Academic journal article Management International Review

Turbulence, Discovery and Foreign Market Entry: A Longitudinal Study of an Entry into the Russian Market

Academic journal article Management International Review

Turbulence, Discovery and Foreign Market Entry: A Longitudinal Study of an Entry into the Russian Market

Article excerpt

Abstract

* Firms entering transition markets are typically ignorant about those markets, and the markets, owing to the transition from a planned to a market economy, are typically turbulent. Consequently the entry process involves discoveries that could not have been predicted in advance. This position is supported by a longitudinal study in real-time of a Swedish firm's entry into the Russian market between 1987 and 1993.

* The paper distinguishes between three types of activity that form part of the entry process, namely search, routines and improvisation, and it discusses how they relate to operative and strategic discoveries made and the characteristics of the entry process.

Key Results

* The paper offers a conceptual framework for studying the role of discovery in the process of entering turbulent foreign markets. A longitudinal case study of a Swedish firm's entry into Russia demonstrates that discoveries were important in the entry process. It shows also that strategic discoveries tend to be a result of either search or improvisation, while operative discoveries are usually made in the course of routine activities performed by the entering firm.

Introduction

When entering foreign markets firms often encounter unplanned situations that could not have been predicted in advance. This problem is particularly acute when entering turbulent markets. As Tsoukas (1996, p. 22) puts it: "Firms are faced with radical uncertainty: they do not know, they cannot know, what they need to know". Thus discovering the unknowable is an important element in the process of entering a turbulent market. The purpose of this paper is to discuss the role of discovery when firms enter the emerging transition markets in Eastern Europe, which are often characterised as turbulent (Czaban/Whitley 2000, McCarthy/Puffer/Naumov 2000, Salmi 2000). The process is seldom linear, but is full of discoveries and surprises that reduce the entering firm's ignorance. In the paper we discuss how discovery is related to the performance of three types of activity: search, routine and improvisation (see Figure 1). The theoretical perspective is supplemented by a longitudinal case study of a Swedish firm's entry into the Russian market from 1987 to 1993. Two different time periods are distinguished, and the roles of the different activities during each period are discussed and related to the kind of discoveries made by the firm.

[FIGURE 1 OMITTED]

The process approach to foreign market entry used in this analysis is consistent with the internationalisation process (IP) model (Johanson/Vahlne 1977, Blomstermo/ Sharma 2002), and we use this model as a conceptual framework for discussing market discovery during the foreign market entry process. The experiential learning of the IP model has been criticised for having too simplistic an approach to learning (Forsgren 2002, Petersen/Pedersen/Sharma 2002). In the IP model, it is simply assumed that learning is an outcome of current activities in the market (Blomstermo/ Sharma 2002). We introduce discovery as a key concept and discuss how different kinds of activity can be expected to lead to discoveries of unknown, and frequently unknowable, features of the market. We also discuss how the activities in the market are related to market knowledge and commitment. Thus, besides the primary objective of the paper, which is to examine the role of market discovery when firms enter turbulent transition markets, a secondary purpose is to deepen our understanding of the internationalisation process of the firm.

The following three sections deal with the theoretical base of the study: market turbulence; the concept of discovery, including the possible impact of firm activities on discovery in the foreign market entry process; and the influence of internationalisation, in the form of market knowledge and commitment, on discovery in the entry process. …

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