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Summaries IE

Aug 17, 2015

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Summaries IE

International Entrepreneurship Summaries1#7 International Expansion by New Venture Firms: International Diversity, Mode o Mar!et Entry, "e#$nolo%i#al &earnin%, and 'erorman#eNew venture frms, being companies six years old or younger, are moving intointernational market early intheir liecycles! "combinationo institutionalactors, industryactors, andorgani#ational actors uel their expansion! $heexpansion allows growth, positive returns, and capitali#ation o learning!%owever, even when a new venture frm has a superior product, it must learnother skills to position its product successully! &nowledge creation can be a di'cult process! (irms must manage this processwith the intent o integrating the learning that has occurred in the internationaloperations! Integrationistheprocessbywhichmanagersdeterminewhathasbeen learned, evaluate its potential importance, and explore ways in which thenewknowledge can be used! )entures undertakingthis integration achievegreater, deeper, and speedier technological learning! $he ability to manage andcultivate knowledge di*erentiates success romailure! E*ective learning iscumulative in nature! $his knowledge in+uences a venture,s ability to adapt itsproducts to local market conditions, capitali#e on market dynamism through rapidnew product developments, and identiy emerging technological change that canin+uencefrmperormance! -readthdenotes themultipleareas inwhichaventure learns technologicalskills! .epth reers to a venture,s mastery o newknowledge, evidenced by an ability to draw new conclusions and fnd new linksamong diverse knowledge bases! (inally, speed o technological learningdescribes how rapidly the ventures ac/uires new insights and skills! &nowledgeintegration moderates the relationship between international expansion activitiesand technological learning, which in turn in+uences frm perormance! International diversity 0Number o countries, technological diversity, culturaldiversity, geographicdiversity,andoreignmarketsegments1denotesafrm,sincreased reliance on oreign markets as a means o growth and fnancialperormance improvements! 2earning derived romnational di*erences andeconomies o scale and scope can be a source o competitive advantage!3oncerning breadth, a venture that expands internationally by entering marketsinseveral oreigncountriesismorelikelytoexperiencedi*erentculturesandinstitutional systems than one that ocuses on a single or a ew countries! $hislearning emerges rom understanding and using cultural values in designing andmarketing the frm,s products and process technologies! 4oreover, exposure to,and direct involvement with, business and customers in multiple countries is animportant means o learningbydoing, whichpromotesdeeper technologicallearning! .iverseideasandcapabilitiesencounteredininternational businessoperations produce combinative knowledge! 5egarding speed,internationali#ationcanenhancethespeedo learningasafrmexperiencesmultiplecultures andmarkets! %owever, earlyexposurecanalsoleadinaninormation overload owing to increased transaction costs and cultural diversity!"s such, the authors propose a curvilinear relationship between a new venturefrm,s international diversity and the speed o learning! 6International business transactions di*er in their risks and payo*s and theexperiencegainedromthem! .eepstakeholder involvement associatedwithhigh7control transactions exposes a frmto uni/ue knowledge bases andexperiences! $hesemodes typicallyre/uireacloseness toamarket anditscustomers, thus increasing the venture,s exposure to di*erent inormationsources! Interactions withlocal suppliers mayprovideinormationabout themarket, customers, and competition, thus increasing the frms breadth otechnological learning! 4oreover, anewventurefrmusinghigh7control entrymodesislikelytoexperiencemoreradical learningthanthoseusingmodesre/uiring less involvement, due to learning by doing, thus increasing the depth otechnological learning! (inally, closeness tothemarket andits customers isconductivetorapidlearning! -yusinghighcontrol entrymodesthatensurecloseness to customers in international markets, ventures increase the speed oits learning! (or technological learning to yield an advantage, it must be captured,interpreted, and deployed e*ectively! Integration enables managers to internali#ewhat is has learnedinits international operations, helps developingsharedlearning and accumulating knowledge over time! (ormal integration is theprocessbywhichmanagersinventory0determinewhat hasbeenlearnedandevaluate importance1, synthesi#e 0understand what has been learned andarticulate the knowledge1, and use 0devise ways to exploit the knowledge1 theknowledge they have gained! New ventures usually have organic structures thatpermit speedy and e*ective +owo knowledge and its subse/uent use inactivities! &nowledge integration is expected to moderate the relationshipbetween the international modes o entry, international diversity, andtechnological learning! $he success o international new ventures is explained by their ability to leveragethe knowledge gained rom oreign operations! $he breadth is useul in designingnew products and updating existing ones! $he depth improves a frm,s ability toredesign its products or ease o use, o*er customi#ed applications, or radicallychange product defnitions! (inally, the speed improves the venture,sperormance by compressing the product development cycle!Internationalexpansion provides new market opportunities in which a frm cansell its product innovation! International diversity allows the new venture to enterandproft rombenefcial networks! "ll modeso entryshouldhavepositivee*ects on frm perormance!$he results show that international diversity is a signifcant predictor o breadth,as well as exports and ac/uisitions! $he same thing goes or depth, with start7upsandoreignac/uisitions beingrelated! $echnological diversity was positivelyassociated with speed! %owever, the number o oreign countries entered has anegative e*ect on speed! $here is a strong relation between international diversity and mode o entry andthebreadth, depth, andspeedo learning, especiallywhenormal knowledgeintegration is used! -readth, depth, and speed are related to new venture frm8perormance! $hehigherthediversityo themarketentered, thegreatertheopportunityor learning! %owever, greater diversitymayreducethespeedolearning as well! New ventures that diversiy internationally may have to tradespeedo*against thebreadthanddeptho technological learning! 4oreover,there was no relationship between start7ups and breadth o learning! $he resultsalso showthat high7control modes are positively associated with depth! Incontrast, lower modes have a negative e*ect on speed! &nowledge integrationincreases the breadth and depth o the technological learning new ventures gain!$he role is even more important with modes o entry! (urthermore, technologicallearning is positively associated with new venture perormance! (inally, there aremixed results o dimensions o international diversity on perormance! #( )ow New Ventures Exploit "rade*+,s amon% International -is! Fa#tors: &essons or t$e .##elerated Internationali/ation o t$e 01st 2entury"ccelerated internationali#ation reers to the phenomenon o frms engaging ininternational business activities earlier in their organi#ational lie cycles than theyhave historically! Existing internationali#ation theory highlights slow andincremental oreign market commitment because such behavior has beenre/uentlyobservedandbecauseinternationali#ationseemssoriskyorsmallmarkets and new ventures! International business is considered inherently riskybecauseitmayinvolvelossoproftsand9orassetsasaresulto changesinpolitical, legal, economic, and social actors in oreign markets! So how can frmsexperiencing the risks o small si#e and newness also successully manage theadditional strategic risks o entering oreign markets so early in their existence: Itcan be argued that multiple internationalrisks can be managed by trading o*one risk against another to keep overall frm risk lower than it would be withoutsuchtrade7o*s! $hreeo themost importantinternational riskactorsare011oreign location, 061 type o commitment to that oreign location, as evidenced bythe modes o entry chosen, and 081 the proportion o revenue exposure a frm hasin that location! Internationali#ation is said to provide small frms with an important opportunityor growth that, due to their relative poverty o resources, oten occurred throughinterorgani#ational alliances! 5apid internationali#ation o new and small venturesis believed to be either an unimportant anomaly or a world7wide expansion o the;apanesekeiretsumodel, wheresmall frmsoperateasthoroughlydependentsuppliers to large established multinational organi#ations! Empirical work showed that clear product di*erentiation and internationallyexperienced directors and managers are associated with the earlyinternationali#ation o independent new ventures! It is most accurate to view internationali#ation and the risks inherent in managingit, as having multiple dimensions that are distinct but simultaneously determined!ne is imitation? frmscompetinginthesameindustries enteringthesamecountries! 3opyingtheactions o another company whose behavior is @udged appropriate grantslegitimacy totheimitator! %owever, imitationis not apredominant way ohandling the risks! $he deep niche strategies oten used by new ventures in theinternational arena, whereby frms deploy unusual products or services to ocuson a narrow sliver o a market, mean that their orte is uni/ueness, not imitateoligopolistic competition! >ther strategic actions are avoidance, +exibility,cooperation, and control! "voidance occurs when the decision makers o a frmbelieve that operating in a particular area is unacceptably uncertain and reusesto enter a country or exit a country it has already entered! $he essence o the+exibility strategy is decreasing the cost o internal organi#ational adaptation to