Academic journal article Management International Review

Leadership Experience Meets Ownership Structure: Returnee Managers and Internationalization of Emerging Economy Firms

Academic journal article Management International Review

Leadership Experience Meets Ownership Structure: Returnee Managers and Internationalization of Emerging Economy Firms

Article excerpt

Abstract How does returnee managers' international leadership experience influence emerging economy firms' internationalization? The internationalization process model suggests that international experience plays a central role enabling firms' internationalization moves. We propose that emerging economy firms can accelerate their development of international experience--and hence their international commitments--by grafting returnees with international leadership experience. We hypothesize that such international leadership experience has a positive effect on firm internationalization, and that this effect is strengthened by central-state ownership and private ownership, but weakened by local-state ownership and foreign ownership. Using 8-year (2001-2008) event-historical data from 164 Chinese electronic manufacturing firms, we found empirical support to our theoretical arguments. Specifically, returnee managers' international leadership experience is positively associated with emerging economy firms' likelihood of conducting foreign direct investment, while for other forms of international experience no positive effect can be detected. Our analysis of moderation by firms' ownership type finds that this positive association is strengthened by central-state and private ownerships, but weakened by local-state and foreign ownership.

Keywords Returnee manager * International experience * Emerging economy * Internationalization process * Corporate ownership * Event history analysis

1 Introduction

International experience of managers plays a central role in explaining the internationalization of business. In particular, studies of the internationalization process model (IPM) suggest that knowledge about foreign markets and international management enables firms to increase their commitment in foreign markets (Eriksson et al. 1997; Hadjikhani et al. 2014; Johanson and Vahlne 1977, 1990). While early IPM studies focus on the role of experiential learning in building foreign market knowledge that drives firm internationalization processes (Johanson and Vahlne 1977), recent studies incorporate a broader range of learning processes, such as networking and vicarious learning by imitating (Clarke et al. 2013; Johanson and Vahlne 2009; Meyer 2014; Meyer and Thaijongrak 2013). This study contributes to the IPM by examining a specific channel for obtaining experiential knowledge, namely the grafting of returnee managers as a source of organizational learning. Our research question asks: what is the effect of the international leadership experience contributed by returnee managers on firms' internationalization, and how is that effect influenced by types of corporate ownership?

The process of knowledge accumulation in internationalizing firms can be accelerated by returnees that help firms, especially those in emerging economies (EEs), to grow and to internationalize (Filatotchev et al. 2009; Kenney et al. 2013; Liu et al. 2010b; Saxenian 2005; Wright et al. 2008). In particular, returnee managers, defined as individuals who gathered leadership experience abroad prior to returning to their home country, hold high potential to contribute tacit knowledge. Local firms in EEs can access such tacit experiential knowledge through recruitment of returnee managers in a process known as 'grafting', which helps organizations to 'increase their store of knowledge by acquiring and grafting on new members who possess knowledge not previously available within the organization' (Huber 1991, p. 97). Grafting is often faster than knowledge accumulation through experiential learning and more complete than knowledge accumulation through imitation (Huber 1991). Since EE firms are typically latecomers in a 'catch-up game' in the global market (Cui et al. 2013; Kumaraswamy et al. 2012; Mathews 2002; Young et al. 1996), they are likely to resort to grafting to accelerate learning, and hence their internationalization process. …

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