Learning in SME Internationalization: A New Perspective on Learning From Success versus Failure.

JurisdictionGermany
Date01 Agosto 2020
AuthorLee, Jeoung Yul

1 Introduction

It is well established that the process by which a firm internationalizes has important repercussions for the future success or failure of firms operating in those foreign markets (Qian et al. 2018; Sedziniauskiene et al. 2019). Because of the importance of internationalization process to internationalization outcomes, International Business (IB) scholars have embraced internationalization process as a cornerstone conceptual contribution to both the academic literature and with respect to the practical guidance the field gives to managers (Casillas and Moreno-Menendez 2014; Oehme and Bort 2015; Santangelo and Meyer 2011; Sui and Baum 2014).

At the core of the internationalization process literature is Johanson and Vahlne's (1977) Uppsala international process model, as well as well as a series of refinements and updates (Johanson and Vahlne 1990, 2003, 2006, 2009). In its original conceptualization, the Uppsala model, was very much deterministically structured in its prescriptions and predictions. However, by 2009, this rather rigid approached had changed, reflecting more fluidity with respect to "internationalization as an entrepreneurial process in a business network context" (Forsgren 2016, p. 1135). More recent work has added a more nuanced understanding of what is meant by a firm's internationalization process (Blankenburg Holm et al. 2015; Casillas and MorenoMenendez 2014; Oehme and Bort 2015; Santangelo and Meyer 2011; Schweizer et al. 2010; Sui and Baum 2014; Vahlne and Johanson 2013). This more recent work has not only put greater emphasis on the role of networks of various forms but also on the constitution and structure of these networks and what externalities flow into and from the firms that constitute them; having taken to heart Johanson and Vahlne's (2009) call for examination of the role of knowledge and learning as key output of the process of internationalization per se. As Forsgren (2016) notes, this consolidation of business network theory and entrepreneurship in the Uppsala model is crucial, as it demands fundamental consideration of the firm's cognitive enhancement via the internalization process with the consequent implications of a relationship between internationalization and entrepreneurship.

In this article and the focused issue of articles, we place attention on the topic of knowledge and learning of entrepreneurial firms in their internationalization process in line with Johanson and Vahlne's (2009) updated model. We expand on the exiting IB literature by concentrating not only on learning from success and general experience but learning from failure. We believe this trend toward learning from success or general experience is explained by both the limited data available regarding failure cases, as well as the tradition by which scholars follow previous research streams. Like Madsen and Desai (2010) we believe that "organizations learn more effectively from failures than successes that knowledge from failure depreciates more slowly than knowledge from success, and...the magnitude of failure influence how effectively organizations can learn from various forms of experience" (p. 451).

In the next section, we discuss the original and updated models of Johanson and Vahlne (1977, 2009) focusing on knowledge and learning in the internationalization process, with particular emphasis on the consequences for entrepreneurship. This is followed by a discussion about the entrepreneurship and the internationalization process model. We follow this with a review of nearly three decades of work on learning in SME internationalization and then discuss the prior literature on learning from failure. The goal, which we cover in the penultimate section, is a combination of the concept of learning in SME internationalization and the concept of learning from success and failure into a new model. Finally, we review the five papers in our focused issue and relate them to this new theoretical structure. We conclude with some implications for future research.

2 Knowledge and Learning in The Uppsala Tradition

Johanson and Vahlne's (2009) variant of the Uppsala model reflected a research trend in which firms' organizational learning and internationalization process contexts, concurrently, have rose to prominence when compared to the original Uppsala model of 1977. In its original form, the Uppsala model conceived of firm knowledge as sprouting from its current operational activities. In addition, there was also the implicit assumption that when the authors referred to 'knowledge', it meant solely market-based knowledge (Barkema et al. 1996; Erramilli 1991; Luo and Peng 1999; Petersen et al. 2003). This was expanded upon when Axelsson and Johanson (1992) introduced the role of business network in market-learning process. Since 1977, IB scholars have come to view general market knowledge and general internationalization knowledge as increasingly crucial to internationalization process, notably due to their influence on foreign market entry, acquisition, alliance, core business, and so on (Chang 1995; Hoang and Rothaermel 2005; Nadolska and Barkema 2007; Padmanabhan and Cho 1999; Sapienza et al. 2006). However, general internationalization knowledge can come not only from these forms of experiences and learning (in association with foreign market entry, acquisition, alliance, core business, etc.), but also from the various contexts and conditions existing in the heterogeneous markets in which firms are operating (Barkema and Vermeulen 1998).

Indeed, Johanson and Vahlne (2009) added the notion of 'relationship-specific knowledge' based on a linkage with the business network perspective. In their revised view, specific knowledge can be developed from partners' interactions, and this knowledge can nurture partners' resources and capabilities each other. This 'general relationship knowledge' reflects the interactive learning regarding how to coordinate the sets of learning and knowledge across heterogeneous overseas markets (Johanson and Vahlne 2003). This newly added 'relationship-specific knowledge' differs from the 1977 Uppsala definition of 'general market knowledge' in that this new form of knowledge comes from business networks-based interactions between buyers' user learning and sellers' producer learning.

Finally, it is important to note that the Uppsala model, in all its varieties, is not free of criticism. For example, the literature claimed that there are non-experiential learning types - i.e., acquisition, imitation, and search which can act as a trigger to accelerate the internationalization process (Forsgren 2002). Other scholars emphasize that the original Uppsala model is fundamentally deterministic, but, in reality, subnational managerial discretion is crucial in the internationalization process (Petersen et al. 2003). This is actually a critical fact for SMEs where ownership and management are generally overlapping or quite close. Johanson and Vahlne's (2009) counterargument is that that gradual experiential learning should be the fundamental mechanism to understand their business network view-based internationalization and its learning connotation after all.

Figure 1 shows the evolution of ideas in knowledge and learning in Uppsala models over time.

3 Entrepreneurship and Internationalization Process Model

In the 2009 version of the Uppsala model, Johanson and Vahlne combined entrepreneurship with a business network perspective. In particular, the revised model drew on Kirzner's (1973) conceptualization of entrepreneurship as a discovery of opportunities. Unlike Schumpeter's (1934) perspective that entrepreneurial chances are created by entrepreneurs, Johanson and Vahlne emphasize 'opportunity recognition' via the discovery of the unknown grounded in alertness and readiness (Schweizer et al. 2010).

Despite this confluence between the revised Uppsala model and Kirzner's conceptualization of entrepreneurship, it is also worth noting some important differences in the perspectives taken. Kirzner (2009, p. 145) argues that his view of entrepreneurship is completely different from entrepreneurial success, but more related to "the nature of the market process". Kirzner's fundamental claim is that entrepreneurship is the interaction among market opportunities, organizational resources, and overseas investments (Kirzner 1978). In contrast, the Uppsala model emphasizes that "knowledge of opportunities and problems" is critical "to initiate decisions" in the internationalization process (Johanson and Vahlne 2009, p. 1418), which depends on experiential learning, gradual process, and path dependency when it comes to knowledge and learning. Kirzner's focus on the composition of entrepreneurship is somewhat dissimilar from, though not holey alien to, the incremental logic of the Uppsala model (Foss and Klein 2012).

Nevertheless, there are also some alternatives views combining entrepreneurship with the Uppsala model. One of the most appealing alternatives is that building on Knight's (1921) perspective, which aligns entrepreneurship with a revised Uppsala model by incorporating some common themes:

(1) Learning and experimentation inspires entrepreneurial activities;

(2) Entrepreneurial commitment can occur within organizations rather than independent of them;

(3) Entrepreneurial decision-making is a process rather than opportunity discovery;

(4) Overseas commitment is based on the risk based on an entrepreneurial judgement; and,

(5) Entrepreneurship is based on not only the entrepreneurs' expectations for the future, but also the organizations' existing resources and knowledge.

Indeed, if we take the view that entrepreneurship is a process of innovation based on experimental learning and knowledge, it is similar in most forms to an internationalization process by which firms enter into new markets thereby creating entrepreneurial opportunities and learning (Jones and Coviello...

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