Modeling firm specific internationalization risk: An application to banks’ risk assessment in lending to firms that do international business |
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| Institution: | 1. Global Projects Center, School of Engineering, Stanford University, CA, USA;2. School of Business, Stockholm University, Stockholm, Sweden;3. Department of Marketing and Strategy, Stockholm School of Economics, Stockholm, Sweden;4. Centre for Banking and Finance, Royal Institute of Technology, Stockholm, Sweden;5. GSE, Stanford University, CA, USA;1. University of Exeter Business School, Streatham Court, Rennes Drive, Exeter EX4 4PU, UK;2. Manchester Business School, The University of Manchester, Booth Street West, Manchester M15 6PB, UK;3. Dept. of Electrical, Managerial and Mechanical Engineering, University of Udine, Via delle Scienze 208, 33100 Udine, Italy;1. University of Bari, Department of Economics, Italy;2. LUMSA, University of Rome, Department of Economic and Political Sciences and Modern Languages, Italy;1. Department of Business Studies, Uppsala University, Sweden;2. CER, Department of Economic Sciences and Law, Mid Sweden University, Sundsvall, Sweden;3. Dalarna University College, Falun, Sweden;1. Aalto University School of Business, Department of Management Studies, Finland;2. Stockholm School of Economics, Department of Marketing and Strategy, Sweden;1. Discipline of Management Studies, Faculty of Business, Government and Law, University of Canberra, Bruce, ACT 2601, Australia;2. School of Business, Monash University Malaysia, PO Box 8975, 46780 Kelana Jaya, Selangor, Malaysia;3. Southern Cross Business School, Faculty of Business and Law, Southern Cross University, Locked Bag 4, Coolangatta, QLD 4225, Australia |
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| Abstract: | Drawing on internationalization process theory, we develop a new model for firm-specific internationalization risk assessment. The model shows that firm-specific internationalization risks can be determined from a firm's experiences and from current business activities in a firm's network. Experiential risks are categorized as international, country market, network, or relationship experience risks. Risk assessment in current network activities can be determined from a firm's dependency on a network and from the network's performance and evolution. We apply our model to credit risk assessment by banks and other credit institutions. This article adds to research on financial institutions’ credit risk assessment by focusing on firm-specific internationalization risk assessment, an area that has previously received little attention in the literature. In addition, this article provides a better understanding of risk assessment in the internationalization process, shedding light not only on the risks involved in firms’ commitment to internationalization but also on the risks that banks and other institutions take when they commit by lending to internationalizing firms. |
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| Keywords: | Bank Experience Internationalization Network Process Risk assessment |
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