Strategic Commitment and Timing of Internationalization from Emerging Markets: Evidence from China, India, Mexico, and South Africa

By Wood, Eric; Khavul, Susanna et al. | Journal of Small Business Management, April 2011 | Go to article overview

Strategic Commitment and Timing of Internationalization from Emerging Markets: Evidence from China, India, Mexico, and South Africa


Wood, Eric, Khavul, Susanna, Perez-Nordtvedt, Liliana, Prakhya, Srinivas, Dabrowski, Raul Velarde, Zheng, Congcong, Journal of Small Business Management


In a study of 257 new ventures from China, India, Mexico, and South Africa, we find support for the mediating effect of strategic early internationalization on international sales intensity. We argued that when new ventures from emerging markets internationalize early and with commitment, the legitimacy they acquire helps them overcome liabilities of newness and foreignness. We develop a typology of international new ventures that, based on strategic intent and timing of internationalization, distinguishes strategic early internationalizers from persistent, serendipitous, and long-term internationalizers. We show that strategic early internationalization accounts for over half of the explained variance in international sales intensity and either fully or partially mediates the effects of managerial knowledge and market orientation on international sales intensity.

Introduction

When new ventures internationalize, they face both liability of newness (Singh, Tucker, and House 1986; Stinchcombe 1965) and liability of foreignness (Zaheer 2002, 1995). For new ventures from emerging markets, the liability of foreignness is often extreme because of the low perceived reputation that firms from emerging markets have globally (Mathews 2006). Such twin liabilities (Mudambi and Zahra 2007) create, arguably, the worst possible legitimacy challenges that can face a fledgling organization (Fischer and Keuber 2007; Deep-house and Carter 2005; Reuber and Fischer 2005; Zimmerman and Zeitx 2002). Nonetheless, the rate at which new ventures from emerging markets are internationalizing is accelerating (Bruton, Ahlstrom, and Obloj 2008; Luo and Tung 2007; Mathews 2006). This trend mirrors growing empirical evidence from industrialized countries where new ventures are internationalizing at an ever earlier age (Burgel and Murray 2000; McDougall and Oviatt 2000; Oviatt and McDougall 2005, 1995, 1994) and where evidence suggests that early internationalization appears to improve performance for survivors (Burgel and Murray 2000; Jones and Coviello 2005; Oviatt and McDougall 2005, 1995; Sapienza et al. 2006; Zahra and George 2002).

However, not all new ventures that do internationalize start with clear intentions of entering international markets early in their life cycles. Conversely, not every new venture with the strategic commitment to internationalize early can act on such commitment effectively. Some new ventures enter international markets opportunistically or reactively (Piercy 1981) without commitment but in response to customer inquiries. Other new ventures have the intent to internationalize but can not establish a sustainable international presence until after they establish one domestically (Park and Bae 2004). We focus on the unique set of internationalizers that not only internationalize early but whose founders also do so with strategic commitment. We develop a typology of international new ventures that distinguishes strategic early internaitionalizers from serendipitous, persistent late, and long-term internationalizers. Each of the four types of international new ventures has international sales, but the latter three arrived at their international position via different routes and/or with a different timing than strategic early internationalizers. (1) From our point of view, effective strategic early internationalization presents a particularly interesting dilemma in understanding how new ventures from emerging markets overcome the legitimacy challenges that deliberate early entry into global markets poses (Luo and Tung 2007; Mathews 2006). As motivation for this paper, we ask why, in the face of legitimacy obstacles associated with their newness and foreignness, do strategic early internationalizers from emerging markets pursue the high-risk strategy of entering international markets early in their life cycle? Furthermore, how does becoming a strategic early internationalizer affect their ability to compete in international markets when we compare them with other internationalizers who enter without intent and/or later in their life cycles? …

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