Achieving the Paradox of Concurrent Internationalization Speed: Internationalizing Rapidly in Both Breadth and Depth.
| Verfasser | Batsakis, Georgios |
| Posten | RESEARCH ARTICLE |
1 Introduction
The internationalization process is considered one of the most important tenets of corporate strategy (Melin, 1992; Vermeulen & Barkema, 2002). Therefore, MNEs have been interested in gaining a better understanding on why (e.g., market-, resource-, efficiency-, innovation-seeking motives), where (e.g., location choice, geographic scope) and how (e.g., foreign market entry mode choice, the role of distance) to internationalize (Eden, 2009) in order to maximize the benefits (Hennart, 1982; Hymer, 1960; Vernon, 1966), and minimize the costs stemming from foreign expansion (Dierickx & Cool, 1989). More recently, a fourth area of concern, relating to when to internationalize, has emerged. This temporal dimension of the internationalization process (such as the timing of entry and speed of internationalization), has been receiving considerable attention in international business (IB) research (e.g., Casillas & Moreno-Menendez, 2014; Hitt et al., 2016; Jiang et al., 2014; Qian et al., 2018).
The emphasis on time-related aspects of the internationalization process in general, and internationalization speed in particular, has been stressed by several scholars. For example, in their seminal paper, Jones and Coviello (2005, p. 284) present internationalization as "a time-based process", suggesting that it is essential for a temporal dimension, such as speed, to be explicitly incorporated in the analysis of the internationalization process. In the same vein, Chetty et al. (2014) view internationalization speed as a process and raise the importance of the managerial challenge firms encounter in their decision-making. This is also reflected by the increasing research attention on the performance implications of internationalization speed (Garcia-Garcia et al., 2017; Mohr & Batsakis, 2017; Powell, 2013; Yang et al., 2017).
Despite the mounting interest towards explaining the determinants of internationalization speed (Li et al., 2015) and its performance effects (Kim et al., 2020), this research territory still remains largely uncharted (Hitt et al., 2016). More specifically, since internationalization is such a time-dependent process, one might not afford to grow in incremental steps, or even at a high pace in a single direction, which has been the focus of extant research. However, a paradox does arise when firms attempt to grow rapidly by concurrently internationalizing their activities in terms of both breadth and depth. From an IB perspective, breadth refers to the dispersion of growth as demonstrated by entries in new foreign markets over a given period of time, while depth refers to the extent by which, resources are committed to scale operations in a given period of time in markets where the firm already operates. In an attempt to explain the difference between the two, De Bono (1971) puts forward an analogy; "breadth refers to digging a new hole elsewhere, whereas depth refers to digging the same hole deeper" (Nadkarni et al., 2011, p. 512). Given that the simultaneous commitment to rapid internationalization in terms of both breadth and depth (i.e., concurrent rapid internationalization) can lead to organizational tensions, we consider such a strategy to be paradoxical since these two dimensions are contradictory, interrelated, simultaneous and persistent over time (Pant & Ramachandran, 2017). In essence, this does not only imply that one is digging new holes elsewhere while making the existing hole deeper, but they are also doing so very fast.
Although the relationship between internationalization speed and firm performance has received a lot of attention recently (Garcia-Garcia et al., 2017; Mohr & Batsakis, 2017; Powell, 2013; Yang et al., 2017), a significant missing link exists: The interaction between different process-oriented dimensions of internationalization speed. While the literature has examined different dimensions of internationalization speed in isolation (Chetty et al., 2014; Hilmersson & Johanson, 2016), or jointly but with respect to other outcomes such as firm survival (Meschi et al., 2017), (1) it still remains unclear how the interaction of two process-oriented dimensions of internationalization speed such as breadth and depth relate to firm performance. The interaction between the two dimensions offers important theoretical implications. First, the revisited Uppsala internationalization process model (Johanson & Vahlne, 2009) considers that firm international growth comprises of two stages; recognition (i.e., exploration) and exploitation of an opportunity. In their revisited model, Johanson and Vahlne (2009) argue that international growth is a process characterized by gradually and sequentially increasing recognition (exploration) and commitment (exploitation) of an opportunity, thus suggesting that firms need to expand in one dimension (either exploration or exploitation) at a time (i.e., following a sequential process). Similarly, the Penrosean lenses support that resource-related constraints associated with fast firm growth will eventually lead to decreasing performance (Penrose, 1959). We argue that breadth and depth of internationalization speed, when considered jointly and not in isolation, can be positively related to performance. We draw on paradox theory which supports that successfully managing seemingly conflicting strategies (i.e., breadth and depth of internationalization speed) would eventually lead to increased performance (Lewis, 2000). Second, the paradoxical and demanding strategy of concurrent internationalization speed, may make the organization appear to operate on the edge of chaos (Eisenhardt & Brown, 1998) which would require the appropriate senior executives to help it navigate. Therefore, we draw from the upper echelons (UE) theory (Hambrick & Mason, 1984) and hypothesize that capable leaders carry value-added knowledge, experience and information which is needed to deliver on such paradoxical requirements (Wang et al., 2018). We thus proceed by investigating how CEO characteristics moderate the relationship between concurrent internationalization speed and firm performance. UE-based research has long suggested that the personal attributes and characteristics of managers should be such that can enable them to process information efficiently in order to deal with complex decision-making and ambiguity in their international tasks (Herrmann & Datta, 2002). Also, considering the proven link between entrepreneurial firms and the adoption of rapid internationalization (Jones & Coviello, 2005; Oviatt & McDougall, 2005; Xue et al., 2021), we argue that CEOs in their risk-taking approach with regards to internationalization processes such as rapid internationalization, can be linked with two observable moderators, these of CEO international experience and CEO education, as proxies of their knowledge capacity, cognitive orientation and ability to effectively process complex information.
This study contributes to the international strategy literature in general, and the temporal dimension of internationalization in particular in three ways. First, it explores the important and under-researched issue of the interaction between the breadth and depth of internationalization speed and why these two dimensions can concurrently have positive performance implications. Our findings confirm that when the two dimensions are jointly considered they are characterized by having a positive effect on firm performance. Second, this study extents the theoretical logic on the relationship between internationalization speed and firm performance. So far, the Uppsala model and the Penrosean lenses, among others, have dominated the discussion as the most effective theoretical underpinnings employed to explain the internationalization speed phenomenon. We integrate an interdisciplinary, yet widely used theory (paradox theory), which has received little attention in the IB literature (Pant & Ramachandran, 2017). We thus aim at explaining the internationalization speed phenomenon from a different, yet informative and relevant theoretical perspective. Third, this study is the first to demonstrate how CEO characteristics associated with knowledge capacity, cognitive orientation and ability to effectively process complex information influence the relationship between concurrent internationalization speed and firm performance. Thus, we add an extra layer of knowledge on the contingent nature of the relationship between internationalization speed and firm performance by integrating insights from the UE perspective.
We test our hypotheses against a panel dataset comprising the largest retail MNEs over the 10-year period 2003-2012 and find support for our conjectures. These retail MNEs are predominantly headquartered in developed markets that were hit hard by the 2008 financial crisis potentially resulting in financial constraints. For that reason, the selection of this particular period allows us to examine our hypotheses during a period of economic stability and a period of economic crisis where international expansion investments might have been adversely affected (Lee & Makhija, 2009).
2 Theoretical Background and Hypotheses Development
2.1 Conceptualization of Rapid Internationalization in the IB Literature
Rapid internationalization can be defined, conceptualized and operationalized in different ways (Chetty et al., 2014; Hitt et al., 2016). Some studies, mainly in the born globals (BG) literature, conceptualize internationalization speed based on the time lag between a firm's inception and its first international expansion (Acedo & Jones, 2007; Cavusgil & Knight, 2015; Chetty & Campbell-Hunt, 2004; Zahra et al., 2000). Other studies which focus on larger, long-established MNEs, conceptualize speed as a firm's subsequent international operations' expansion in scale or scope over a given period of time (Chang & Rhee, 2011; Vermeulen & Barkema, 2002) or through counting...
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