Academic journal article Management International Review

Rethinking the Paradigm of Service Internationalisation: Less Resource-Intensive Market Entry Modes for Information-Intensive Soft Services

Academic journal article Management International Review

Rethinking the Paradigm of Service Internationalisation: Less Resource-Intensive Market Entry Modes for Information-Intensive Soft Services

Article excerpt

Abstract and Key Results

* The service sector is becoming increasingly important in the global economy; this is especially true for 'soft' services involved in providing information and knowledge-based solutions. It has been suggested that soft service firms are restricted to internationalising through market entry modes requiring substantial resource commitment, such as wholly owned subsidiaries and equity based joint ventures. We argue that this assessment is based on overly simplistic assumptions regarding the characteristics of these information-intensive soft service firms.

* Focusing on the nature of the value-adding activities and operations of these firms, an information transformation model is proposed to describe the value creation process for information-intensive soft service firms.

* Using the model to represent different types of internationalisation situations yields 10 lower-involvement approaches available to information-intensive soft service firms seeking to enter foreign markets.

Key Words

Internationalisation * Soft Services * Value Creation Process

Introduction

It is commonly assumed that most services are non-tradable (Roberts 1999). This assumption is especially strong in the case of information-intensive soft service firms, which are organisations involved in the provision of idea- and knowledge-based solutions. Erramilli (1990) suggested that non-tradability results in the need for information-intensive soft service firms to utilise resource-intensive entry modes, such as FDI and equity joint ventures, in order to internationalise. However, using a value transformation model to represent the complex nature of information-intensive soft service firms' products and operations, we propose that a collection of less resource-intensive modes has the potential to be effective for foreign market entry.

This paper is organised as follows. The next two sections discuss the literature on information-intensive soft services, and provide a context for the conceptualisation of the value transformation model. Following the presentation of the model, examples of its potential application are discussed. Finally, we conclude with a summary of the conceptual development, and discuss implications for further research.

Information-intensive Soft Services

While less fully developed, our understanding of the internationalisation of service firms has paralleled that of firms operating in the manufacturing sector. A persistent theme in the literature has been the distinction between services and manufactured goods. Although the nature of these differences has been widely debated (e.g., Sasser/Olsen/Wyckoff 1978, Lovelock 1983, 1991), it is commonly agreed that the most fundamental issues are the intangibility of service products and the inseparability of the production and delivery processes in the service environment (Zeithaml/Parasuraman/Berry 1985).

However, the manufacturing/service distinction is not sufficiently fine-grained. Erramilli (1990) suggested that internationally traded services fall into two groups: hard and soft. Hard services are characterised by production that is separable from consumption, such that the service can be provided effectively, absent co-location of the consumer and the producer. Soft services, however, are characterised by simultaneous production and consumption, requiring the presence of the provider for consumption to occur. In a similar vein, Driver and Johnston (2001) proposed that service firms can be categorised by the interactions they require: interpersonal and non-interpersonal. Likewise, Berthon et al. (1999) distinguished service firms by the ability for their output to have a manifestation in space. Ekelondo and Sivakumar (1998) suggested that other classification systems (e.g., Patterson/Cicic 1995, Clark/Rajaratnam/Smith 1996, Lovelock/Yip 1996) can be translated into Erramilli's framework of hard and soft services. …

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