The co-evolution of learning and internationalization strategy in international new ventures.
| Verfasser | Pellegrino, Juan M. |
| Posten | RESEARCH ARTICLE |
Abstract In this paper, we examine the co-evolution of learning and internationalization strategy in international new ventures (INVs). Many researchers have suggested that in contrast to the reliance on experiential learning by firms that internationalize incrementally, firms that internationalize rapidly use alternatives such as congenital and vicarious learning. However, few empirical studies explicitly examine how the use of learning processes in INVs evolves. We used retrospective longitudinal analysis to explore the learning processes of four New Zealand-based INVs, and found that their dominant learning mode and foci of learning changed as internationalization increased. Around the time of founding, congenital learning dominated, but as the firms began to internationalize, they relied more on experiential, vicarious, searching and noticing learning processes. The focus of their learning also shifted from product knowledge to knowledge about foreign markets and the internationalization process. In the later stages of their internationalization, experiential learning increased in importance, as did other resource-intensive learning processes such as grafting by hiring locals or acquiring foreign companies. We conclude that the learning processes used by INVs co-evolve with their internationalization, and are more rapid and less systematic than is implied by traditional models of the internationalization process, with substitutes for experiential learning dominating early in the process.
Keywords International new ventures * Internationalization process * Knowledge ? Learning * Process research
1 Introduction
Knowledge and learning are essential when new ventures internationalize (e.g., Casillas et al. 2009; De Clercq et al. 2012; Oviatt and McDougall 1994, 2005). Oviatt and McDougall (1994) argued that the unique knowledge of founders facilitates early and rapid entry by international new ventures (INVs) into multiple countries. Subsequent research has focused on founders' and top managers' congenital learning (i.e., prior knowledge, abilities, and experience) (Yeoh 2004). Because congenital learning may have only compensatory (Femhaber et al. 2009) and temporary effects on internationalization (Bruneel et al. 2010), researchers have studied other knowledge acquisition processes that early and rapidly internationalizing firms may use, such as vicarious learning (Casillas et al. 2009; Schwens and Kabst 2009b; Freeman et al. 2010) and grafting (Gabrielsson et al. 2008; Loane et al. 2007).
This perspective contrasts with traditional theories like the Uppsala model, which emphasize experiential learning in incremental internationalization. Such learning occurs gradually through direct experience in international markets. It is a slower and more resource intense, but possibly richer, learning process that may supplement congenital learning when INVs internationalize. Studies of INVs are equivocal, however, with evidence of both positive (Michailova and Wilson 2008) and negative effects (Schwens and Kabst 2009b).
De Clercq et al. (2012) concluded that there is a need to align research about learning by INVs with literature about organizational learning. They argue that the "... snapshot nature of cross-sectional studies limits their ability to examine how processes and performance unfold" (p. 162), and recommend longitudinal research that examines how learning and internationalization processes are intertwined. The research reported in this paper begins to address this gap by using a process method to examine the co-evolution of learning and internationalization in four New Zealand based INVs.
In constructing retrospective histories of how these firms internationalized, we focused on specific events and strategy components, along with learning processes, sources, and foci. Strategy components are constructs, such as pace, market scope and mode of entry, that characterize the pattern of an SME's internationalization. Similarly, learning processes, sources and foci describe how a firm learns, from whom it learns, and the content of their learning. We generalized the experience of these firms by examining how their learning, together with their strategy components, co-evolved during three analytically derived phases--pre-internationalization, early-internationalization, and later internationalization--which involved changes in both internationalization and learning processes, sources and foci. Our findings suggest that congenital learning, supported by learning from networks and market research, significantly influences an INV's competitive advantage, its initial product and market scopes, and the pace of its entry into offshore markets. However, experiential, vicarious, searching, and noticing become more important during the early-internationalization phase, when the focus of learning shifts from product knowledge to knowledge about foreign markets and internationalization processes. Finally, experiential learning and other resource-intensive learning processes such as grafting increase in importance later in internationalization.
Practitioners and policy-makers can benefit from our research, which offers an integrated, intuitive explanation of the ways INVs can learn about foreign markets, and the implications of these processes. Our work suggests that vicarious learning and searching can complement congenital learning, and that knowledge relevant to the early stages of internationalization develops through means other than experiential learning. Greater recognition of the usefulness of different learning modes, and of how learning and strategy components interact, might result in founders paying more attention to non-experiential forms of learning. It could also inform the design of export development programmes, resulting in innovative, economical approaches that increase the speed and effectiveness of internationalization.
The remainder of the paper proceeds as follows: first, we review extant research on knowledge acquisition by INVs and apply Huber's framework (1991) to categorize knowledge acquisition processes, sources of knowledge, and learning foci. We then describe the development of the cases and our findings about internationalization strategy and learning (processes, sources and foci) that characterize each phase. Finally, we discuss the implications of these findings and present our practical contributions.
2 Literature Review
The "discovery" of early-internationalizing firms by Rennie (1993) and later theories of INVs by Oviatt and McDougall (1994) sparked interest in how these firms internationalize. For instance, firms may follow the traditional/incremental path, in which they internationalize in stages after developing their domestic markets (e.g., Bell et al. 2001), or be bom global/INVs that internationalize early and rapidly (e.g., Oviatt and McDougall 1994; Rennie 1993; Knight and Cavusgil 1996), or be born-again globals that internationalize quickly after focusing on their domestic market for a long period (e.g., Bell et al. 2001; Bell et al. 2003). These firms have various distinctive characteristics. Bell et al. (2003) distinguished among these three types of firms based on their pace of internationalization, method of market entry, and international strategy. Similarly, Chetty and Campbell-Hunt (2004) characterized SMEs in terms of their international markets, products, modes of market entry, competitive strategy, pace, and manufacturing location. However, this literature is largely descriptive, and does not explore links between learning and the characteristics of internationalization pathways. Similarly, while there is considerable literature on how MNEs learn (e.g., with respect to R&D and innovation, and learning by subsidiaries), few studies have investigated the role of organizational learning during internationalization (Hsu and Pereira 2008).
The Uppsala model posited that experiential learning is the primary way to acquire knowledge about both international markets and the internationalization process, and that it results in incremental internationalization (Johanson and Wiedersheim-Paul 1975; Johanson and Vahlne 1977). It is likely that INVs learn differently. Studies that explore this possibility focus on the earliest stages of internationalization; how INVs compensate for their lack of industry and international experience; and the extent to which they depend on the prior knowledge, abilities, and experience of the founder and management team. However, few of these studies specifically examine the individuals and organizations from which INVs acquire knowledge, and the relative importance of internal and external sources of knowledge. Also, most of this research is cross-sectional, so little is known about how learning processes and the focus and source of learning evolve (De Clercq et al. 2012) as a firm enters foreign markets and then rapidly internationalizes.
Although some recent work examines the evolution of learning and knowledge during internationalization (Fletcher and Harris 2012; Fletcher and Prashantham 2011), it does not examine all learning processes, how their use evolves from the earliest stages of firm formation through advanced stages of internationalization, or the foci and sources of learning. Thus, we use findings from extant cross-sectional studies to infer how learning and internationalization may be intertwined in INVs. Table 1 organizes this literature using Huber's (1991) categorization of learning processes into congenital learning, experiential learning, vicarious learning, grafting, and searching/noticing.
This literature focuses on how firms learn, but it is important to understand the sources of knowledge (i.e., from whom firms learn), and the foci of learning (i.e., what they learn about). The studies that examine sources of knowledge usually begin by distinguishing between internal and external sources. For example, Femhaber...
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