A Leap of Faith? Managerial Religiosity And Market Entry Decisions.

Author:Richardson, Christopher
Position:RESEARCH ARTICLE
 
FREE EXCERPT

1 Introduction

Firms initiating market entry face all manner of uncertainties and risks (Zachary et al. 2015) and it is therefore vital that they exercise great caution in their decision-making. IB scholars have identified three decisions that are particularly salient in this regard, namely 'where', 'when', and 'how' a firm should internationalise its activities (Williams and Gregoire 2015). Each of these decisions is usually informed by a desire to minimise risk (Gallego and Casillas 2014; Hashai 2011), which in turn is often influenced by perceived cultural differences between a firm's home and target markets (Freeman et al. 2012). Operating in unfamiliar and strange settings can be a daunting prospect for firms taking their first steps abroad, and therefore the appeal of culturally similar markets, where formal and informal institutions are deemed somewhat reflective of those found at home, is quite reasonable, especially during the early stages of foreign expansion.

In spite of the substantial amount of research that has been undertaken examining the relationship between culture and entry decisions, one factor that has failed to yield much scholarly interest among IB researchers is religion (Dow et al. 2016). We believe there are two key reasons for this. Firstly, religion is often subsumed under the broader context of 'culture', alongside other cultural components like language. While it is certainly true that culture is a holistic concept that incorporates such components, it is important that scholars also attempt to unpack the construct and analyse these components in their own right, as some have recently done with language (Janssens and Steyaert 2014), for example. Secondly, religion occupies a somewhat peripheral place in the public life of various societies today. Though it is undeniable that religion's public role has become somewhat negligible in certain countries, there are two related reasons why this is not a strong justification for its marginalisation in the IB discourse. Firstly, religious belief actually remains widespread, with 83% of the global population being, broadly speaking, religiously affiliated (Pew Research Center 2012). Secondly, for many people religion is about far more than a mere belief or opinion about God; it serves as the source of their morals and as a guide for the right course of action, including in the sphere of business and management (Richardson 2014; Richardson et al. 2014). For example, in the religious approach, the greater good of society is emphasised over the selfish pursuit of profit maximisation (Rice 1999). As Harrison (2011, p. 26) surmises, religion may not be "the only fount of cultural values, beliefs, and attitudes [...] [but] it is surely one of the most influential". While religion's scope and influence may be waning in some parts of the modern world, this is not a universal trend. In many societies, religion continues to play a central, and in many cases even a growing, role not only in life generally (Olivier 2016) but also within the broad confines of business and management, as recent studies from various disciplines within the field have demonstrated (Giimiisay 2015; Richardson and Rammal 2018).

With this in mind, it is important to understand more about the impact of religious belief on IB activities, which is the overarching objective of the present study. More specifically, the study focuses on the effect of managerial religiosity, or 'religiousness' as some authors (e.g., Donahue 1985) prefer, on the three market entry decisions ('where', 'when', and 'how') taken by firms seeking to initiate cross-border expansion. In essence, the study is guided by the following research question: To what extent, and in what ways, does managerial religiosity influence market entry decisions? While firm internationalisation represents one of the central themes in the IB research agenda (Seno-Alday 2010), relatively little is known about the role and impact of religion (Dow and Karunaratna 2006; Li 2008; Richardson 2014), and, by extension, religiosity.

Although the world is religiously very diverse, the present investigation focuses specifically on the Islamic context. The reasoning behind this is threefold. First, with more than half a billion followers worldwide, Islam is one of the world's largest religions. Furthermore, it is the fastest growing religion, with its total number of followers expected to grow by 73% between 2010 and 2050 (Pew Research Center 2015). Second, among the world's religious traditions Islam is fairly unique both in terms of its powerful influence on the culture of its faithful (Harrison 2011) and the extent to which the religion shapes mainstream society (Lewis and Kashyap 2013). The prevalence of Islamic law (the Sharia) across large parts of the Muslim world is possibly the most prominent example of this. Third, business transactions within the Muslim world have been largely overlooked in the IB literature (Richardson 2014), despite the fact that, firstly, nearly a quarter of the world's population is Muslim (Pew Research Center 2015) and secondly, a number of countries in the Islamic world, such as Malaysia, Indonesia, and those belonging to the Gulf Cooperation Council, are beginning to play a more prominent role in IB (Weir 2000; Zahra 2011). Accordingly, this study contributes not only to our understanding of the role of religion generally in entry decisions, but also, on a secondary level, to a particular socio-cultural context that has hitherto occupied the fringes of IB research but which is in fact a significant presence in our world today and will likely continue to be so in the generations to come.

The remainder of the paper is structured as follows. The following section reviews the literature relating to (a) market entry decisions, with particular emphasis on the importance of cultural differences, and (b) religion/religiosity, leading to the development of our hypotheses. Next, the methodological approach adopted in the investigation is described, followed by an overview of the results. These results are then discussed in light of extant knowledge before the article ends with some concluding remarks and a note on the study's limitations.

2 Initiating Market Entry: Three Key Decisions

Despite its inherent risks, costs, and challenges, firm internationalisation, or "the crossing of national boundaries in the process of growth" (Buckley and Ghauri 1999, p. 9), constitutes a common and growing objective among firms throughout the world. The appeal of foreign expansion stems from a multitude of both 'push' and 'pull' factors (Benito 2015; Cuervo-Cazurra et al. 2015). More precisely, firms may pursue internationalisation in response to unfavourable domestic market conditions, such as competitive pressures, market saturation, and labour shortages (Luo and Tung 2007), and/or in proactive efforts to gain access to, for example, tacit forms of knowledge, lucrative foreign markets, and resources that are unobtainable at home (Deng 2004).

Regardless of the underlying motivations, the initiation of foreign market entry revolves around a number of important questions, of which three are particularly pertinent, namely 'where', 'when', and 'how' to internationalise (Coeurderoy and Murray 2008; Williams and Gregoire 2015). Naturally, managers contemplate a wide range of issues when deciding on each of these issues, though the minimisation of uncertainty is a central point of consideration (Johanson and Vahlne 1977, 1990).

2.1 Where to Enter

IB scholars have long had an interest in analysing the markets in which firms initiate cross-border expansion (Johanson and Vahlne 1977; Johanson and Wiedersheim-Paul 1975) and as more and more firms internationalise their activities, this theme remains paramount in the IB research agenda (Cuervo-Cazurra 2011; Gallego and Casillas 2014). Traditional internationalisation theories (Bilkey and Tesar 1977; Czinkota 1982; Davidson 1980; Johanson and Vahlne 1977; Johanson and Wiedersheim-Paul 1975) posited that market choice, particularly during the initial stages of internationalisation, is heavily influenced by perceived cultural similarity between markets. This reflects the sequential process of internationalisation described by these models, namely that firms establish themselves domestically, then accumulate international experience in 'low-risk' culturally close markets, before finally, equipped with experiential knowledge of running a business internationally, extending their reach into culturally distant markets. This idea of a gradual expansion of international operations according to cultural differences has received much empirical support over the years (Barkema and Drogendijk 2007; Erramilli 1991; Sakarya et al. 2007).

However, the lowering of trade barriers around the world and the rapid technological advances that have come about since these traditional models were developed have cast doubt on their continued applicability (Oviatt and McDougall 1994). The evolution of internationalisation research reflects this (Knight and Liesch 2016), with scholarly attention increasingly being paid to the phenomenon of 'born globals' (BGs), defined as "entrepreneurial start-ups that, from or near their founding, seek to derive a substantial proportion of their revenue from the sale of products in international markets" (Knight and Cavusgil 2004, p. 124). A number of empirical studies on BGs suggests that culture's role in determining internationalisation patterns is a vestige of an earlier, less globalised era of human history when cross-border business was, for the most part, the preserve of large companies (Bell 1995; Moen and Servais 2002). Bell's (1995) study of small software firms, for instance, suggested that client followership, sectoral targeting, and industry trends are more likely to determine market attractiveness and entry than cultural differences.

While the BG...

To continue reading

REQUEST YOUR TRIAL