Essays on the internationalization of entrepreneurial firms

Zheng, Congcong (2005) Essays on the internationalization of entrepreneurial firms. Doctoral thesis, University of London: London Business School.

Abstract

This thesis consists of three related essays that investigate the internationalization of entrepreneurial firms. The essays investigate the motivation of entrepreneurial firms to internationalize, the learning mechanisms during the internationalization process and firm performance post-internationalization. I build on the behavioural theory of the firm and the learning theory to explain internationalization of entrepreneurial firms. In the first essay, I explain the motivation of entrepreneurial firms to internationalize. I propose that internationalization represents a significant strategic change for an entrepreneurial firm. Following the literature on the behavioural theory of the firm, I argue that firms engage in internationalization when they encounter difficulties in the domestic market. I posit that firms that are performing below their aspiration level in domestic markets are more likely to internationalize (entry hypothesis). I further posit that such underperforming firms will compete in locations that are more culturally distant than firms that are performing above their aspiration level (culture distance hypothesis). My entry hypothesis is supported and culture distance hypothesis is not. In the second essay, I explain how entrepreneurial firms with no previous international experience learn in the international market. I draw on the learning theory and the experience spillover effects to predict firm's learning behaviour. I argue that there are essential similarities between managing a foreign alliance and managing international expansion. I posit that firms can transfer their experience at managing a foreign alliance before international entry to managing international market once they made the entry. I find empirical support for such transfer effect. In the third essay, I focus on learning and performance effect postinternationalization. I argue that entrepreneurial firms that have entered international markets face competing learning demands. The competing demands originate from the needs to developing core capability inside the firm and from the need to adjust to a new environment outside the firm. Excelling on both types of learning will lead to faster international growth. But when firms cannot achieve both simultaneously, those that use their international exposure to facilitate core capability development internally will achieve faster international growth.