International Entrepreneurship –
Summaries
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#7 – International Expansion by New Venture Firms: International Diversity, Mode of Market Entry,
Technological Learning, and Performance
New venture firms, being companies six years old or younger, are moving into international market
early in their life cycles. A combination of institutional factors, industry factors, and organizational
factors fuel their expansion. The expansion allows growth, positive returns, and capitalization of
learning. However, even when a new venture firm has a superior product, it must learn other skills to
position its product successfully.
Knowledge creation can be a difficult process. Firms must manage this process with the intent of
integrating the learning that has occurred in the international operations. Integration is the process
by which managers determine what has been learned, evaluate its potential importance, and explore
ways in which the new knowledge can be used. Ventures undertaking this integration achieve
greater, deeper, and speedier technological learning. The ability to manage and cultivate knowledge
differentiates success from failure. Effective learning is cumulative in nature. This knowledge
influences a venture’s ability to adapt its products to local market conditions, capitalize on market
dynamism through rapid new product developments, and identify emerging technological change
that can influence firm performance. Breadth denotes the multiple areas in which a venture learns
technological skills. Depth refers to a venture’s mastery of new knowledge, evidenced by an ability to
draw new conclusions and find new links among diverse knowledge bases. Finally, speed of
technological learning describes how rapidly the ventures acquires new insights and skills. Knowledge
integration moderates the relationship between international expansion activities and technological
learning, which in turn influences firm performance.
International diversity (Number of countries, technological diversity, cultural diversity, geographic
diversity, and foreign market segments) denotes a firm’s increased reliance on foreign markets as a
means of growth and financial performance improvements. Learning derived from national
differences and economies of scale and scope can be a source of competitive advantage. Concerning
breadth, a venture that expands internationally by entering markets in several foreign countries is
more likely to experience different cultures and institutional systems than one that focuses on a
single or a few countries. This learning emerges from understanding and using cultural values in
designing and marketing the firm’s products and process technologies. Moreover, exposure to, and
direct involvement with, business and customers in multiple countries is an important means of
learning by doing, which promotes deeper technological learning. Diverse ideas and capabilities
encountered in international business operations produce combinative knowledge. Regarding speed,
internationalization can enhance the speed of learning as a firm experiences multiple cultures and
markets. However, early exposure can also lead in an information overload owing to increased
transaction costs and cultural diversity. As such, the authors propose a curvilinear relationship
between a new venture firm’s international diversity and the speed of learning.
International business transactions differ in their risks and payoffs and the experience gained from
them. Deep stakeholder involvement associated with high-control transactions exposes a firm to
unique knowledge bases and experiences. These modes typically require a closeness to a market and
its customers, thus increasing the venture’s exposure to different information sources. Interactions
with local suppliers may provide information about the market, customers, and competition, thus
increasing the firms breadth of technological learning. Moreover, a new venture firm using high2
control entry modes is likely to experience more radical learning than those using modes requiring
less involvement, due to learning by doing, thus increasing the depth of technological learning.
Finally, closeness to the market and its customers is conductive to rapid learning. By using high
control entry modes that ensure closeness to customers in international markets, ventures increase
the speed of its learning.
For technological learning to yield an advantage, it must be captured, interpreted, and deployed
effectively. Integration enables managers to internalize what is has learned in its international
operations, helps developing shared learning and accumulating knowledge over time. Formal
integration is the process by which managers inventory (determine what has been learned and
evaluate importance), synthesize (understand what has been learned and articulate the knowledge),
and use (devise ways to exploit the knowledge) the knowledge they have gained. New ventures
usually have organic structures that permit speedy and effective flow of knowledge and its
subsequent use in activities. Knowledge integration is expected to moderate the relationship
between the international modes of entry, international diversity, and technological learning.
The success of international new ventures is explained by their ability to leverage the knowledge
gained from foreign operations. The breadth is useful in designing new products and updating
existing ones. The depth improves a firm’s ability to redesign its products for ease of use, offer
customized applications, or radically change product definitions. Finally, the speed improves the
venture’s performance by compressing the product development cycle.
International expansion provides new market opportunities in which a firm can sell its product
innovation. International diversity allows the new venture to enter and profit from beneficial
networks. All modes of entry should have positive effects on firm performance.
The results show that international diversity is a significant predictor of breadth, as well as exports
and acquisitions. The same thing goes for depth, with start-ups and foreign acquisitions being
related. Technological diversity was positively associated with speed. However, the number of
foreign countries entered has a negative effect on speed.
There is a strong relation between international diversity and mode of entry and the breadth, depth,
and speed of learning, especially when formal knowledge integration is used. Breadth, depth, and
speed are related to new venture firm performance. The higher the diversity of the market entered,
the greater the opportunity for learning. However, greater diversity may reduce the speed of
learning as well. New ventures that diversify internationally may have to trade speed off against the
breadth and depth of technological learning. Moreover, there was no relationship between start-ups
and breadth of learning. The results also show that high-control modes are positively associated with
depth. In contrast, lower modes have a negative effect on speed. Knowledge integration increases
the breadth and depth of the technological learning new ventures gain. The role is even more
important with modes of entry. Furthermore, technological learning is positively associated with new
venture performance. Finally, there are mixed results of dimensions of international diversity on
performance.
#8 – How New Ventures Exploit Trade-Offs among International Risk Factors: Lessons for the
Accelerated Internationalization of the 21st Century
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Accelerated internationalization refers to the phenomenon of firms engaging in international
business activities earlier in their organizational life cycles than they have historically. Existing
internationalization theory highlights slow and incremental foreign market commitment because
such behavior has been frequently observed and because internationalization seems so risky for
small markets and new ventures. International business is considered inherently risky because it may
involve loss of profits and/or assets as a result of changes in political, legal, economic, and social
factors in foreign markets. So how can firms experiencing the risks of small size and newness also
successfully manage the additional strategic risks of entering foreign markets so early in their
existence? It can be argued that multiple international risks can be managed by trading off one risk
against another to keep overall firm risk lower than it would be without such trade-offs. Three of the
most important international risk factors are (1) foreign location, (2) type of commitment to that
foreign location, as evidenced by the modes of entry chosen, and (3) the proportion of revenue
exposure a firm has in that location.
Internationalization is said to provide small firms with an important opportunity for growth that, due
to their relative poverty of resources, often occurred through interorganizational alliances. Rapid
internationalization of new and small ventures is believed to be either an unimportant anomaly or a
world-wide expansion of the Japanese keiretsu model, where small firms operate as thoroughly
dependent suppliers to large established multinational organizations.
Empirical work showed that clear product differentiation and internationally experienced directors
and managers are associated with the early internationalization of independent new ventures.
It is most accurate to view internationalization and the risks inherent in managing it, as having
multiple dimensions that are distinct but simultaneously determined. When a firm enters a foreign
country, it faces both financial and strategic risks. Handling financial risks involves the purchase of
insurance to protect against property, casualty, and liability losses due to foreign operations and the
buying and selling of financial instruments such as forward contracts, futures, swaps, and options, to
lock in fixed prices and to protect against foreign exchange risks However, insurance and hedging are
never complete, and all firms must use strategic actions to manage some of their risks. There are five
types of strategic actions that are possible responses to international risks. One is imitation: firms
competing in the same industries entering the same countries. Copying the actions of another
company whose behavior is judged appropriate grants legitimacy to the imitator. However, imitation
is not a predominant way of handling the risks. The deep niche strategies often used by new ventures
in the international arena, whereby firms deploy unusual products or services to focus on a narrow
sliver of a market, mean that their forte is uniqueness, not imitate oligopolistic competition. Other
strategic actions are avoidance, flexibility, cooperation, and control. Avoidance occurs when the
decision makers of a firm believe that operating in a particular area is unacceptably uncertain and
refuses to enter a country or exit a country it has already entered. The essence of the flexibility
strategy is decreasing the cost of internal organizational adaptation to changing international
circumstances. This way, the firm may respond rapidly and effectively when prices, demand, or
standards change. With the strategic response of cooperation, ventures enter into agreements with
other parties to reduce uncertainty in exchange for giving up unilateral control. Sometimes, foreign
entry through cooperative action is forced upon a firm by foreign laws mandating some arrangement
such as a joint venture with a host country business. Finally, the concept of control involves direct
attempts to influence the behavior of others, especially other firms through vertical and horizontal
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integration, moves designed to gain market share, and political actions, although new ventures tend
not to vertically integrate. Thus, in summary, even entrepreneurs of new ventures entering foreign
countries are able to influence, if not control, international risks.
H1 follows, for new ventures entering a specific foreign country, the degrees of foreign market
revenue exposure, host country risk, and entry mode are simultaneously determined. Moreover, H2,
for new ventures entering a specific foreign countries, the degrees of foreign market revenue
exposure, host country risks, and entry mode commitment are traded off against each other. That is,
when level of one increases, the levels of one or both of the others decrease.
Shifting resources among various country subsidiaries in response to change in relative prices and
knowledge has been show to be an important way of managing risk in large multinational
corporations. The operational flexibility afforded by geographic diversification is the foundation for
long/term competitive advantage in large multinational corporation. As a venture enters more
countries, it seems likely that the proportion of its revenue exposure in any single country will
decrease. Moreover, the relationship between foreign country risk and the number of countries
entered is less clear, but it seems likely to be positive. As the number of countries entered rises, the
venture gains experience in handling foreign market risk and may be willing to enter countries with
greater political and economic risk. The number of countries entered by a firm may have no
systematic relationship with entry mode, although low/risk entry modes are likely with more
countries. Following this, H3, for new ventures, the degree of foreign market revenue exposure in a
specific country will be negatively related to the number of countries entered, H4, for new ventures
the degree of host country risk will be positively related to the number of countries entered, and H5,
for new ventures the degree of entry mode commitment will be negatively related to the number of
countries entered.
Control variables are top management team and their experience. Ventures whose managers have
significant technical and marketing experiences are likely to be able to adapt existing skills to serve
diverse and higher/risk markets much more readily. Perhaps more than any other type of experience,
new venture experience can help compensate for the liabilities of newness. Moreover, higher
performance objectives may lead a firm to assume greater international risks, which is why firm/level
conditions and strategies must be controlled for. The more firms focus on narrowly defined niches,
the more likely it is that their domestic markets will be inadequate for their sales objectives and the
more likely they will be to enter foreign markets. Firms that compete on the basis of cost frequently
enter foreign countries to achieve economies of scale, lower production costs, and to prolong
product life cycles and thereby increase sales. Finally, industry conditions have to be accounted for.
For new ventures, these include the degree of global integration, the speed of technological change,
domestic competitive intensity, and the rate of industry growth.
The results show that H1 ,H2, H3 and H5 are supported. There is no support for H4. Results indicated
that the number of countries entered by these ventures was not related to the level of host country
risks. Perhaps the sample countries have not entered enough countries to create a portfolio
diversification effect or a capability for transferring assets among a network of subsidiaries. From the
control variables, internal, marketing, and prior new ventures experiences were positively associated
with more and riskier international operations. Management team size was positively related to
entry mode commitment, since the increasing complexity of entry modes requires more people and
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greater specialization among top managers. Firm strategies were an important influence on the
degree of foreign market revenue exposure. However, emphasis on quality was negatively related to
all three internationalization variables. Finally, global integration was associated with lower foreign
market risks.
In established multinational corporations, flexibility that enables moving knowledge and assets
among a diversified set of countries has been highlighted as an advantage and a way of managing
risk. In contrast, new ventures experiencing accelerated internationalization can manage risks by
determining trade/offs among the three risk factors. In summary, the research indicates that
international entrepreneurial experience, trade/offs among strategic international risk factors, and a
foundation in advanced technology may be important elements in a theory of accelerated
internationalization.
The results show that there was indeed evidence of trade-offs among those three types of strategic
international risk. Smaller firms that are new to the international arena are believed to manage the
risks by cautious and slow-paced foreign entries. Firms experiencing accelerated internationalization
and lacking large networks of foreign subsidiaries may manage international risks by trading foreign
location, entry mode commitment, and foreign revenue exposure off against each other in each
country they enter.
#9 - Innovation, Organizational Capabilities, and the Born-Global firm
Despite the scarce financial, human, and tangible resources that characterize new ventures, these
early internationalizing firms leverage innovativeness, knowledge, and capabilities to achieve
considerable foreign market success early in their evolution. Born globals are business organizations
that, from or near their founding, seek superior international business performance from the
application of knowledge-based resources to the sale of outputs in multiple countries. The
distinguishing feature of these firms is that their origins are international, as demonstrated by
manager’s global focus and the commitment of specific resources to international activities. These
early adopters of internationalization begin with a global view of their markets and develop the
capabilities needed to achieve their international goals at or near the firm’s founding. The period
from domestic establishment to initial foreign market entry is often 3 years or less. The smaller size
typical of young firms confers a sort of flexibility that provides key benefits for succeeding in foreign
markets. Two trends have substantially reduced the transaction costs of foreign market expansion,
being the globalization of markets, and technological advances in information and communications
technologies.
The superior ability of certain firms to sustain innovation and create new knowledge leads to the
development of organizational capabilities, consisting of critical competences and embedded
routines. Innovation results from two major sources: internal R&D that draws on the firm’s
accumulated knowledge, and imitation of the innovations of other firms. The function of
entrepreneurs is to reform or revolutionize the pattern of production by exploiting an invention or,
more generally, an untried technological possibility for producing a new commodity or producing an
old one in a new way, by opening up a new outlet for products. Internationalization, or new entry
into overseas markets, is an innovative act. Knowledge is the most important resource, and the
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integration of individuals’ specialized knowledge is the essence of organizational capabilities.
Knowledge provides advantage that facilitate foreign market entry and organizations and is the
capacity of the firm to apprehend and use relationships among informational factors to achieve
intended ends. Organizational capabilities reflect the ability of the firm to perform repeatedly, or
replicate, productive tasks that relate to the firm’s capacity to create value. Competences are those
knowledge-intensive, performance-enhancing business activities in which the firm is particularly
skilled. Organizational capabilities are the main source of the firm’s performance advantages and
have two major aspects: the shifting character of the business environment and strategic
management in adapting, integrating, and reconfiguring knowledge based capabilities.
Larger, long-established firms usually experience substantial bureaucratization that hinder innovative
activities, smaller or younger firms are more flexible and generally enjoy internal conditions that
encourage innovativeness. R&D productivity relative to size decreases when firms get older and
become larger. Possession of capabilities-based resources helps firms to attenuate their liabilities of
foreignness and newness.
A key dimension of born-global firms is that they appear to lack the deeply rooted administrative
heritage. Well-established firms must unlearn routines before new ones can be learned.
Organizational learning theory suggests that the development of new knowledge occurs best under
conditions in which there are little or no existing organizational routines to unlearn.
The qualitative phase of the study revealed that born globals are likely to be formed by
entrepreneurs who pursue foreign ventures with a strong marketing orientation. They tend to
leverage technological prowess, relatively unique products, and strong quality focus to sell their
offerings via independent distributors in markets worldwide.
Having an international entrepreneurial orientation implies that these firms make the leap into
international markets because of unique entrepreneurial competences and outlook. International
entrepreneurial orientation reflects the firm’s overall innovativeness and proactiveness in the pursuit
of international markets. Possession of this orientations gives rise to certain processes, practices, and
decision-making activities associated with successful entry into new markets.
The international marketing orientation refers to a managerial mindset that emphasizes the creation
of value, via key marketing elements for foreign customers. Marketing oriented firms seek to offer
products and services whose value buyers perceive to exceed the expected value of alternative
offerings. It provides the foundation from which the firm interacts with diverse foreign markets.
The most important business strategies are global technological competence, unique products
development, quality focus, and leveraging of foreign distributor competences. Global technological
competence refers to the firm’s technological ability relative to cohort firms in its industry.
Entrepreneurial firms continually seek to create products and operating methods that improve
organizational performance. International marketing orientation can also foster global technological
competence, since firms leverage technology to innovate in the creation and improvement of
products. Information and communication facilitate learning about customers and competitors. Thus,
H1, in he born-global firm, global technological competence is a function of international
entrepreneurial orientation and international marketing orientation. Unique products development
reflects the creation of distinctive products and is akin to differentiation strategy. An entrepreneurial
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orientation is required to cope with the more established rivals. Moreover, differentiation strategy
and the creation of unique products are marketing-based strategies, thus, H2, in the born-global
firm, unique products development is a function of international entrepreneurial orientation and
international marketing orientation. Quality focus reflects efforts to develop products that meet or
exceed customer expectations with respect to features and performance. Entrepreneurial
orientation gives rise to innovative processes and practices intended to maximize organizational
success in new markets. As an important marketing strategy, firms with a strong international
marketing orientation are also likely to promote a quality focus. Thus, H3, in the born-global firm
quality focus is a function of international entrepreneurial orientation and international marketing
orientation. Finally, leveraging foreign distributor competences refers to the tendency of born
globals to rely on foreign independent distributors and their competences to maximize performance
outcomes. The uncertainty, risk, and unique challenges present in foreign markets can be overcome
by leveraging the localized market knowledge and competences of foreign intermediaries. Strongly
marketing-oriented firms will also tend to seek competent foreign intermediaries because strong
distribution capabilities facilitate superior promotion, customer relationship management, and other
downstream marketing activities. Thus, (H4) in born global firms, leveraging foreign distributor
competences is a function of international entrepreneurial orientation and international marketing
orientation.
To summarize, global technological competence is a critical source of new products and business
methods and has the potential to foster information technology and e-commerce, unique product
development yields differentiation strategy benefits which can allow born globals to serve nice
markets more capably and minimize harmful interaction with competitors, quality focus implies a
system of firm resources specifically devoted to creating superior offerings, and leveraging foreign
distributor competences is markedly critical. All factors are hypothesized to lead to superior
performance in H5. H1b and H4a are not supported, the rest is.
In conclusion, born globals acquire a substantial, fundamental base of international experience and
knowledge that traditional MNEs typically have taken longer to acquire.
#10 – International Entrepreneurship in Internet-Enabled Markets
By increasing the quality and speed of communications and transactions and decreasing their costs,
advances in IT made internationalization more feasible for resource-constrained firms.
A firm’s reputation is a perceptual representation of a company’s past actions and future prospects
that describe the firm’s overall appeal to all its key constituents when compared to other leading
rivals. Firms with favorable reputations benefit because they are more attractive to stakeholders.
This attractiveness can yield price, cost, and selection advantages that may persist over time.
Further, reputation involves both visibility and quality. The second resource identified is the online
technology capabilities, which are defined as the engagement of routines, prior and emergent
knowledge, analytic processes, and simple rules to turn IT into customer value. The sustainability of
the competitive advantage from technology lies in the firm’s ability to configure and leverage
technological components in a rapidly changing technological context. Firms that make higher
investments in technology are more successful in their use of internet-based export channels.
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Thirdly, an online brand community is an online specialized, non-geographically bound community,
based on a structured set of social relationships among admirers of a brand. Prospective buyers
want online information about sellers quality to lower their search costs and online brand
communities can provide positive endorsements. The internet lowers switching costs for current
buyers and so they are easily disrupted by a new competitive entry, but brand communities can
foster affective support which increases switching costs.
In order to stand out of this larger pool of companies and be able to exploit internationalization
opportunities, it is important that firms develop an online reputation. In new industries, an early
online reputation yields gains because there is an increased capacity for herding behavior, with
buyers imitating the purchase decisions of previous buyers. Online visibility is defined as familiarity in
the eyes of online stakeholders relative to that of its rivals. P1 follows that the online visibility of a
firm is positively related to the firm’s successful pursuit of international opportunities, when
competing in internet-enabled markets. Beyond signaling quality through price and advertising,
managers also have the option of signaling quality through the information they disclose online.
Affiliations with famous people, third-party awards, certifications and testimonials are all reputationbuilding mechanisms that have been found to be beneficial to disclosure for firm operating online.
Moreover, a company can disclose its country-of-origin, which may be associated with reputational
signals of a country’s image. Finally, signal volume and signal consistency are aspects of a firm’s
online reputational signals that researchers need to take into account when assessing a firm’s online
reputation. When multiple reputation signals are available, consistency across the valence of
individual signals leads to perceptions of high quality among the signal’s valence. P2 follows, the
perceived trustworthiness of a firm positively mediates the relationship between the valence,
volume, and consistency of its online reputational signals and the firm’s successful pursuit of
international opportunities, when competing in internet-enabled markets.
The quality of a firm’s online technology has been found to be associated with lower online customer
switching, better international customer-supplier relationships, better online market performance,
and better overall firm performance. Having online technological capabilities will better enable firms
to pursue internationalization opportunities provided in internet-enabled markets. Firms with more
integrated back-end functionality are better able to discover international opportunities because
they are better able to analyze their data. They are expected to be able to exploit international
opportunities better because they can deliver responses to customers more quickly. Thus, P3 follows,
the back end integration of a firm’s online technology is positively related to the firm’s successful
pursuit of international opportunities, when competing in internet-enabled markets. A second
dimension of online technological capabilities is a firm’s ability to customize the online experience for
particular markets. Website customization facilities promote effective communication with
customers in specific regions, which in turn is critical to building an international presence via the
internet. P4 follows, a firm’s website customization capabilities are positively related to the firm’s
successful pursuit of international opportunities, when competing in internet-enabled markets.
Firms competing in a dynamic environment need dynamic capabilities because they need to
regenerate their competitive advantage on an ongoing basis. A useful construct is technological
opportunism, which is a sense-and-respond capability with two components. Technology-sensing
capability is an organization’s ability to acquire knowledge about and understand new technology
developments, while technology response capability is an organization’s willingness and ability to
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respond to the new technologies it senses in its environment that may affect the organization. In
order words, the sensing capability involves identifying, scanning, and evaluating innovations, while
the response capability involves monitoring, staving off threats, experimentation, and/or adoption.
Firms with a greater sensing capability are likely to be better able to discover opportunities and firms
with a greater response capability are likely to be better able to exploit such opportunities, leading to
P5, the technological opportunism of a firm is positively related to the firm’s successful pursuit of
international opportunities, when competing in internet-enabled markets.
Finally, success depends on setting a strategic direction, developing the necessary resources and
capabilities and institutionalizing the strategy among internal and external stakeholders. Thus, top
management championship, with both an attitudinal dimension and a behavioral dimension, is
required. It is defined as positive tmt believes about the value of online initiatives, as well as
participation in those initiatives. P6 follows, the relationship between top management
championship of online technological initiatives and a firm’s successful pursuit of international
opportunities, when competing in internet-enabled markets, is positively mediated by three
dimensions of online technological capabilities: back-end integration, website customization
capabilities, and technological opportunism.
Having well-developed social networks with stakeholders facilitates internationalization. Online
interactions can provide companies with important information about their markets and so have the
potential to enable firms to discover, evaluate and exploit international opportunities. Online brand
communities may be initiated by a firm or by buyers or users of its products. Online brand
communities can enable brand use, enhance brand perception, provide affective support, provide
solutions to users, and help to build additional meanings of the brand. Companies can monitor and
learn from them about product and company perceptions., leverage active users insights, and
stimulate positive word of mouth. P7 follows, the level of engagement of a firm’s online brand
community is positively related to the firm’s successful pursuit of international opportunities when
competing in internet-enabled markets.
The extent to which there are market-related barriers to entry such as jurisdictional regulations and
cultural barriers hinder the firm and reduces the generalizability of this research.
#11 – Internationalization in different industrial contexts
The structure of an industry is continually evolving, driven by technological, economic, and
competitive change. A common way of classifying changes in an industry is the industry life cycle,
which categorized an industry’s development in four parts: introduction, growth, maturity, and
decline.
Internationalization decisions are often seen as a rational decision after an analysis of, for example,
transportation costs, tariffs and nontariff barriers, transaction costs, relative wages and market size.
The industry perspective can be included to show how the firm’s internationalization is influenced by
The Upsalla model follows two ways: First, the sequence of foreign market entry and second, the
pattern describing the increasing commitment to a single market. The pattern is explained by the fact
that firms enter markets with a successively greater psychic distance, meaning factors preventing or
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disturbing the flows of information between firms and market. However, research shows that market
potential plays a larger role than psychic distance. Criticism of this theory is that the company should
not be viewed as an independent actor, but as part of a network. Moreover, the model is thought
only to be valid in the early stages of internationalization, when the lack of market knowledge and
resources is still a constraining force. In the later stages, the local networks of which the foreign
subsidiaries are a part become the most important sources of knowledge for the localization of
foreign activities.
There is an option for strategic choice when it comes to selecting national markets and modes of
entry. Firms can be global shortly after their inception. Management view the world as its
marketplace from the outset and unlike traditional companies, they do not see foreign markets
simply as adjunct to the domestic market. Born globals being exporting one or several products
within two years of their establishment and tend to export at least a quarter of total sales. The RBV
and entrepreneurship theory are better able to explain the concepts of born globals. Born globals
emerged because of an increasing role of niche markets, advances in process technology and
communication technology, and more means towards internationalization. The growth of a born
global is associated with high innovative skills, including the ability to access effective R&D as well as
distribution channels, often in partnerships, and involving frequent, intense, and integrated efforts
across nations. The risk of entering foreign markets is managed by exploiting simultaneous trade-offs
between entry mode commitment, country risk, and foreign revenue exposure in each country.
Examples of early internationalization in mature industries can be found in Trelleborg (following
Uppsala model) and Skega (not taking into account psychic distance). Late internationalization is also
found in Trelleborg, now acquiring firms that were cheap, in different industries. Early
internationalization in high-growth industries is IBS, Intentia, and IFS.
Internationalization, as a learning process, and the concept of psychic distance are most relevant
when discussing export substitution market expansion. FDIs, which are the base for the search for
resources and low/cost considerations, are not likely to be explained by using the concept of psychic
distance. Firms in different industries may have different international patterns. It is important that
the analysis of cultural differences is carried out at industry level, as cultural differences vary
between industries. Moreover, the individuals responsible for the international expansion have a
great influence on the international development, as do personal networks and language ability.
Knowledge of foreign markets through personal experience is important for international
development. Different theories are appropriate depending on the firm´s stage of
internationalization and whether the industry is mature or growing:
Industry
Stage of
internationalization of
the firm
Early
Mature
Learning process
Late
Oligopolistic reaction
Growth
International
Entrepreneurship
Dynamic cluster
#12 – International Entrepreneurship and Geographic Location: An Emperical Examination of New
Venture Internationalization.
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Pursuing internationalization early in their existence enables new ventures to realize improved
performance, to achieve greater breadth, depth, and speed of technological learning, and to exploit a
competitive advantage. The local environment is noted to be the primary source of resources needed
for operations. Resources develop according to the needs of industries operating therein and
consequently increase with the concentration of industry clustering within a given location,
becoming geographic cluster locations. The resource benefits of geographic cluster locations
combined with the importance of resources to the internationalization process suggests that the
greater availability of resources in locations with higher concentration of industry clustering would
enable new ventures operating therein to acquire the resources needed to internationalize their
operations. However, higher competition over resources may limit the resources a firm is able to
acquire and the strategic initiatives it is able to pursue.
Early internationalization enables a new venture to take advantage of narrow windows of
opportunity to exploit products in international markets before competitors are able to attain a
foothold. The industry-specific resources that become available to firms as the industry
concentration increases include workers with important skill sets, specialized inputs, access to buyers
and suppliers, and knowledge about opportunities and competitors activities. The creation and
availability of these resources initially lowers the costs of entry, however, as subsequent investments
increase, competition for those resources increases.
Being co-located with foreign firms increases the entrepreneurs consciousness of and responsiveness
to opportunity in international markets and provides new ventures with an understanding of the
standards required for competing at an international level, making internationalizing operations a
more feasible option. Moreover, networks are known to be a critical source of knowledge about
international opportunities for new ventures and may provide greater access to capital and
knowledge spillovers.
With limited access to resources within the cluster, new ventures might choose to focus on servicing
other industry firms within the cluster, or simply on serving a domestic market nice that would
require fewer resources. Taken together, H1 follows, the concentration of industry clustering is
positively related to the level of new venture internationalization to a point, after which it becomes
negative. However, this relationship is not expected to hold uniformly across all ventures, since firm
characteristics determine whether a firm will internationalize and how dependent he is upon the
local environment.
The size of a new venture is linked to higher levels of internationalization, because an international
strategy requires a higher volume of resources to execute. Larger firms realize extensive advantage in
the internationalization process because they typically have greater diversity of product offering and
more expansive industry connections. Moreover, their greater need for resources would make them
less likely to be dependent solely upon the local environment for the resources needed. H2 follows,
larger ventures receive a more positive effect of industry clustering on internationalization up to the
optimal point and a less negative effect afterwards than smaller ventures.
A unique product can motivate a venture to internationalize in order to take advantage of higher
global demand or to exploit the innovation before competitors can replicate it. Innovative new
ventures may also internationalize to leverage the R&D costs across a greater market volume.
Moreover, high R&D ventures may be more apt to exploit knowledge spillovers from clusters. H3
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follows, ventures with high R&D intensity receive a more positive effect of industry clustering on
internationalization up to the optimal point and a less negative effect afterwards than ventures with
low R&D intensity.
The international experience of a new venture’s TMT has been show to increase the new venture’s
awareness of and ability to exploit opportunities in international markets. And to increase venture
internationalizations. H4 follows, ventures with high internationally experienced top management
teams receive a more positive effect of industry clustering on internationalization up to the optimal
point and a less negative effect afterwards than ventures with low internationally experienced top
management teams.
H1 receives full support whereas H2 and H3 receive partial support. H4 is not supported. The results
show that clustering can foster new venture internationalization, but too much clustering, this
constraints the venture’s ability to garner resources needed. Moreover, the way a venture is affected
by its location depends on the characteristics of the venture. Smaller new ventures were found to be
negatively affected by the concentration of industry clustering sooner than were larger new
ventures, because of more difficulty in obtaining resources or a lower need to do so. Large and small
ventures penetrate international markets at the same rate, although larger new ventures were to be
more capable of withstanding the negative impacts of increasing competition and pursuing
internationalization activities across multiple continents. Firms with higher R&D intensity are able to
internationalize to more continents than less R&D intensive firms, perhaps in part because of their
increased ability to reconfigure their technologies
#13 – Bounded entrepreneurship and internationalization of indigenous Chinese private-owned
firms.
The theory of international new ventures integrates transaction costs, corporate governance,
entrepreneurship and the resource-based view of the firm. Together with the PTI, the focus has
always been on developed economies. The main idea of PTI is that the process of firm
internationalization is the process of the firm’s gradual acquisition, integration, and use of knowledge
about foreign markets and operations, and incrementally increasing commitments to foreign
markets.
The international expansion of Chinese firms have shifted media attention from spotlighting China as
a giant sucking vacuum cleaner for global inward FDI to characterizing the country as a cash-rich
predator embarking on a global buying binge. We need to understand why and how ordinary Chinese
firms go international. The paper argues that existing individual theories cannot explain this and that
the concept of bounded entrepreneurship applies, which proposes that the founders of this group of
firms are entrepreneurial by nature, but their cognition and ability are bounded both by their limited
education and international experience and by China’s unique institutional barriers.
A firm’s external environment includes its political, social, technological, economic and business
conditions both at home and abroad. The PTI assumes that the domestic and foreign business
environment are very different in terms of language, etc. Firms need knowledge about the foreign
business environment to make resource commitment decision. The INV model argues that changing
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economic, technological, and social conditions reduced transactions costs of multinational
interchange. Lessons learned in the domestic business environment can be easily leveraged for
expansion in another country environment. P1 follows, the more closely linked and homogenized the
domestic and international business environment are, the earlier the entrepreneur will initiate firm
internationalization.
In the PTI, there is little role for an entrepreneur to play as the model is interested in the decisionmaking system rather than the individual decision maker. However, cognitive biases influence
entrepreneurs’ decisions. The entrepreneur’s education, functional expertise and past track records
of success and failure can significantly influence risks calculations. P2 follows, the choice between
focusing on domestic and international business is determined by entrepreneurial cognition of
relative advantages and disadvantages of internationalization, which is in turn influenced by the
entrepreneur’s education, experience and environmental conditions.
Resources are needed, and the decision to commit resources is made in response to perceived
problems and/or opportunities in the foreign market. The perception comes from experiential
knowledge. PTI does not elaborate on how the process gets started, beyond noting that firms
typically start the process as going concerns, often by reacting to unsolicited export orders. PTI
acknowledges the influence of networks and agree that entrepreneurs may go to more distant
markets because they have networks of colleagues dealing with the new technology. P3 follows,
firms need experiential knowledge to identify foreign opportunities and other resources to commit
to foreign markets when they internationalize. In addition, for small high-tech firms, networks are
important in the initial step abroad, the subsequent entry of new markets and shortening or skipping
stages of internationalization.
An INV is a business organization that, from inception, seeks to derive significant competitive
advantage from use of resources and the sale of outputs in multiple countries. So long as an
organization owns some assets or resources to exchange, firm size it no required for an INV.
However, pre-firm experience of entrepreneurs is vital. Only the entrepreneur possessing
competencies (networks, knowledge, and background) is able to combine a particular set of
resources across national borders and from a given INV. P3(INV) follows, only entrepreneurs who
have developed competences such as network, knowledge and background from their earlier
activities are able to form INVs. So long as an organization owns some assets to exchange in an
economic transaction, firm size is not required for an INV.
The psychic distance is the sum of factors preventing the flow of information from and to the market,
which lead to a lack of, and difficulty in obtaining market knowledge in international operations. PTI
assumes firms enter new markets as a function of their psychic distance. Firm internationalization is
seen as an incremental, risk-averse and reluctant adjustment to changes in a firm or its environment.
Thus, H4 (PTI) follows, given psychic distance, firms develop their international operations in small
steps. Typically, firms enter new markets with successively greater psychic distance and use entry
modes with successively greater control. INV challenges the PTI proposition because of improved
communication and transportation. P4 (INV) follows, technological and economic changes can
minimize the psychic distance and shorten, simplify, or skip stages of firm internationalization.
Finally, there can be a two-way relationship between inward and outward internationalization. Firms
may develop their knowledge and resources on the home market and then start their outward
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internationalization process, but they can also initiate inward internationalization to make use of key
foreign resources on the domestic market. Hence, P4, inward and outward activities can reinforce
each other to accelerate the internationalization process.
PTI focuses on the role of knowledge in keeping a fit between firm’s resource commitments and the
characteristics of the foreign market. P5 (PTI) follows, knowledge is required in the
internationalization process to keep the firm in step with its business environment. INV also pays
special attention to knowledge. Private knowledge may be used to create differentiation or cost
advantages. P5(INV) follows, knowledge is required in the internationalization process for the firm to
adapt a differentiation or cost leadership strategy.
PTI assumes that late internationalizers are more likely to survive internationalization moves than
early internationalisers, since firms accumulate resources over time, hereby increasing survival
chances. On the other hand, argue that early internationalization may be not only an opportunity but
also a necessity to ensure chances for growth, because opportunity windows are short. P6 (PTI)
follows, late internationalisers will perform better than early and rapid internationaliser, whereas P6
(INV) follows, early internationaliser will perform better than late internationalisers.
The Chinese experience is unique. Normal entrepreneurship embedded in and prevailing on a
developed market economy is unable to provide an explanation of the Chinese experience. Chinese
entrepreneurs are very much bounded.
Because of limited education and experience and institutional barriers, the founders were unable to
correctly recognize the exact degree of market integration. Chinese entrepreneurs tend to start their
business in the home market. Experiential knowledge or pre-firm internationalization experience and
networks are not the necessary conditions for entrepreneurs to initiate their internationalization
process, whether at an early or a late stage.
Embedded in a transitional and emerging country, indigenous Chinese entrepreneurs are bounded by
their low education and experience and by unfavorable institutional arrangements. They have limited
technological, managerial, and linguistic knowledge. Thus, they have limited capabilities in assessing
the degree of integration and homogeneity of the domestic and foreign markets and they have
bounded entrepreneurial cognition of international business opportunities and hence tended to start
their business in the home market. Given the lack of business networks and experiential knowledge
about foreign markets and operations, they either waited for windfall or strove to obtain the
information by other means such as attending exhibitions. Given the bounded entrepreneurship,
some of them carried out inward-oriented internationalization activities to learn technological and
managerial knowledge before they started outward-oriented activities. Given the bounded
technological knowledge, they pursed a combined strategy of differentiation and cost leadership.
Finally, the timing of internationalization alone may not be sufficient to interpret firm performance,
as the latter may be influenced by many other factors.
#14 – A roasted duck can still fly away: A case study of technology, nationality, culture and the
rapid and early internationalization of the firm.
This paper outlines and explores the complex relationships between a firm’s technological, national,
and cultural context and its rapid and early internationalization strategies (REI). Global technological
15
environments remain differentiated nationally. Korea has chaebols, diversified groups owned and
managed by one or more interrelated families. The technology-based start-ups that have emerged in
the last few years constitute an important departure from Korea’s conventionally large-firm
dominated industrial structure and for the government’s historical industrial policy which was
focused towards supporting the chaebols. Now, the government follows a segewha policy o
encouraging internationalization. The industrial and technological context for this study is mobile
payments, an emerging sector in which Korea is recognized as a world leader. The sector is a valuable
focus of study of REI due to the many opportunities for start-ups to quickly develop niche
applications with international markets, operate as brokers between different sectors of
international business and to contribute to international technical standards committees.
Avaro was led by a dynamic entrepreneurs with international management experience, attracted
international venture capital and operated in a supportive government policy environment.
Amongst the factors identified in the literature are resources including knowledge and technology,
and its industrial and environmental context. The development and use of technology, knowledge,
and innovation as a core resource, is very important in IE. Reproducing and distributing some
knowledge-intensive products, such as computer software, comes at a nearly marginal cost.
Moreover, the economic life cycle of many knowledge-intensive products has diminished due to
rapid technological innovation which urges firms to reach as many customers as possible within the
ever shorter effective life cycle. Because of these features, reaching an international critical mass of
users for an emerging technology is often crucial for success, especially when network effects exist.
For an innovation to become commercially viable, complementary contributions are required from a
variety of different plays. Technical standards greatly simplify the process of developing and
designing the components of systems and realizing complementarities of subsystems. Positive
feedback loops work in favor of the more widely accepted standards and therefore the market can
potentially become locked into such a standard. The importance of national differences is evident in
the variation in the influences on entrepreneurs and entrepreneurial behavior, such as ownership
patterns, business formation and co-ordination, management processes, and work and employment
relations, across countries or regions. There is an implicit role for culture in explaining cross-country
differences.
Opportunities for REI are influenced by specific characteristics of technology products and markets.
Where network effects and externalities exist, there are distinctive international advantages to be
derived from the ownership of technical standards. Start-up firms possessing valuable international
standards in the network economy face extraordinary REI opportunities and challenges.
#15 – The network Dynamics of International New Ventures
One distinguishing feature of INVs is that they are different from conception because from, or near
founding, they have a global focus and commit resources to international activities. A second feature
is the INVs involvement in networks to facilitate rapid internationalization, whose ties may have
emerged pre-internationalization.
Common across studies is the focus on patterns of internationalization rather than either the
network itself or the INV within the network. The benefits of increased social capital for the new
venture can include better access to resources and international opportunities, and a means by
16
which to overcome liabilities of newness and foreignness. External social capital (management
contact, involved customers and suppliers) positively impacts upon foreign market knowledge and, in
turn, the international growth of new ventures.
Over time, network relationships are transformed from simple, unidimensional dyadic exchanges to a
dence set of multidimensional and multilayered organizational relationships. The organization shifts
from a reliance on dyadic ties with family and friends or previous contact to a stage where mutuality
of business interests becomes clear, thus causing social and economic relationships to overlap. Then
the emergent firm develops added complexity, as reflected in a tighter integration of dyadic
relationships and a greater number of economic ties. This evolution helps provide stability for the
network and positions the firm to leverage network ties and mobilize more resources in the pursuit
of growth. Other authors argue that, in the emergent stage of the firm, networks will be cohesive
and composed primarily of socially embedded ties. Such networks exploit strong and densely
connected relationships for growth, and are consequently referred to as path dependent. As the firm
moves into the growth stage, the network changes to encompass a balance of embedded and arm’s
length economic ties that are more intentionally managed to explore growth. The entrepreneurial
network will shift from being identify based to more calculative over time.
Networks are having structural dimensions and interactional dimensions. A firm’s network structure
can be measured it size, and the extent to which ties are interconnect, or which actors are positioned
centrally vs peripherally in the network. Underlying this structure are the interactions that created it:
interactions manifest as relationships that can be analyzed in terms of whether they are social or
economic in nature, how they originated, how long they have existed etc. Networks can be
characterized by dimensions that portray what the network looks like and who is involved. The INV
literature generally takes the position that INVs are proactive and strategically aggressive. The
internationalizing firm’s network relationship are dominated by strong social or personal elements.
Although ties are important in the early phases of a firm’s evaluation, they are less influential over
time. Once the INV’s start-up process is complete, organizational needs become more complex and
necessitate non-social relationships. Economic rather than social ties may play a primary role through
INV network evolution.
The results of the three cases show that all the initial ties were based on previous economic rather
than social ties. As each INV network grew, it also decreased in density. Although the networks had a
range of densities at start-up, they all became larger and less dense over time, allowing for diverse
groups to form within them. These results support the view that a network will shift from being
dense to sparse as part of a natural evolution. Turning to the structural hole measures, the number
of actors that each venture was directly connected to increased. This should create opportunities for
control and information/resource access that, arguably, could be useful in internationalization. The
constraint measures decreased over time, indicating greater opportunities for action, because fewer
relationships were redundant. Finally, each INV showed high levels of closeness centrality through all
three stages, and each firm increased its closeness centrality from stage 2 to 3. The structural
analysis suggests a linear path of change within each network. All three networks were dominated by
economic ties. The interactional analysis identifies more subtle pattern on a case by case basis.
Although economic ties were prevalent through each firm’s life cycle, the relative emphasis of tie
content is unique to each INV. All three networks showed a mix of ties in terms of direction, although
one particular pattern can be noted. The networks were characterized by outward-directed and
17
third-party ties by the time the firms were internationalized and, notably, relatively few inwarddirected ties. Although this suggests that the INVs were more intentionally managed, they were also
path dependent. The ventures had not yet attracted network contacts based on their own reputation
and identity, in spite of the fact that they had begun to internationalize. Tie durability also seems to
be path dependent. Thus, although internationalization did not occur until each INV was well into its
life cycle, it resulted from business ties established before or during conception, and all ties involved
third-parties as catalysts.
Networks will open doors for INVs by providing market access, financing, distribution channels,
referrals and a pool of contacts for both internal and external development. Thus, network
relationships are intangible resources salient to organizational growth. Such resources are also
essential pre-internationalization, pre-growth and even pre-commercialization, that is, from the very
earliest stage of firm development: conception. Although network ties are consistently found to
facilitate INV evolution and also internationalization, they are not able to be easily categorized. INVs
benefit from competitive capability and informational advantages generated by their network, so INV
capabilities are not only internally generated. Thus, the new venture can leverage network
relationships for international market advantage.
We can also develop some propositions. First, the range and density of INV networks increase over
time. At the earliest stage of evolution, a higher level of closure was useful in providing access to
resources through a network characterized by trust and mutuality. On the other hand, in a loosely
constrained network, the entrepreneur may be able to discuss ideas and problems without a high
risk of idea appropriation by discussion partners, as the loose network protects the basic business
idea. The betweenness of each INV continuously strengthened within its network, suggesting
potential for the INV to control information and broker exchange processes.
Overall, the results suggest that although a small dense network is perhaps beneficial at the
conception stage in order to generate initial resources from trusted sources, the overall changes in
network structure lead to an increase in social capital for the INV. That is, the structural hole
argument prevails through INV network evolution. Further, the results of the structural analysis
suggest a linear path of evolution for the networks of young INVs. Tie content, direction, and
duration are more idiosyncratic than are the structural patterns. Resource development pathways
are unique for every venture. An entrepreneurial firm can operate reactively and proactively at the
same time. Thus, in spite of the arguments than an INV is more aggressive and practices, the start-up
firms studied here suggest both unintended occurrences and intended design. Finally, although
reputational effects are generally expected to increase as the network evolves and the venture gains
an identity, this was not clear in the cases here.
#16 – Internationalization and the Performance of Born-Global SMEs: The mediating role of Social
Networks.
Home-based social networks may function as a mediating factor linking internationalization
orientation to firm performance. Social networks, broadly defined as a web of personal connections
and relationships for the purpose of securing favors in personal and/or organizational action, are at
the core of network resources for the organizations involved. Home-based social networks represent
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an efficient means to respond to the demand of global supply chain networks. Such network ties are
vital for internationalizing SMEs to identify global market opportunities and to extend connections
with foreign intermediaries. In addition, trust-based personal connections and referral can also
facilitate the key capabilities of these firms in terms of the speed ad flexibility of response to global
markets. These benefits are seen to reduce information and knowledge barriers, thereby facilitating
successful cross-border business operations and improving transaction costs efficiency. Thus, homebased social networks are believed to be a critical factor in mediating the performance impact of
internationalization, suggesting there is an underlying mechanism through which a firm’s
international orientations contribute to its superior performance. Such a network mechanism seems
important to newer, international entrepreneurial SMEs in emerging economies where personal
connections such as guanxi serve as the metaphor for doing business and understanding economic
transactions. It can substitute for formal institutional support.
There are two types of internationalization orientation: outward internationalization (seeking and
selling in foreign markets, developing alliances with foreign businesses) and inward
internationalization (utilizing management skills, new technology, and direct investment from foreign
countries). Inward internationalization can enhance performance through learning about or utilizing
foreign technologies, management skills, and capital investment. Social networks are vital to the
identification of new opportunities, to gain access to foreign markets, and to develop specific
competitive advantages through the accumulation of international knowledge and the development
of formal business linkages across borders. Building and maintaining network relationships are
considered an integral part of the internationalization process, as both outcomes and inputs into the
process. As an outcome, it is imperative for internationally oriented SMEs to resort to relationship
networks that can provide valuable information benefits. As an input, the information benefits of
social networks could influence the performance impact of internationalization strategies. Finally,
Guanxi-related networks are able to reduce transaction costs or increase transaction values through
facilitated exchange of resources, information, and knowledge.
The central foundation of social network theories is the transmission of knowledge or useful
information through interpersonal ties and social contacts with individuals. Sporadic interactions of
weak ties are effective means for gaining novel information and accessing to diverse pools of
information sources. Strong ties are characterized by frequent and stronger social interactions,
whether information is perceived to be more trustworthy and thus more effective in the
transmission of tacit, complex knowledge for experiential learning. Individuals within the same
network may have redundant information, making the spread of novel information about new ideas
and opportunities typically coming through bridging ties that link individuals in separate networks of
social relations.
Personal ties and connections play the role of infomediaries in facilitating exchange of the most
valuable information. The importance of social networks as conduits for information and knowledge
flows in helping stimulate awareness of foreign market opportunities, influencing export initiation,
helping identifiny foreign exchange partners, providing tacit knowledge about international business
practices, and helping sharpen international vision and managerial openness. The strategic value of
social network ties is emphasized in the context of internationalization for knowledge of foreign
market opportunities and advice and experiential learning about cross-border business operations.
Moreover, social clusters of contract can be an important source of referral for endorsement of an
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entrepreneur’s personal trust or the assurance of economic transactions involved with external
parties. Such referral trust often takes place because strong social norms and beliefs, associated with
a high degree of closure of the network, encourage compliance with business rules and customs and
thus reduce the need for formal control. International entrepreneurs have the desire and effort in
exploiting informal social ties with external entities and extending social interactions and clusters
necessary for opportunity identification and resource mobilization. This explains the first mediating
criterion – how internationalization is related to the social network.
Social networks often are often critical to providing the type of information that can help firms
reduce the risk and uncertainty inherent in international operations. These networks have the
advantages of transmitting personal and experiential information more effectively, being flexible and
adapting more quickly to changing circumstances. The speed and flexibility of response that such
loose network ties make possible may represent a key capability that underpins the rapidity of bornglobal internationalization. Thus, internationally oriented SMEs can use networks to save information
search costs, lower risks and uncertainties and reduce transaction costs, hereby increasing the
performance of a firm.
H1 states, guanxi-related social networks mediate the relationship between outward
internationalization orientation and firm performance. Te information benefits of social networks can
be more or less equally critical, regardless of the directional nature of internationalization. Firms with
inward orientation can also make use of the key sources of social networks for the knowledge of a
foreign-sourced product or technology for their home markets, advice and experiential learning
about foreign partners and arising business opportunities, and referral endorsement to build trust to
attract foreign technologies, capital and management skills. Thus, H2 follows, guanxi-related social
networks mediate the relationship between inward internationalization orientation and firm
performance. H1 is largely supported for the performance measures of export growth and
profitability growth. H2 is largely supported for the performance measure of export growth, but not
for profitability or sales performance. Although higher degrees of outward and inward
internationalization orientations are likely to be associated with higher business performance, guanxi
networks play a significant role in mediating the performance impact of internationalization.
Internationalization orientations require network ties to have a positive performance impact because
they may not necessarily bring about sufficient information and knowledge on the part of the
internationalizing firm to take risks and rapidly capture market opportunities at home or abroad.
Born-globals that operate in the broader appeals of social networks are believed to enjoy a rapid and
experiential learning advantage, and therefore find it relatively easy to achieve the performance
consequences of early internationalization. There is strong support for the mediation effect on
export performance, some support on profitability performance, and little support on sales
performance.
There is little difference in the extent to which guanxi networks mediate the performance on export
growth between inward and outward internationalization orientations. This confirms the expectation
that guanxi utilization is relatively comparable to both directions of internationalization strategies.
However, at the same time, the mediation effects of guanxi networks on other performance
measures may vary. Secondly, there seems to be a significant difference in the mediating function of
guanxi networks on the performance measures of profitability between outward and inward patterns
20
of internationalization, with a stronger impact in the case of outward internationalization. It may be
that inbound network costs are substantially higher than outbound network costs, therefore causing
insignificant or lower profitability growth in this case. Finally, the mediating effect of fuanxi networks
does not seem to be associated with sales performance for either outward or inward
internationalization orientations. The information benefits of social networks may have more to do
with quality performance than with quantity outcomes.
# 17 – Effects of Alliances, Time, and Network Cohesion on the Initiation of Foreign Sales by New
Ventures.
The ability to seize opportunities from foreign markets is increasingly important for establishing and
maintaining a competitive advantage. This challenge requires both the recognition of new
opportunities and an understanding of how to obtain market share abroad. Growing evidence
suggests that the initiation of foreign sales by new ventures is enabled by the alliance networks to
which the ventures belong. The complexity of a task, the amount of time involved, and the
connectivity of network partners interact to affect important outcomes.
Learning and knowledge transfer are sometimes more important reasons for alliance formation than
short-term economic rewards. The two types of knowledge known to motivate firm forays into
international markets are technological and foreign marketing knowledge. Technological knowledge
is the idea set regarding scientific and technical advances on an applied, high-technology product.
Firms with strong technological knowledge can cultivate critical thinking and problem-solving skills
that are used to develop technologies for foreign markets, without incurring substantially more costs
than they incur by operating solely in their domestic market. Foreign marketing knowledge
incorporates information about host countries’ financial, cultural, social, and political conditions as
well as general facts about country differences and how international business operations are
conducted. It is knowledge used to identify opportunities, alleviate perceptions of uncertainty, and
better understand the new market context in which they would be selling.
Technological alliances involve the development of joint routines and capabilities, the sharing of
intellectual and scientific skills, and perhaps joint R&D, and can provide access to novel ideas and
complementary skills. However, these alliances are more difficult to manage because of the
complexity of the products and the difficulty of transferring knowledge. Thus, experience matters in
these alliances and the benefits may only manifest over time. The process of assimilating technology
knowledge from an alliance is even more likely to be time consuming for the young ventures because
they have more limited absorptive capacities. Thus, (H1), a venture’s likelihood of initiating foreign
sales increases with the technological knowledge of its technology partners, but the effect of
technological knowledge is only observed over time.
The alliances leading to marketing alliances permits new product capabilities to be explored, new
customers to be acquired, and currently unexplored markets to be reached. Knowledge important
for successful foreign marketing can move in both directors between alliance partners. Knowledge
accumulates, so knowledge about foreign marketing derived from alliances increases with the
number of such alliances a venture creates. Marketing alliances involve fewer unknowns and are
likely to aid a venture’s initiation of foreign sales in a short period of time. However, in the long term,
21
the value of knowledge could dissipate as the ventures themselves gain more and more beneficial
international marketing knowledge. Thus (H2a), a venture’s likelihood of initiating foreign sales
increases with the marketing knowledge of its foreign marketing partners, and the effect of market
knowledge endures over time and (H2b) a venture’s likelihood of initiating foreign sales increases
with the marketing knowledge of its internationally experienced domestic partners, but the effect of
marketing knowledge decreases over time.
Network cohesion increases the value of knowledge by providing access to data from multiple
sources and promotes trust between partners. In cohesive networks, opportunism is often
discouraged because news about one firm’s opportunistic behavior spreads quickly to others. Sparse
networks provide greater opportunities for a venture to acquire novel knowledge. Knowing the type
of knowledge flowing between partners and how it is used by organizations is essential to
understanding whether sparse or cohesive networks are likely to be beneficial. Dense networks
distribute knowledge efficiently in the short term, but over time lack diversity leads to less new
knowledge being available to the focal firm. With regards to technological knowledge, firms in
cohesive networks tend to converge on available initial solutions to a problem, which can result in a
small pool of technological knowledge. Thus, despite the fact that network cohesion may accelerate
the transfer of knowledge within a network, over time it may limit a venture’s motivation to search
for alternative solutions. Thus (H3), network cohesion decreases the positive effect of technological
knowledge of its technology partners on the likelihood of venture initiation of foreign sales, and the
effect of network cohesion increases over time.
In the foreign marketing context, the transfer of knowledge is less complex because it changes more
slowly. Novelty may be undesirable because new and unverified business knowledge increases
uncertainty and unreliability. Network cohesion can allay partners’ concerns over the viability of the
venture’s operation and reduces concerns about opportunism. In summary, foreign marketing
alliances encourage ventures to initiate foreign sales, while network cohesion circumvents many of
the complications and communication delays that can arise between partners in different countries.
Thus, (4A) network cohesion increases the positive effect of marketing knowledge from foreign
partners on the likelihood of venture initiation of foreign sales, and the effect of network cohesion
increases over time. In the long run, the value of domestic partners foreign marketing knowledge and
the value of cohesion will dissipate. This leads to (H4b), network cohesion increases the positive
effect of marketing knowledge from internationally experienced domestic partners on the likelihood
of venture initiation of foreign sales, but the effect of network cohesion decreases over time.
The results show that in the short term, the technological ability of the alliance partners does not
have a significant impact on the likelihood of new ventures’ international sales. In the long run,
partnering with technologically stronger firm confers benefits that lead new ventures to sell in
international markets. In the short term, marketing alliances increase sales, but in the long run, this
coefficient is insignificant. Moreover, H2b that assets that the knowledge exposure from marketing
alliances with internationally experienced domestic firms leads to foreign sales is not supported. One
explanation is that alliances are established for specific strategic purposes and internationally
experienced domestic partners may be leveraged more for their ability to provide knowledge
concerning the domestic market, rather than as a source of direct knowledge about achieving sales in
foreign markets. There is very strong support for H3b, in that network cohesion negatively
moderates the positive effect of technological alliance partner expertise on the likelihood of venture
22
initiating international sales, this moderation increasing over time. H4a and H4b are also both
supported. Finally, the research confirms that both network content and network structure are
important influences on venture outcomes, and that time should be incorporated into analyses of
new venture internationalization.
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# 18 – Social ties and international entrepreneurship: Opportunities and constraints affecting firm
internationalization.
How foreign market opportunities come to be recognized and exploited is rarely addressed. The
author proposes that recognizing international exchange opportunities is a highly subjective process,
shaped by entrepreneurs existing ties with others.
The course and outcomes of an exchange are context dependent, and will be shaped by the
characteristics of those conducting the exchange, as well as the physical, psychological, and social
setting in which they operate. Overcoming the additional barriers of international exchanges requires
an act of entrepreneurship. Innovation arises not just from the creation of new ventures, goods or
services, but also from the matching of existing goods and services with existing, unmet needs in new
markets.
An international opportunity is defined as the chance to conduct exchange with new partners in new
foreign markets. The only meaningful opportunity is the one that leads to the formation of a new
international exchange. The formation of exchange agreements with new partners in new foreign
markets constitutes strong evidence of market-making entrepreneurship. Opportunity recognition is
influenced by entrepreneurs’ participation in social and business networks. Social networks are
distinguished from business networks primarily by the level of analysis: a social network is the sum of
relationships linking one person with other people, whereas a business network is normally
described as a set of relationships linking one firm with other firms. However, opportunities are
recognized by individuals, not firms. Moreover, the business network approach cannot be used to
account for entry of the firm into new markets, which is why the social networks are chosen as the
unit of analysis.
Opportunities are exogenous, arising as a consequence of market imperfections and the disruptive
introduction of new information. The propensity to recognize new opportunities is determined by
the reach and redundancy of one’s existing ties with others. There are both advantages (valuable
information) and disadvantages (access is selective) to relying on social ties. Social ties are thought to
lower the transaction costs and uncertainty associated with foreign market entry while at the same
time promoting credibility and trust among exchange partners.
Thus, entrepreneurs’ social networks (1) are idiosyncratic, (2) take time to develop, (3), are
constrained by network size and reach, and (4) provide a context for trust-based transacting. Since
opportunities for international exchange are exogenous and ubiquitous, there are informational
benefits for those who are positioned to be among the first to recognize new exchange
opportunities. The possible implication is that entrepreneurs whose networks span structural holes
will be more likely to identify exchange opportunities via their ties with others. Finally, (H1)
entrepreneurs in open economies will be able to benefit more from their social ties with others when
compared to closed economies.
Social networks take time to develop, which suggests a correlation between network benefits and
experience. As such, (H2) states that the use of social ties as a means for identifying international
opportunities increases with international experience.
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Network theorists trade off the information benefits of different networks against the associated
costs of maintaining network ties. A key construct is network constraint, which reflects
entrepreneurs’ cognitive limits. Networks are inherently constrained, but sparse, diverse networks
will be more efficient and therefore less constraining than small, dense networks. As such, (H3)
states that opportunities identified via social networks are more likely to emanate from sources that
are geographically, culturally, psychically, and linguistically proximate than exchange opportunities
identified via non-network means.
The best exchanges are the result of formal market research and the systematic evaluation of
opportunities according to predetermined criteria. As such, reliance on informal social networks
represents an inferior approach to partner identification, the implication being that tie-based
exchanges will be of lower quality than non-network methods of opportunity identification. An
alternative perspective is that tie-based exchanges benefit from being embedded in a context of
trust. Thus, as tie-based exchanges come primed with an initial stock of trust, they are likely to be
rated more highly. As tie-based exchanges are embedded within a history of social exchange, they
will be easier to set up, leading to a more rapid market penetration and greater sales volumes. H4
follows: the use of social ties as a means for indentifying international opportunities will lead to
exchanges that are rated more importantly and account for greater sales volumes relative to
opportunities identified through other means.
H1 is supported, whereas H2 receives only qualified support. The study is controlled for private
ownership and colonial effect, both highly significant. Entrepreneurs in open economies have
recognition options that are unavailable to their counterparts in less open settings and
entrepreneurs in the open coastal cities were able to exploit their existing ties with others to greater
effect. Concerning H3, it was shown that tie-based opportunities lead to exchanges that are
constrained by geographic and psychic distance but not cultural distance. The findings reveal that
course and outcome of cross-border exchange are shaped by the physical, psychological, and social
setting in which exchange partners operate. The use of social ties to identify international
opportunities will lead to exchange that span smaller gaps in comparison with exchanges based on
non-tie methods. An alternative explanation is that entrepreneurs seeking to enter distant markets
might find they have relatively fewer network possibilities, compelling them to rely more on non-tie
methods of partner identification. The implication is that an exclusive reliance on social networks
may inhibit entrepreneurial initiative, leading to inferior choices. Finally, exchanges formed with
partners identified via ties were rated more highly than exchanges based on other methods of
identification. Moreover, tie-based exchanges are 70% larger than non-tie-based exchanges.
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# 19 – The influence of the management team’s international experience on the internationalization
behaviors of SMEs.
SMEs are argued to be disadvantaged in entering and expanding sales in international markets
because they lack the necessary skills and resources, experience, and credibility that a domestic track
record provides. However, although in large firms the availability of slack resources or the efficiencies
to be gained by internalizing markets may explain internationalization, in newer and smaller firms,
the skills and knowledge of the top decision makers are likely to be more predictive of and influential
on the patterns of internationalization.
Characteristics that been found to predict propensity for success in exporting include the extent to
which the manager had engaged in foreign travel, the number of languages spoken by the manager,
and whether the top decision maker was born abroad, lived abroad, or worked abroad. The
correspondence between top management experience and organizational outcomes is expected to
be even more pronounced in SMEs, since these business reflect the dominant role of the founding
team to a greater extent. However, the influence of top decision makers should be modeled as
indirect rather than direct. The experience of the founder of the management team is likely to
influence the behavior of an SME, which will in turn influence subsequent firm performance.
More experienced top management teams are more likely to form partnerships because they have a
better ability to know, attract, and engage partners. Partnerships formed in order to ease entry into
foreign markets are likely to increase the degree of internationalization of the firm. In addition, since
partnerships can allow new and small ventures to control resources without owning them, there is
greater flexibility in disposing of resources that are no longer needed. This leads to H1a, the
international experience of the top management team in SMEs is related to the use of foreign
strategic partnerships by the firm, and H1b, the use of foreign strategic partnerships by SMEs
mediates the relationship between the team’s international experience and the firm’s degree of
internationalization.
Organizations that internationalize earlier are likely to develop fewer routines and resources which
make it difficult for them to move out of domestic markets. Having a longer domestic track record
before obtaining foreign sales is not beneficial to levels of foreign sales and may lead to a delay.
SMEs managed by internationally experienced teams are likely to delay less. Experience with, and
knowledge of, foreign markets make it more likely that decision makers will consider mechanisms to
sell outside the domestic market early on and less likely that they will set up routines based on a
purely domestic perspective. H2a states that the international experience of the top management
teams in SMEs is negatively related to the delay after start-up in selling to foreign markets, and H2b,
that the delay after start-up in selling to foreign markets by firms mediates the relationship between
the team’s international experience and the firm’s degree of internationalization.
The results show that both age and size are not significantly related to the degree of
internationalization for SMEs. In addition, all hypotheses were confirmed, thus confirming the
validity of the model in that the relationship between degree of internationalization and top
management’s international experience is moderated by delay before internationalization and the
amount of strategic partners used.
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# 20 – Decision-Making and Market Orientation in the Internationalization Process of Small and
Medium-Sized Enterprises.
Internationalization for SMEs can be expensive, time consuming and a significant drain on scarce
resources. Decision-making processes related to choice of market, timing, and mode of entry are
therefore important to understand.
Internationalization is the process by which firms both increase their awareness of the direct and
indirect influences of international transactions on their future, and establish and conduct
transactions with other countries. International network relationships of decision-makers, both
informal and formal, have been highlighted in studies on the internationalization of SMEs. Through
the use of network relationships, firms were able to instigate rapid internationalization in diverse
markets with major partners often guiding foreign market selection and providing the mechanism for
market entry. However, for a large number of small and medium entrepreneurial firms, the
established theories of internationalization fail to adequately explain the patterns and processes of
internationalization observed.
Experimental experience rather than objective knowledge is critical for internationalization decision
making. The experience and personal characteristics of small firm owners have been shown to have
significant impact on firm performance. Factors that influence decision-makers international
decisions and behavior are market knowledge, market orientation, and market motivation.
Mental maps are cognitive representations of the nature and attributed of the spatial environment.
Mental maps can illustrate market orientation, trends in orientation, and provide a means of
investigating the influencing factors behind their construction.
The findings show that individuals within firms with international experience are influence by the
firm’s experience. Decision-makers within non-international firms are subject to similar influences
and have similar perceptions of overseas markets for the purposes of foreign trading activity.
Previous international experience was identified as a significant factor, in both international and noninternational firms. Market knowledge was not cited as a primary determinant in the foreign market
selection decision. Individuals within firms with limited international experience place significantly
higher importance on non-economic criteria, particularly climate and ease of access to markets, than
their more experienced counterparts. Other factors include the availability of capital, the ownership
structure and investor requirements. At the individual level, education, previous work experience,
and other behavioral factors were identified. The acquisition of additional business was the primary
motivation for engaging in foreign market activity. For firms in dynamic industries, risk reduction
through market diversification and sales stabilization are of limited applicability. The significant
motivational factors identified were market opportunities and the risk preferences of owners. Firms
with a founder-dominated ownership structure and owners with a risk-taking bias were more likely
to act on international opportunities.
In conclusion, the selective identification of opportunities by decision-makers, combined with their
risk preferences, is a primary motivation underlying the where, how, and why of international
expansion. It is their network relationships and experiences that play a key role in developing
relevant foreign market knowledge which guides this process. Psychic distance is a barrier to
internationalization in certain markets but can be overcome through a combination of industry and
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firm-specific factors, as well as by the knowledge, experience, and relationships of individual
decision-makers. Experiential knowledge is a key element within the internationalization process and
does appear to have a more dominant role than objective knowledge. The feedback loop of historical
experience on the mental maps of individuals was an important feature of the learning process.
The mental maps do play a central role in the executive decision-making processes of dynamic SMEs
and in the foreign market location decisions of these firms. The mental maps reflect their individual
and group perceptions of opportunity and risk and subsequent geographical bias and form the basis
of internationalization decision.
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# 21 – Speed of internationalization and entrepreneurial cognition: Insights and a comparison
between international new ventures, exporters, and domestic firms.
Because ventures with similar resources competing in the same environments make different choices
when it comes to strategy, it is likely that the individual’s perceptions are determinant in identifying
opportunities. Thus, cognition might be useful for understanding why some persons become
entrepreneurs and why some are more successful than others.
The perception of risk decreases as firms advance in the internationalization process. Knowledge, an
n particular experimental knowledge influences differences in risk perception longitudinally along the
internationalization process. Intention is a combination of attitude, situation, and motivation, making
export intention a function of beliefs, as well as awareness and readiness. Thus, it is the decisionmaker who determines the perception of the environment and the way of doing business. Generally,
entrepreneurial personality is considered a multi-construct composite of attitudes and behavior.
Tolerance to ambiguity is the extent to which an individual is able to make decisions in risky
environments or situations filled with uncertainty and has been found to have a positive relationship
with entrepreneurial behavior.
In considering internationalization (H1), those managers with an international orientation will
present higher levels of proactivity. Moreover, (H2), CEOs with an international orientation will
exhibit a higher tolerance for ambiguity when confronted with internationalization decisions than
those with a lower international orientation. Furthermore, (H3), CEOs with an international
orientation will exhibit a lower perception of risk when confronted with internationalization than
CEOs without an international orientation, and CEOs (H4) with a higher tolerance for ambiguity will
exhibit a proactive disposition towards internationalization. (H5) CEOs with a higher tolerance for
ambiguity will perceive lower levels of risk associated with internationalization than CEOs with a low
tolerance for ambiguity, (H6) CEOs with a higher proactive disposition will perceive lower levels of
risk associated with internationalization than CEOs with a lower proactive disposition. Finally, CEOs
with perceptions of lower levels of risk associated with internationalization will access to
international markets faster than CEOs with higher perceptions of risk.
The results show that international orientation is not indicative of the individual’s tolerance to
ambiguity. The three former constructs present significant effects in relation to risk perception when
considering international activities, although tolerance for ambiguity only affects proactivity in a
negative sense. Moreover, risks perception is a clear determinant of the speed of accessing
international markets. Internationally oriented individuals appear to have a lesser risk perception
derived from international operation. AS such, it seem that the risk is not just a matter of behavior, it
is possible to reduce risk perception whether or not the manager is tolerant to uncertain situations
or has the will to change things.
Cognitive traits do exert an influence on the internationalization path followed by firms. Proactivity is
determined to a greater extent by tolerance to ambiguity in the exporters and non exporters
subsample, which may indicate that the firms in these groups are more experience dependent. There
was no significant differences between international entrepreneurs and the other internationalizing
firms. Non-exporters do not associate their ability of confronting ambiguity with the opportunity of
engaging their business in a new market. The only way of reducing the risk from foreign markets in
the nonexporters sample appears to be having a greater tolerance to ambiguity.
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In summary, for all firms international orientation was found to lead to higher levels of proactivity
and a lower perception of risk. However, international orientation was not found to be significant in
relation to tolerance of ambiguity. International orientation is indicative of a deeper and broader
education, language ability, enjoyment of travel and international experience. Individuals who are
more tolerant of ambiguity are less perceptive of risk, but are not proactive. Overall, those with
lower levels of risk perception are more likely to internationalize more quickly. Implications are that
perception of risk is the key cognitive factor as regards rapid internationalization, and that risk
perception may be lowered through increasing the international orientation and increasing
individuals’ tolerance to ambiguity.
Finally, significant differences were found between international entrepreneurs and non-exporters as
regards the relationship between international orientation and tolerance to ambiguity, and between
tolerance to ambiguity and proactivity. While non-exporters level of proactivity is increased by their
tolerance to ambiguity, it is not extended to internationalization suggesting that other factors than
cognition may be of more significance to this group. International entrepreneurs on the other hand
experience greater tolerance of uncertainty due to having an international orientation, which adds
knowledge or insights that render individuals less risk averse towards internationalization. Finally,
the only way to increase their speed of internationalization would be to reduce the perceptions of
uncertainty towards international markets, perhaps through policy provision of information, training,
and knowledge development.
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# 22 – The effect of human capital, social capital, and perceptual values on nascent entrepreneurs
export intentions.
The development of a new venture may be influenced by prior knowledge, with intentions being one
of the best predictors of behavior in an entrepreneurial context. The born global perspective seeks
explanations at the individual level on how early rapid internationalization of new ventures is
possible, whereas the process models investigate the process of internationalization itself at the
enterprise level once the firm is founded.
Human capital – the aggregate human skills an knowledge needed to do business – significantly
influences a firm’s size, scope, and overall potential for growth and survival. An educated
entrepreneur with a professional degree will be more outward looking, and thus, (H1) entrepreneurs
with higher education are more likely to develop export intentions. The firm’s decision to enter new
markets is related to the depth and breadth of their experience and the relative distance of those
markets. Prior domestic start-up experience is expected to have negative effect on entrepreneurs’
likelihood to develop export intentions, whereas prior international start-up experience has a
positive effect. An individual’s experience in a new environment is influenced by similar environment
from the past, resulting in a lower level of search activity., less experimentation, and a reduction of
preference development. H2 follows: entrepreneurs with prior domestic start-up experience are less
likely to develop export intentions, where H3 follows: entrepreneurs with prior international start-up
experience are more likely to develop export intentions.
Networks may open doors for entrepreneurs by providing market access, financing, distribution
channels, referrals and a pool of contact for both internal and external development. H4 follows:
entrepreneurs who belong to a social network that includes one or more entrepreneurs are more
likely to develop export intentions.
Individuals cognitive systems are likely to influence entrepreneurs decision rules, decision horizons,
and risk preferences and, as such, may influence the entrepreneurial behavior of the
internationalizing firm. Individuals with self-efficacy – belief in their own capability to perform a
certain activity – are more likely to perform a given. H5 follows: Entrepreneurs who believe they have
the skills, knowledge, and experience required to start a business are more likely to develop export
intentions. Furthermore, risk aversion reduces individuals likelihood of becoming self-employed. As
such, H6 follows: Entrepreneurs who state that fear of failure would not prevent them from starting
a business are more likely to develop export intentions.
The results indicates that while human capital and social capital affect the level of intended exports,
cognitive characteristics, including self-efficacy and risk aversion, do not seem to influence the
intended level of exports. The novel result of this study is that they establish that entrepreneur’s
education level affects export behavior already in the prefounding stage where export intentions are
being formed and are taking shape. Moreover, prior experience does not unconditionally enhance
export intentions but rather determines a path dependency in the sense that entrepreneurs who
have previously started a business are likely to start similar kinds of business following the logic they
used in earlier ventures. Furthermore, certain kinds of social networks enable entrepreneurs to
discover and exploit international opportunities which individuals with less efficient social networks
are less likely to discover or exploit. Nascent entrepreneurs with a social network that includes one
or more entrepreneurs are more likely to develop export intentions than those without. Finally,
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entrepreneurs who believe they have the skills, knowledge, and experience required to start a
business and who state that fear of failure would not prevent them from starting a business are not
more likely to develop export intentions prior to the start of their business than individuals who do
not possess these cognitive characteristics, which may be due to ‘unsolicited orders’.
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