to the path type of internationalization the firm employs as well as the geographical diversification in market entry. In other words, the results suggest that the firm's resource-base influences on both its entry timing orientation and to the internationalization strategy. These and other findings are discussed with regard to their scholarly and managerial implications.     

Moderators on international diversification of advanced emerging market firms

Firms from advanced emerging markets are becoming notable players in the global marketplace. This study seeks to examine how these firms expand to international markets successfully. Drawing on R&D intensity and learning capability, this study finds that an s-shaped relationship exists between firm internationalization and performance. The results also show that R&D intensity and learning capability significantly strengthen the impact of internationalization on firm performance. These results imply that R&D intensity and learning capability are the main drivers of success for firms from advanced emerging markets in foreign markets.     

The Internationalization of Small and Medium-Sized Firms

This paper contributes to the existing research by integrating the notions of organizational learning and entrepreneurial orientation into the body of international entrepreneurship. Our primary framework combines learning theory and the new venture theory of internationalization to study the extent to which small and medium-sized companies engage in international activities. We found that the firms’ international learning effort and entrepreneurial orientation are positively associated with internationalization intent whereas domestic learning effort is negatively related with internationalization intent. Overall, our results suggest (1) that intensive knowledge renewal and exploitation regarding foreign markets and the internationalization process itself may increase internationalization by affecting the perceptions of opportunities offered by further international expansion, and (2) that firms with an entrepreneurial mindset may be more likely to develop a long-term, substantial presence in the international arena, compared to firms that are more reactive or conservative.     

DIY: How internationalization shifts the locus of indigenous innovation for Chinese firms

We elaborate theories of indigenous innovation by explaining how internationalization choices help emerging market firms transition from dependence on external knowledge to self-reliance on internal knowledge. Using a 1998–2007 census dataset of Chinese manufacturing firms, we theorize and test the moderation effect of foreign equity and export orientation on the relationship between knowledge and indigenous innovation. We show that foreign equity dis-incentivizes, while export orientation incentivizes, investments in internal knowledge. We contribute by showing that internationalization choices may radically change indigenous innovation outcomes by shifting the locus of problem solving outside or inside the firm. Our study corroborates the negative direct and indirect effects of external knowledge on indigenous innovation at the firm level previously suggested by China-centric scholars but also shows how two types of internationalization choices may gradually relieve firm-level dependence on imported technology. We bridge the gap between Western research and Chinese thought and practice by introducing a do-it-yourself (DIY) explanation of how firms may implement China’s indigenous innovation (zizhu chuangxin) policy.     

Rapid internationalization of emerging market firms—The role of geographic diversity and added cultural distance

In this study, we examine drivers of internationalization speed of emerging market multinational enterprises who have been known to internationalize rapidly, even to culturally distant countries. Drawing on the organizational learning theory, we argue that, devoid of a pre-existing knowledge base before they begin their international expansion, these firms are unencumbered by the pathologies and traps that are likely to slow a firm with pre-existing knowledge. We posit inverted U-shaped relationships between geographic scope and added cultural distance on the one hand, and internationalization speed of Indian software multinationals, on the other hand. We also hypothesize a moderating effect of the regularity of added cultural distance on the relationship between added cultural distance and internationalization speed. Our analyses of 650 internationalization expansions of 32 largest Indian software firms over a ten-year period support our hypotheses.     

Digitalization,internationalization, and firm performance: A resource-orchestration perspective on new OLI advantages

Digital forces and digital global connection weaken traditional ownership, location and internalization (OLI) advantages and intensify new OLI advantages (open resources, linkages and integration). However, by building on the resource-orchestration theory, we raise the question of how digitalization (utilization and orchestration of digital resources) and internationalization (firm-level outward internationalization and country-level inward internationalization) affect firm performance. We introduce the degree of outward internationalization and home-country inward foreign direct investment (FDI) inflows as moderators in achieving firm performance as a result of digitalization. Using a panel dataset of 571 U.S. manufacturing firms, we find a curvilinear relationship between digitalization and performance. The top quartile of digitalization efforts is rewarded by significant profitability. Moreover, high levels of outward internationalization and high net-FDI inflows increase the performance gains attributable to high levels of digitalization. Overall, the resource-orchestration theory complements new OLI advantages in explaining firm performance in the digital world.     

Navigating liminality in new venture internationalization

Prior research describes international expansion as a series of discrete steps and notes that taking them threatens new ventures' survival, especially due to unexpected setbacks. Seen through the lens of social science, the source of such threat becomes clearer. In this paper, we argue that internationalization in new ventures involves what social anthropologists call a liminal transition – a betwixt-and-between period lying between the intent to internationalize and the realization of a stable internationalized state. The ambiguous and transitory nature of this liminal transition has the potential to increase the odds of overreach (e.g. a high-cost market entry without sufficient resources). Avoiding the negative influence of liminality – and instead harnessing its positive effect – relies on three sources of support that we refer to as opportunity scaffolding: self-reflective learning, peer learning and consultative learning. We argue that entrepreneurs with personality profiles high in levels of core self-evaluation (CSE) are more likely to utilize the scaffolding like that available in business incubators effectively. This leads to the development of a more reflective mindset, making capability learning more likely, preventing decisions that lead to overreach and reducing the threat to INV survival. However we also strike a note of caution in that at excessive (hyper) levels of CSE, the internationalizing new venture could become the victim of hubris. Emboldened with unrealistically high self-confidence, hubristic entrepreneurs are more likely to rebuff use of scaffolding, leading to a more reactive mindset, increasing the probability of liminal overreach and threatening INV survival.

Cognitive foundations of firm internationalization: A systematic review and agenda for future research

Managerial cognition has a fundamental role in the internationalization of firms. However, there exists no coherent understanding of how prior research has examined and captured the cognitive foundations of internationalization. This paper provides a systematic review of this body of literature. The review identifies three main streams of research that, overall, consists of nine more specific research areas. We show that especially the areas addressing (1) managerial learning, (2) characteristics of upper echelons, (3) intra-organizational perceptions, and (4) external actors’ perceptions provide opportunities for the further advancement of internationalization literature. For harnessing these opportunities, we find that the microfoundational approach could support the empirical examination of the cognitive foundations and would notably contribute to the Uppsala model-based theorization of the firm internationalization process.