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Doctoral Dissertation

Speed of Internationalization,

the Knowledge Link

and Effects of Creativity

February, 2020

YOUNG SHIN M. CHUN

College of Business Administration

Seoul National University

i

Abstract

Speed of Internationalization,

the Knowledge Link

and Effects of Creativity

YOUNG SHIN M. CHUN

College of Business Administration

The Graduate School of

Seoul National University

With increased global competition, the speed of internationalization

is an important strategy for international expansion. However, conventional

theories describing the gradual internationalization of established firms fall

short in explaining recent patterns of internalization whereby firms

internationalize at a significantly faster pace and scope. Moreover, speed in

international business literature has been focused on young and small firms

ii

mostly examining the time it takes for initial foreign expansion after

foundation. This has led to the lack of studies on what happens after that first

initial expansion and the diverse factors that affect this process. To address

this issue, the study draws attention to the importance of speed to established

firms. It examines the factors that affect subsequent international expansion

especially in terms of the pace of internationalization which in this study is

referred to as ‘speed.’

The first section of this study examines various theoretical

frameworks that explain why and what causes firms to expand to foreign

markets and how the notions of speed is incorporated in theses literatures.

These frameworks explain processes, entry modes, timing and speed of

internationalization. While it is important to examine different explanatory

factors of each theory, these theories fall short in explaining recent

internationalization patterns when interpreted singly. Thus, the study

highlights the importance of integrating various theoretical approaches

acknowledging the complementarity of different theories to better understand

why some firms deviate from predicted patterns of internationalization.

The second section empirically investigates certain knowledge and

firm characteristics that affect the speed of internationalization. Using data on

186 Korean firms (2009-2018), it found that technological knowledge and

prior experiential knowledge had a positive relationship with the speed of

iii

internationalization. It also found that firm level creativity positively

moderated this relationship. The results contribute to existing literature by

examining the circumstances under which rapid expansion through

internationalization becomes a viable strategy for firms. It also enriches the

empirical context of internationalization speed research by examining

established firms in a wide variety of industries as opposed to the most

commonly studied small and young firms in technology intensive industries.

Keywords: speed of internationalization, born global, knowledge-based view,

international entrepreneurship, creativity, firm level creativity

iv

TABLE OF CONTENTS

CHAPTER I. INTRODUCTION AND OVERVIEW .................................... 1

1. Research Motivation ............................................................................. 2

2. Empirical Setting .................................................................................. 7

3. Organization of Thesis .......................................................................... 9

CHAPTER II. INTERNATIONAL EXPANSION: BACKGROUND

THEORIES, AND RECENT APPROACHES TO

INTERNATIONALIZATON STUDIES ...................................................... 12

1. Background Theories .......................................................................... 13

1.1. The Knowledge Based View of the Firm .................................. 13

1.2. The Organizational Learning theory of the Firm ...................... 20

2. Internationalization, a Multitheoretical Framework ........................... 28

3. Recent Approaches to Internationalization Studies ............................ 35

3.1. International Entrepreneurship .................................................. 35

3.2. Dynamic Capabilities ................................................................ 41

3.3. Firm Level Creativity ................................................................ 44

3.3.1. Assessing Firm level Creativity ............................................ 48

4. Conclusion .......................................................................................... 58

CHAPTER III. THE SPEED OF INTERNATIONALIZATION AND

KNOWLEDGE, THE MODERATING EFFECTS OF FIRM LEVEL

CREATIVTY ................................................................................................ 59

1. Introduction ......................................................................................... 60

v

2. Literature Review ................................................................................ 66

2.1. Sequential View on Knowledge and Learning.......................... 67

2.2. International Entrepreneurship View on Knowledge and

Learning .................................................................................... 70

2.3. Speed and the Internationalization of the Firm ......................... 74

3. Hypothesis Development .................................................................... 77

3.1. Prior Experiential Knowledge and Speed ................................. 77

3.2. Technological Knowledge and Speed ....................................... 81

3.3. Firm Level Creativity and Speed .............................................. 85

4. Research Method ................................................................................ 90

4.1. Sample and Data Collection ...................................................... 90

4.2. Measures ................................................................................... 91

5. Results ................................................................................................. 97

6. Discussion and Conclusion ............................................................... 101

CHAPTER IV. CONCLUSION ................................................................. 112

References .................................................................................................. 119

국문초록 .................................................................................................... 142

vi

LIST OF TABLES

Table 1. Definition and measurement of speed of internationalization in

recent studies .............................................................................................. 107

Table 2. Descriptive statistics..................................................................... 108

Table 3. Correlation matrix ........................................................................ 109

Table 4. Regression analysis of internationalization speed on prior

experiential knowledge and technological knowledge ............................... 110

Table 5. Regression analysis of the moderating effects of firm level

creativity ..................................................................................................... 111

1

CHAPTER I. INTRODUCTION AND OVERVIEW

2

1. Research motivation

An important aspect of global strategy in international business

literature is concerned with the speed of internationalization (Acedo & Jones,

2007, Guillen & Garcia-Canal, 2009, Lee et al., 2015). With a rapidly

changing global environment, a firm’s ability to act quickly in the

international market can be a significant time-based competitive advantage

(Chang & Rhee, 2011, Riolli-Saltzman & Luthans, 2001).

Internationalization is understood as the process of increasing foreign market

involvement over time (Welch & Luostarinen, 1988) and by definition

involves a time sequence of events (Jones & Coviello, 2005). Traditional

studies on internationalization offer little consideration to speed, regarding it

only as an implicit dimension. The classical sequential approach based on the

Uppsala model regards internationalization as a succession of events, treating

speed as an underlying concept rather than acknowledging it as key

dimension that requires explicit research (Eden, 2009). This has led to

criticisms such as the failure to consider the duration of each stage (Leonidou

& Katsikeas, 1996), failure to explain firms that do not take the proposed

sequential process and the existence of born globals that internationalize

almost immediately and at a rapid pace (Oviatt & McDougall, 1994). This

prompted a body of research based on international entrepreneurship where

the concept of speed became the center of focus (Rialp et al., 2005). However,

3

the majority of born global literature focuses on the conceptualization of

speed as speed to initial internationalization, which is the time it takes for the

firm to begin its first international expansion (Oviatt & McDougall, 2005,

Zahra & George, 2002). Thus, investigations have been mostly focused on

pre-internationalization periods rather than subsequent international growth

following the initial entry (Jones & Coviello, 2005).

The advent of born globals has caught the attention of academia in

that contrary to the expectation of traditional literature which cautions against

internationalizing too fast, they internationalize at a fast pace and quite

successfully so. In an increasingly competitive global environment and a new

era of global flows based on digitization and communication, firms and

individuals are using global platforms to quickly learn, find work and build

networks. Now, even the smallest firms are competing with large

multinationals. Not only that, accelerated internationalization is not a

phenomenon restricted to young, small firms. Increasingly, established firms

alike pursue strategies of rapid internationalization. For example, Bell et al.,

(2001) examine “born again” or “late” global firms where accelerated

expansion occurs much later in the firm’s life cycle. Multinational firms from

emerging markets such as India and China internationalize quickly and often

aggressively, with internationalization patterns different than their western

counterparts (Fey et al., 2016). They are emerging as significant global

4

competitors showing distinctive characteristics and behaviors questioning the

applicability of existing theories on internationalization (Cuervo-Cazurra &

Ramaurti, 2014). Previous studies explain that born global firms

internationalizing rapidly are likely to surface from emerging economies that

have small, underdeveloped markets. However, they have also begun to

emerge from well established markets such as the United States (Cavusgil &

Knight, 2015). These new players are transforming the dynamics of global

competition and an in depth study on why and how they successfully

internationalize so fast is necessary.

To better understand the internationalization patterns of recent

multinational firms, this study examines why firms may speed up

internationalization and what firms are likely to benefit from accelerated

internationalization. Acknowledging the importance of knowledge and

learning as one of the key drivers of internationalization (Casillas et al., 2015),

it looks at the different types of knowledge and why and how it may affect

the speed of internationalization for firms in diverse industries. It aims to

validate the need for a greater dynamic perspective to explain the speed of

internationalization. While it is important to understand how each theoretical

framework on international expansion explains the internationalization of

firms, the dynamic nature of the global competitive environment calls for a

more comprehensive approach. Whilst learning and knowledge accumulation

5

through foreign expansion activities are indeed important like the Uppsala

model suggests, knowledge can also come from outside sources such as

previous experiences of the entrepreneur or international networks (Oviatt &

McDougal, 1996, Coviello & McAuley, 1999). The study also enriches

literature on entrepreneurship and learning by examining the effect of firm

level creativity on internationalization. Not only is creativity highly correlated

with several dimensions of entrepreneurship (Onetti et al., 2012, Carvalho &

Williams, 2014), enhanced levels of creativity throughout the firm is

important for effectively accelerating internationalization. Most often it is the

front line employees operating in foreign markets that encounter new and

often contradictory knowledge. Enhanced levels of firm level creativity will

affect how such knowledge is sensed and seized and what will be processed

upwards the firm. Thus, it may be important to expand the realm of creativity

above and beyond entrepreneurs.

Accelerated internationalization has mostly been limited to the realm

of small and young born globals. Although international entrepreneurship

literatures acknowledge that established firms alike can have entrepreneurial

qualities which accelerate the speed of internationalization, empirical testing

has been largely limited to young small firms (Keup & Gassman, 2009).

Moreover, while fast internationalization is not specifically associated with

technology intensive sectors (Rialp et al., 2005) most research has been

6

concentrated on the empirical testing of technology intensive industries in the

belief that it will be most prominent in such industries (Knight & Cavusgil,

2004, Weerwardena et al., 2007). Hence, this study shifts the focus of speed

in born global literature from ‘time it takes to internationalize’ to the

subsequent speed of international growth that follows after initial entry. It also

expands the scope of firms to established multinationals in diverse industries.

It hopes to develop a more comprehensive approach to studying the recent

internationalization patterns of multinational firms. In short, this study

supports the need for more comprehensive theoretical frameworks for

understanding the speed of internationalization of current multinational firms.

It combines classical internationalization theories with more recent theories

such as entrepreneurship and organizational creativity. It also enriches the

empirical context of born global studies by examining internationalization

speed of established firms in a wide variety of industries.

Some of the limitations of this study include only looking at the

number of new countries when measuring the speed of internationalization. It

does not take in to account the scope or breadth aspects which the Uppsala

model suggests are important for consideration. For example, firms that

originated from emerging markets may find it easy to expand into other

emerging markets since they are used to the lack of well established

institutions and infrastructure. They may be well capable of starting things

7

zero base. On the other hand, firms based on well established markets may

find the void of well established institutions hard, as they are accustomed to

operations in better business environments, preferring to expand to similar

markets. Furthermore, a deeper understanding of the motivations behind rapid

foreign expansions may be necessary. Although this study looked at foreign

establishment of foreign subsidiaries to measure speed of internationalization,

examination of diverse entry modes is necessary. For example, emerging

market firms have actively used M&As not only to gain fast access to key

resources, technologies ore glowing in size, they also use it as way to

overcome their double hurdle of both liabilities of foreignness and the liability

of country of origin that comes from the unfavorable image of their home

countries (Chang et al., 2009).

2. Empirical setting

This study uses comprehensive panel data on 186 listed companies

in the Korean Stock Exchange over a period of 10 years. Prior work on

international expansion was either mostly focused on advanced economies

that have done gradual expansion or at the other extreme, examined young

and small born globals that internationalize almost immediately after

foundation. In efforts to take a more comprehensive approach to

internationalization patterns of today’s firms, this study extends empirical

8

testing to established firms. To date, only a few studies have studied

internationalization based on a sample of firms with different sizes, diverse

industries and different degrees of internationalization (Chetty & Martin-

Martin, 2014). By examining the internationalization experiences of Korean

firms, this study may provide insights to other multinational firms from

emerging markets such as China and India that are expanding aggressively

into foreign markets. These firms from emerging market economies are

becoming increasingly important global players, rising as serious competitors.

With distinctive characteristics, the expansion patterns of these firms raise

questions about the applicability of prevailing theoretical frameworks at both

the macro and micro levels (Cuervo-Cazurra & Ramamurti, 2014).

A variety of industries were selected to examine the speed of

internationalization in diverse settings. They include 1) food manufacturing

2) textiles manufacturing 3) chemical manufacturing 4) wood and furniture

manufacturing 5) non-metal and metal manufacturing 6) automobile

manufacturing 7) electronics manufacturing 8) construction 9) wholesale and

retail 10) other services. It focused on the analysis of internationalization

through foreign direct investment calculating speed as the average number of

foreign direct investments per year, a method particularly well suited for

studying the internationalization of large MNEs (Mohr & Batsakis, 2017).

Also, while born global studies mainly focus on the entrepreneurial

9

characteristics of the founder, this study looked at both CEO and top

management characteristics. This was because it understood that established

firms are more likely to have decision making routines that do not depend

solely on the CEO. Although creativity has been discussed to closely share

many characteristics of entrepreneurship, not many have looked at this in

terms of internationalization nor the speed of internationalization.

Benchmarking other areas of organizational studies that use content analysis

to measure various constructs such as innovation and entrepreneurship, this

study suggests content analysis as a way to asses firm level creativity. Primary

sources of data for this study were the Korea Listed Companies Association,

Korea Credit Rating Agency, Financial Supervisory service, WIPS on for

patent data and the Korea Press Foundation for newspaper articles.

3. Organization of thesis

This dissertation is organized into two main sections whereby chapter

two is an overview of the international expansion literature and chapter three

is an empirical study investigating the knowledge link on the speed of

internationalization and the moderating effects of firm level creativity. It is

followed by chapter four which summarizes and concludes the findings of

this study.

10

Chapter two is an investigation on general international expansion

theories and more recent approaches to internationalization studies. General

background theories begin with the discussions of the knowledge based view

of the firm which understand knowledge as the central reason that motivates

the internationalization of firms. Closely related are theories on

organizational learning which is how firms acquire, assimilate and exploit

knowledge for sustained competitive advantage. In the belief that a more

comprehensive approach is needed to understand the internationalization

patterns of recent firms, the study reviews various theoretical frameworks on

international expansion of firms. It then moves on to the discussion of more

recent approaches to internationalization which is the international

entrepreneurship literature, the dynamic capabilities literature and studies on

organizational creativity. Especially, creativity has not been frequently

discussed in internationalization literature. However, a close examination

reveals that it is closely related to entrepreneurship and could enhance the

internationalization capabilities of a firm.

The third chapter is an empirical study investigating how certain

types of knowledge affect the speed of internationalization and how levels of

firm level creativity positively moderates this relationship. Speed can be an

important international strategy and the availability of certain types of

knowledge could determine the long term internationalization success of

11

firms. Results showed that prior experiential knowledge and technological

knowledge were important in accelerating the speed of internationalization.

Interestingly, firm level creativity played an important role in amplifying this

positive relationship. Speed of internationalization has rarely been discussed

in terms of creativity. This research could be an initial study calling for greater

investigations on the effects of creativity on the speed of internationalization.

Chapter four is a summary and conclusion on the study’s findings for

the extensive review on international expansion scholarship and empirical

studies investigating the knowledge link on the speed of internationalization

and the moderating effect of firm level creativity. The main findings are

summarized and considerations on how the dissertation topic could be further

extended is discussed.

12

CHAPTER II. INTERNATIONAL EXPANSION:

BACKGROUND THEORIES,

AND RECENT APPROACHES TO

INTERNATIONALIZATON STUDIES

13

1. Background theories

Over the last few decades, international business literature has

examined the internationalization of firms from many different aspects. The

increase in internationalization in diverse industries generated a growing

interest in the factors that affect a firm’s ability to gain sustainable

competitive advantage in foreign markets. Knowledge and learning are two

of the most foundational theoretical mechanisms that explain the

internationalization of firms. Knowledge is regarded as one of the main

reasons behind a firm’s international behavior and helps explain the

internationalization patterns such as timing, patterns and modes entry (Autio,

et al., 2000, Johanson & Vahlne, 1990, Zahra, et al., 2000). Closely related to

knowledge is organizational learning. Internationalization is considered the

learning process, where firms start from different degrees of previous

knowledge and expand and generate new knowledge bases as they

internationalize. New knowledge is acquired, absorbed and accumulated

through learning processes and shared through the organization’s routines

(Anderson & Skinner, 1999, Barkema &Vermeulen, 1998).

1.1 Knowledge based view of the firm

The resource based view (RBV) is a widely recognized framework

14

for understanding the competitiveness of the firm (Wernerfelt, 1984, Barney,

1986, Grant, 1991). A firm is regarded as a bundle of resources and it is the

uniqueness of these resources that gives a firm sustained competitive

advantage. Such resources must be valuable, rare, inimitable and non-

substitutable (VRIN) making it hard to imitate or transfer. Although RBV has

been used to explain a variety of the firm’s activities, it is static in nature and

falls short in explaining how firms can sustain competitive advantage in

dynamic environments (D’Aveni, 1994). Considered as an extension of the

RBV, the knowledge based view explains that in dynamic, turbulent

environments, knowledge based resources are most important in contributing

to a firm’s performance. The firm’s ability to manage and create knowledge

differentiates success from failure (Nonaka & Takeuchi, 1995). In his

overview explaining the knowledge based view of the firm, Grant (1996)

explains that the knowledge based view is not in and of itself a theory of the

firm, but more a set of ideas emphasizing that the existence and nature of the

firm largely depends on the role of knowledge. He recognizes that knowledge

is a productive resource which is costlier to create and replicate. The

transferability of such knowledge is high for explicit knowledge and much

lower for tacit knowledge such as skills and know-how. Also, contrary to

tangible goods that depreciate in value when it is used, the value of knowledge

grows when it is used and rather depreciates when it is not used (Sveiby, 2001).

15

For knowledge based view scholars, knowledge management is a key and

central issue (Prashantham, 2005).

The knowledge based view can be traced back to the work of Penrose

(1959) on the theory of growth of the firm. She argued that determinants of

firm growth depended on the firm’s knowledge and on how it integrated its

resources for higher-level capabilities. Following this study, scholars began

to examine the importance of knowing how to coordinate various resources

within the firm whereby the source of competitive advantage came from

knowledge and not the resources alone (Spender, 1996). Consequently, the

firm’s ability to protect the valuable knowledge and preventing its migration

and imitation became important for sustaining competitive advantage

(Liebeskind, 1996). Because of such characteristics Kogut and Zander (1993)

described the firm as “repositories of social knowledge and structures for

cooperative action.”

1.1.1 Knowledge and internationalization

International business scholars have highlighted the importance of

knowledge as a driver of international expansion (Autio et al., 2000, Johanson

& Vahlne, 1977). From the theory of growth perspective, the productive

goods and services in a firm, created by an increase in knowledge will remain

16

unused if firms do not expand (Penrose, 1959). Firms use internationalization

as the strategy to exploit new opportunities in foreign markets, actively

combining existing knowledge bases with knowledge it acquires from foreign

markets (Kylaheiko et al., 2011). Knowledge also becomes important for

dealing with environmental uncertainties that come with internationalization

(Liesch & Knight, 1999). It helps with decisions on important strategic

choices such as market selection, mode of entry and pace (Young et al., 1989).

There are five types of knowledge that have been commonly highlighted as

important regarding internationalization (Mejri & Umemoto 2010). These

different types of knowledge play varying roles and come from different

sources. First is the valuable knowledge itself. Knowledge intensity, in the

form of technological knowledge has often been a cause for early and active

internationalization. Through rapid new product development, these firms are

able to capitalize dynamic markets and identify emerging technologies that

could improve firm performance. Studies show that knowledge intensity

influences internationalization processes (Golovko & Valentini, 2011). Others

show that the intensity of knowledge leads to greater diversity of foreign

markets and entry modes (Zahra et al., 2000). Also, internationalization for

such knowledge intensive firms happens early on and at a rapid pace (Autio

et al., 2000).

Second is the importance of market knowledge. Johanson and

17

Vahlne (1977) regarded market knowledge as vital to internationalization,

affecting how much a firm commits its resources to a foreign market. The

lack of market knowledge could be a significant obstacle, whereby without it,

firms may not be able to internationalize (Ericksson et al., 1997). They argued

that much of the market knowledge is gained through experience (Johanson

& Wiedersheim- Paul, 1975). Such market knowledge could be for example,

information on foreign markets such as market size, competitors, regulations

and so forth. Hence prior international expansion, the firm will try to

accumulate as much market information possible. This is especially important

for firms initiating internationalization for the first time (Dichtl et al., 1990).

Gradually as firms progresses in the internationalization path, other kinds of

knowledge may become more important.

Third is the role of experiential knowledge. Such knowledge comes

from practice and is learned through personal experience (Penrose, 1959).

Experiential knowledge can include knowledge that comes from operational

and business experience and cultural knowledge such as language, norms or

laws and entrepreneurial knowledge such as finding opportunities and the

ways of exploiting them. Accumulation of experiential knowledge can start

prior internationalization becoming increasingly important during its later

stages. Within the process or sequential models, greater accumulation of

experience leads to more involvement and commitment to foreign markets

18

(Johanson & Vahlne, 1977, Cauvsgil, 1987). They support the importance of

enhancing experiential knowledge through a sequence of internationalization

activities. On the other hand, studies that focus on the organizational

capabilities of born globals believe that experience acquired prior

international activity is a critical determinant for superior international

performance of born globals (Oviatt & McDougal, 1994, Autio et al., 2000).

The fourth type of knowledge is network knowledge. Network

knowledge concerns both the social and business networks that ease

internationalization of the firm. Previous studies have shown that such

knowledge has been influential for both manufacturing (Holmlung & Kock,

1998) and service sectors (Sharma & Johanson, 1987). Through an

international network, firms can find opportunities, establish international

relationships and access new information. The intensity of network

knowledge usage during early stages of internationalization is low, increasing

greatly during the later stages (Mejri & Umemoto, 2010). Johanson & Vahlne

(2009) went as far as stating that it was no longer the liabilities of foreignness

that prevented firms from internationalizing but the liability of outsidership,

which is not being part of a network.

Lastly, entrepreneurial knowledge has also been identified as a vital

source of the firm’s knowledge resources. This regards knowledge that enable

managers to recognize and exploit opportunities in foreign markets.

19

Entrepreneurial opportunity can be further understood as the opportunity to

recombine resources that lead to profits (Shane, 2004). The ability to

recognize such opportunity will depend on absorptive capacity where prior

knowledge is important. Opportunity recognition is a result of a cognitive

process of identifying something new with potential value (Barron, 2008).

Moreover, being able to recognize opportunity is a skill, but this will only be

meaningful when one knows how to exploit it. The manager will have to find

an effective way to make the opportunity profitable in a foreign market which

will be starkly different from the circumstances of the domestic market (Mejri

& Umemoto, 2010). Such entrepreneurial knowledge can come from prior

experience of the manager (Oviatt & McDougall, 1944) or accumulated as

firms internationalize. Firms can gradually apply acquired opportunity

recognition and exploitation of knowledge to other foreign markets.

In short, international business scholars have argued that knowledge

is one the most important resources to a firm and the ability to integrate

diverse specialized knowledge is the essence of organizational capabilities

(Knight & Cavusgil, 2004). The accumulation and combination of the above

mentioned types of knowledge will lead to the variation of the

internationalization process of the firm (Eriksson et al., 2000). Hence,

developing, integrating and transferring knowledge becomes key to the

strategic management of internationalization (Johanson & Vahlne, 2003).

20

Through organizational capabilities, firms must be able to create and leverage

knowledge (Eisenhardt & Martin, 2000). At the same time the ability to create

such knowledge in turn leads to the development of competitive

organizational capabilities (Nelson & Winter, 1982). Tallman & Fladmoe-

Linquist (2002) notes that there exists both a capability-leveraging aspect and

a capability-building aspect of knowledge regarding international expansion.

1.2 Organizational learning theory of the firm

Closely related to the knowledge based view is organizational

learning (Cohen & Levinthal, 1990, Nonaka & Takeuchi, 1995). Like the

knowledge based view, the importance of organizational learning stems from

recognizing the centrality of knowledge within firms and how firms are

important knowledge creating entities (Nonaka & Takeuchi, 1995). Firms will

learn by acquiring, assimilating and exploiting knowledge to achieve superior

performance. Learning, perceived as both a process and an outcome,

describes how firms build, add and organize their knowledge and routines

around firm activities (Dodgson, 1993). Levitt and March (1988) explain that

organizational learning allows firms to encode implications from its activities

into routines which consequently guide firm behavior. Huber (1991) further

explains learning will take place when firms acquire knowledge that it

recognizes as potentially useful. Also, the need to learn, can be explained by

21

changes in the competitive environment. Such changes will require adaptation

and improved efficiency which firms achieve through learning (Dodgson,

1993). Thus, learning is the pursuit with intention to retain and improve firm

competitiveness, productivity and innovativeness under uncertain market

circumstances (Freeman & Perez, 1988). Indeed, large innovative firm

strategies on learning are determined by their attempts to learn in highly

uncertain conditions where the difference in the ability to learn will change

the pattern of competitive relationships with others (Pavitt, 1991).

Several studies have identified different types of learning. For

example, Fiol and Lyles (1985) explained that there is a higher and lower

level of learning. Whereby lower level learning concerns more everyday

repetitive routine level learning and higher levels are associated with more

complex development and understanding of causation. Others have

distinguished between adaptive and generative (Gibb, 1995), incremental and

transformational (Appelbaum & Goransson, 1997) or instrumental and

transformative learning (Mezirow, 1990). Most well known is perhaps

Argyris and Schon ‘s (1978) single-loop and double-loop learning. Where

single-loop is geared toward detecting and correcting an error while double-

loop occurs when error detection leads to the modification of a firm’s

underlying norms, policies or objectives. The interchange between these two

types of learning will guide firms to reflect on previous learning or failure to

22

learn, and discover or invent new strategies and routines. Through such

learning activities, a firm’s uniqueness is defined by the distinctive

knowledge bases and processes for acquisition, articulation and development

of such knowledge. Teece et al., (1997) understand this as firm specific

capabilities which they explain are the ‘mechanisms through which firms

accumulate and dissipate new skills and capabilities.’ Prahalad and Hamel

(1990) explain this as core competencies which involves the collective

learning of the organization that involves harmonizing knowledge, organizing

work, delivering value and communication across the firm’s boundaries.

Lastly, Nelson and Winter (1982) looked at the importance of routines. They

believed that it was through routines the firms operationalized its memories

and knowledge bases. Firms will evolve by storing routines and structures

that have led to success and let go those that have led to failure (Cyert &

March, 1963).

The organizational learning approach also examines when learning is

most likely to occur. Cohen and Levinthal (1990) explained that it is more

likely to occur when the new knowledge is close to existing knowledge and

when it does not require too much change in existing routines. For example,

Lane and Lubatkin (1998) found that firms learned from its partner more

when they shared a similar knowledge base and organizational structure. An

important element in learning is absorptive capacity, which is the recognition

23

of the value of new knowledge followed by its assimilation and application

for commercial purposes (Cohen & Levinthal, 1990). This capacity is

dependent on prior knowledge and highlights that learning is a process which

is dependent on history. It takes that learning is cumulative in nature and

learning performance is maximized when the object of learning is related to

existing knowledge. Also, the assimilation of new knowledge is likely

conditioned by the unlearning of existing knowledge (Nonaka, 1994). Autio

et al., (2000) argued there needs to be an intense and repetitive pattern for

knowledge to be effectively assimilated.

1.2.1 Organizational learning and internationalization

Studies that emphasize the importance of learning in

internationalization, regard internationalization as a learning and knowledge

accumulation process. Learning changes the ways firms perceive and

interpret the world (Eriksson et al., 2000). The more knowledge gained in

international markets through learning efforts, the more willing the firm will

be in using it for exploiting subsequent international expansions (De Clerq et

al., 2005). Many studies have examined how internationalization experience

provides opportunities for learning and creating new knowledge (Forsgren,

2002, Hitt et al., 1997).

24

Early internationalization literature pioneered by the Uppsala model

was based on the theory of growth (Penrose, 1959) and behavioral theory of

the firm (Cyert & March, 1963) which argued that internationalization was

inherently an incremental process. Firms acquired and accumulated

experiential learning based on path-dependent processes (Eriksson et al.,

1997). Their emphasis was on ‘learning by doing’ (Johnson, 1988, Lindblom,

1959) where market knowledge was tacit in nature and the main source for

such knowledge was mostly dependent of the experiences of the firm’s own

operations abroad. According to this view, the main obstacle to foreign

expansion is the lack of such knowledge and resources. Perceived risk in

foreign markets is a function of market knowledge where the firm is to

postpone successive foreign market expansion until level of perceived risk

becomes lower than maximum tolerable risk (Johanson & Vahlne, 1977).

Thus, a firm’s drive to internationalize comes from the organizational routines

and procedures it creates based on this international experience. The

knowledge accumulated in turn drives firms to engage in further expansion.

Also, the Uppsala model takes a reactive rather than proactive approach to

learning. Reactive learning occurs when a problem arises. The firm then tries

to find a solution by trying to acquire more knowledge about existing

solutions. When it finds a good solution, learning is completed (Cyert &

March, 1963). Proactive learning on the other hand focuses on finding new

25

solutions or opportunities involving starkly different search processes (Huber,

1991). However, later internationalization literature criticized key

assumptions of the Uppsala model in that it used an overly narrow

interpretation of learning which lead to quite specific and narrow predictions

of internationalization behaviors (Forsgren, 2002). Within the

internationalization process model, it is by definition not possible for ventures

to learn from international experience before they operate internationally (De

Clerq et al., 2012). Because of such shortcoming, rather than focusing on

unidimensional experiential knowledge, scholars have increasingly called for

the need to consider other potential sources for knowledge and learning

(Casillas et al., 2015). Increasingly, studies have begun to acknowledge that

different types of knowledge foci and learning can jointly affect firm

internationalization but in varying degrees of importance and different times

throughout the firm’s life (Pellegrino & McNaughton, 2015).

The Uppsala model emphasizes that learning occurs from current

experiences of foreign operations which is most likely to be concentrated at

the operational level. However, if one acknowledges that learning can occur

at different levels of the organization, knowledge accumulated at higher levels

can also influence international behavior. While market specific knowledge

may be learned mostly at the operational level, general knowledge can be

accumulated at higher levels of the organization and affect

26

internationalization. This is one of the key distinctions between sequential

models of internationalization and the explanation of born globals or

international new ventures (McDougall & Oviatt, 1994). They recognized

that internationalization decisions of born globals were not only based on

organizational experience, routines or capabilities. Rather the general

knowledge and past experiences of founders and key managers could

substitute for such deficiencies. The firm knowledge inherited from the

founder’s experiences was key to explaining subsequent learning patterns.

Huber (1991) explained that what an organization knows at birth was likely

to determine what it searches for what it experiences and how it makes sense

of what it encounters.

Another form of learning is vicarious learning, which is learning by

the observation of others. Largely centered around learning from network

partners, vicarious learning can play an important role in early

internationalization decisions through imitation or partnerships (De Clerq et

al., 2012). Studies have shown that greater presence of foreign contacts will

increase the likelihood for early internationalization (Casillas et al., 2009).

Such networks became sources for absorptive capacity, inter firm tacit

knowledge and technology knowledge (Schwens & Kabst, 2009). Oviatt and

McDougall (2005) found that it was rather weak ties that were more likely to

affect internationalization decisions. Such ties were more effective in limiting

27

redundant information, exposing firms to diverse information and leading

firms to identify and deliberately search for international opportunities. Other

studies have investigated how young firms imitate others for

internationalization decision making. Lacking their own established routines

and knowledge about foreign markets, firms have imitated behaviors of firms

with geographical proximity (Aldrich, 1999) and within the same industry

(Fernhaber & Li, 2010).

Finally, firms can also learn from grafting and searching. Grafting

involves the hiring of people or acquisition of businesses (Huber, 1991). For

example, hiring a manager with international experience. This allows firms

to forgo some of the slow processes of experiential learning based on one’s

own experiences alone (Barkema & Vermeulen, 1998). It can be used to fill a

variety of knowledge gaps such as product/technology knowledge, business

knowledge, access to foreign networks and so forth (Loane et al., 2007).

Firms can also learn trough searching. When they identify an opportunity

abroad, they can actively search for knowledge about the market, competitors,

customers and the institutions (Casillas et al., 2009). Burpitt and Rondinelli

(2000) showed empirical support that firms with greater tendency to seek for

new knowledge had a greater learning orientation and were more adept to

internationalize. In short, learning can come from diverse knowledge sources.

It is important to acknowledge the different ways learning and acquiring

28

foreign knowledge and how it can evolve and interact with each other as the

learning process of internationalization (De Clercq et al., 2012).

2. Internationalization, a multitheoretical framework

Internationalization, has been defined as the outward movement of a

firm’s international operations (Turnbull, 1987). Others have described it as

building an operational presence in foreign markets over time (Tallman &

Fladmore-Lindquist, 2002, Casillas & Acedo, 2013). However, since

internationalization can also involve the pulling out, lay off or selling of a

foreign operation, some scholars like to understand it as the process of

adapting a firm’s operations to international environments (Calof & Beamish,

1995). Thus it is better to understand the process of internationalization as

encompassing all preentry, entry and postentry strategies (Yip et al., 2000).

Currently, internationalization research has developed to into three major

paths. First is the examination of international expansion theories and entry

choice strategies. It looks at how these theories apply to certain countries or

industries and tests its generalizability and applicability (Chen & Hennart,

2002). Entry mode studies examine how and why different modes such as

exporting (Johanson & Vahlne, 1990, Vernon, 1966), licensing, franchising

(Alon & McKee, 1999), joint ventures (Buckley & Casson, 1976), strategic

alliance (Das & Teng, 2000), foreign direct investments, greenfield and M&A

29

(Dunning, 1998, Hill et al., 1990, Nitsch et al., 1996) are chosen. The second

is research that examines the motivation and performance consequences of a

firm’s international expansion and its choice of entry strategy. It studies how

external and internal factors such as national, economic, financial, industry or

organizational behavior affects internationalization behavior and

performance (Erramilli et al., 2002). Lastly, recent studies proposed the

combination of existing theories to better reflect the dynamic conditions of

internationalization. This includes for example, broader applications of

learning and knowledge based theories, such as dynamic capabilities

(Weerawardena et al., 2007), or real options theory to explain market entry

mode and timing (Reuer, 2002).

There exists several theories that explain the internationalization of

the firm. Understanding the theoretical backgrounds of these theories is

important for a comprehensive picture on internationalization. The

international product life cycle theory developed by Vernon (1966), has been

used extensively to explain international trade patterns. It describes four

stages where the first is characterized by export dominance, second the

beginning of foreign production, third foreign firm competition in markets

abroad and fourth, foreign firm competition in the domestic market. It looks

at various factors that affect each stage such as the type of the product, level

of competition, degree of specialization and government regulations

30

(Onkvisit & Shaw, 1983) to understand the stages involving location of

production and market penetration.

The market imperfections theory (Hymer, 1976) focuses on the

motivations behind internationalization. The theory argues that imperfect

markets and a firm’s unique advantages are drivers for foreign direct

investment. It originated from the industrial organization theory by Bain

(1956). Market imperfections can exist in product markets in the form of

product differentiation, brand name and managerial skills or factor markets

and also in the form of proprietary technologies or managerial skills,

imperfect competition which is caused by government policies, restrictions

or economies of scale (Malhorta et al., 2003). Such imperfect markets create

higher competitive environments and the firm with higher power is able to

control products, profits and potential rivals. Extending this view to

international markets, Hymer (1976) believed that firms would aim to control

foreign markets through ownership advantages and competition.

Resource advantage theory of internationalization is based on the

assumption that firm resources are heterogeneous and relatively immobile.

Such differences are the source of comparative advantage. Hence a firm will

enter a foreign market when it can exploit its comparative advantage

(Anderson et al., 1999). Entry mode would depend on the type of resource

advantage. For example, if the superior resource is knowledge based on tacit

31

information, it would go for a hierarchical governance structure when

expanding internationally. If it faces capability constraints, collaborations

such as strategic alliances would be more adequate (Malhotra et al., 2003).

The transaction cost theory has also been applied to explain

internationalization. This theory views the firm as a governance structure

(Williamson, 1987). The basic assumption of the transaction cost theory is

that the firm internalizes activities it can perform at lower cost and externalize

and rely on the market for activities others have an advantage over (Coase,

1937). This view has been useful to understand the economic factors of

internationalization. Based on this, firms will choose appropriate governance

structures to best economize on its transactions. In this context, the

transactions cost theory has been used to explain entry modes (Erramilli &

Rao, 1993). Firms must choose based on trade-offs between control and cost

of integration. However, critics have pointed out that overly focusing on

opportunism, this approach neglects environmental factors and path

dependencies (Calof & Beamish, 1995, Gulati et al., 2000). Other scholars

have tried to expand the transaction cost view by taking into account other

non transaction cost benefits such as coordination strategies and extension of

market power (Erramilli & Rao 1993).

The eclectic theory by Dunning (1998) explains determinants

important for successful foreign direct investment. Firms must have

32

ownership advantage, location advantage and internationalization advantages.

A multi theoretical approach in nature, it integrates resource advantage theory

for ownership advantage and international trade theory for location advantage

and transaction theory for internationalization advantage (Malhorta et al.,

2003). One of the key contributions of this theory is highlighting the

importance of building and maintaining competitive advantage for success

through foreign market exploitation (Prahalad & Hamel, 1990). Although this

view has been supported by many (Kogut & Zander, 1993, Anderson &

Gatignon, 1986) others point out that the overstating the costs of conducting

international business limits the theory to mostly large multinational

corporations. It fails to explain many of the small companies that

internationalize successfully without enormous ownership advantage.

The internationalization theory explores in greater depth the concept

of time. It views internationalization as a sequential, time dependent process

(Johanson & Vahlne, 1990). Both innovation and learning models are also

closely related to this view in that they adopt a process oriented stage model.

The learning model is based on the learning process of market knowledge and

market commitment. The innovation model also involves a step by step

development. Through this process, the firm enhances its experiential

knowledge and certain firm specific skills (Malhotra et al., 2003). It views

internationalization as a series of incremental decisions as the firm ‘fans out’

33

from geographically close foreign markets to those less so. It is a function of

market knowledge gained from experience, commitment in foreign markets

and the firm’s current activities. However this gradual, unidirectional

approach has also been widely criticized in that much of its hypotheses do not

receive empirical support (Anderson, 1993, Sullivan & Bauerschmidt, 1990).

The major challenge of the internationalization theory is the presence of born

globals who completely skip much of the above mentioned sequential

processes (Oviatt & McDougall, 1994).

The network theory addresses some of the concerns of the

incremental approach. Through the exchange of relationships that evolve in a

dynamic and complex manner, this theory focuses on the network context of

interorganizational and interpersonal relationships (Coviello & McAuley,

1999). Thus, internationalization occurs as a result of network relationships

with foreign individuals and firms (Johanson & Mattson, 1988). This network

acts as an important source of knowledge and market information which

would otherwise cost the firm a long time and a lot of effort (Chetty &

Campbell-Hunt, 2003). Through this network, firms can achieve international

expansion, penetration and international integration (Johanson & Mattson,

1988). The network theory successfully explains why some firms can

internationalize so quickly and why they chose certain modes of entry

(Coviello & Martin, 1999). The important contribution of this view is in

34

acknowledging that internationalization is not a solo effort. It involves a third

party that can greatly influence foreign expansion through formal or informal

relationships (Mtigwe, 2006). The limitation of the network theory however

is that it cannot explain internationalization of firms that do not have networks.

International business studies have a long and rich history of

explaining the foreign expansion activities of the firm. The more classical,

grounded international theories explain reasons, conditions and motivations

behind internationalization while emerging theories on networks and

entrepreneurship helps scholars understand how international business occurs.

Consequently, understanding the continuously changing global environment

such as the emergence of new organizations based on cooperative alliances

and networks is also important. The nature and evolution of networks are

changing due to IT technologies such as social media, drastically changing

how small businesses internationalize. On another note, emerging market

multinational firms expand abroad early and fast, not because they have

competitive resources but as a way to escape constraints of the domestic

market. This may entail different motivations, dynamics and challenges. In

short, it is important to take a more comprehensive approach in understanding

the internationalization of firms reflecting the current global competitive

environment. There have been many attempts to develop a unified theory of

internationalization and continued efforts are needed in defining relationships

35

among these different models to facilitate more integrative theoretical

conceptualizations.

3. Recent approaches to internationalization studies

In the attempts to better understand the internationalization of current

multinational firms, scholars have increasingly tried to enrich the literature

through a cross-border approach combining different streams of research.

They have tried to diverge from the traditional simplistic, static nature of

theoretical models that fall short in explaining the dynamic and complex

nature of internationalization. Whereas previous literature focused on the

confounding differences between the theoretical approaches, more studies

have begun to focus on the commonalities, trying to develop a more grounded

and comprehensive theory on internationalization.

3.1. International entrepreneurship

A recent approach to internationalization, is the literature on

international entrepreneurship. To start, entrepreneurship in previous

literature is defined as the study of how opportunities are used to create goods

and services and how they are discovered, evaluated and exploited (Shane &

Venkataraman, 2000). Also, it has been understood as the identification and

36

pursuit of opportunities regardless of a firm’s current resources (Stevenson &

Jarillo, 1990). When extending this to international entrepreneurship, Zahra

and George (2002) define it as “the process of creatively discovering and

exploiting opportunities that lie outside a firm’s domestic markets in the

pursuit of competitive advantage.” It is based around the decisions that

managers face when strategizing, on how and when the firm will enter a

foreign market focusing on the act rather than the event itself (Perks &

Hughes, 2008). Entrepreneurship studies can be said to emphasize two

aspects, opportunities and the individuals who take advantage of them (Shane

& Venkataraman, 2000).

Initially international entrepreneurship literature was directed

towards explaining how small and young firms internationalized quickly and

at a fast pace. Entrepreneurial firms were characteristically more innovative

and opportunity seeking while being significantly influenced by the owner or

founder. They were less constrained by established rigid routines and formed

an international identity almost at birth and had fast learning abilities (Autio

et al., 2000). This focus on entrepreneurial firms is in part due to their

emergence as serious competitors to large established firms (Fillis, 2001).

They effectively acquired market knowledge, managerial, financial and

competitive advantages through their collaborative networks in domestic and

foreign markets (Coviello & Munro, 1997). Increasingly however, scholars

37

began to argue that it is important to acknowledge that such entrepreneurial

behavior is not limited to small, new ventures and born globals (Jones, 2005).

They have called the international entrepreneurship theory to extend to larger

and more traditional sectors. Hence, rather than focusing on firm size and age

characteristics, they began to focus on examining the competitive value of

entrepreneurship (Lumpkin & Dess, 1996), the behavior of firms and its

managers (McDougall & Oviatt, 2000) and opportunity identification and

exploitation (Stevenson & Jarillo, 1990). Moreover, the term entrepreneur is

not only limited to key decision makers such as the CEO or top management

but includes a broad range of individuals who can act in entrepreneurial ways.

Thus, the formal position of the entrepreneur is rather unimportant. It could

be the founder but also very much a manager, owner or team leader (Autio,

2005). Entrepreneurship looks at how people act, why they act in such way

and what happens when they act.

In entrepreneurship literature, the ability to seize the opportunity

despite the odds is important. In environments of dynamic change, the

entrepreneur must have the ability to see and develop new combinations, be

able to act based on one’s visions rather than rational calculations alone and

convince its team members to act accordingly. Lastly, proper timing is key.

Understanding the reasons why certain individuals are able to act in such way

has been important in entrepreneurship literature (Bhave, 1994). Studies have

38

examined the cognitive influences such and cognitive style, psychological

traits and personalities (Acedo & Jones, 2007).

Managerial knowledge, taking the form of experiential, market and

technological knowledge plays an important role for internationalization

decisions (Ericksson et al., 2000, Ibeh & Young, 2001). The complexity and

type of knowledge will affect how fast an entrepreneurial opportunity can be

exploited (Oviatt & McDougall, 2005). Others have examined the importance

of perceptions. How decision makers perceived aspects such as risks, costs,

profits or growth potential will affect how they approach foreign markets.

Such perceptions are conditioned and modified through the individual’s

cognitive biases (Kraus, 2015) which could be affected by previously

accumulated knowledge. It can also be affected by more generic aspects such

as proactivity (Crant, 1996), tolerance to ambiguity (Chatterjee & Das, 2015)

and risk perception (Cavusgil & Naor, 1987). Such perceptions also change

throughout the firm’s internationalization process for example, Cavusgil and

Naor (1987) observe that risk perception decreases with greater international

experience and knowledge. Personal characteristics have also been important

for explaining international behavior. It is considered a multi combination

construct of attitudes and behaviors (Dess et al., 1997). Entrepreneurs may

have innovative or a conservative attitude (Robertson & Chetty, 2000), have

high risk tolerance (Gomez-Meija, 1988), tolerance to ambiguity (Chatterjee

39

& Das, 2015), flexibility (Dichtl et al., 1990) and dynamism (Heavey et al.,

2009).

Along with characteristics of the entrepreneur, the role of the external

environment is also considered. Lee et al., (2004) note that entrepreneurship

is not based only on individual characteristics but requires a supportive and

productive business climate. Afterall, since no firm operates independently

from its market, the entrepreneurship literature borrows other international

expansion theories to explain how it can jointly affect internationalization

behavior. For example, network theory examines networking competencies

and other social capital of the entrepreneur as drivers of accelerated

internationalization (Chetty & Campbell-Hunt, 2003, Schwens & Kabst,

2009). Other studies examine the role of resources and how the presence of

technological knowledge and network relationship moderated the likelihood

of venture firms to internationalize quickly (Oviatt & McDougall, 2005).

Opportunities in this context were viewed as cross national combinations of

resources and markets (Di Gregorio et al., 2008). Fan and Phan (2007)

explained that internationalization decisions could also be influenced by the

size of the firm’s domestic market and production capacities as well as

cultural and economic characteristics. Closely related to resources, scholars

examined dynamic capabilities. Which regards a market focused learning

capability and internal learning capability along with knowledge from the

40

firm’s networks. Such capabilities were key to the development of knowledge

intensive products that speed up internationalization (Weerawardena et al.,

2007).

Because rapid internationalization is not restricted to small firms

alone, there has been increasing demand for integrating perspectives from

entrepreneurship literatures with more traditional approaches to

internationalization. Future research could span theoretical boundaries and

create comprehensive frameworks that better explain internationalization

activities of today’s firms. Cavusgil and Knight (2003) feel that it is also

important to keep tracking born global firms and whether they keep

successfully managing their entrepreneurial qualities. Scholars have

attempted to reconceptualize international entrepreneurship as a dynamic

process that can evolve over time (Coviello, 2006, Mathews & Zander, 2007).

They also called for more studies examining how firms could enhance their

entrepreneurial qualities or how established firms could develop such

qualities through various mechanisms. A shortcoming of international

entrepreneurship literature is its over focus on small firms for empirical

testing. According to Keup & Gassman (2009), without being able to rule out

the characteristics of firm size, many empirical studies on international

entrepreneurship may have only been identifying context specific subsets of

theoretical relationships rather than the actual relationship themselves. They

41

called for the need to overcome both empirically and conceptually the small

firm focus.

3.2 Dynamic Capabilities

The dynamic capabilities view evolved from the resource based view

in the attempt to escape the static view of the latter and better explain the

evolutionary nature of firms (Weerawardena et al., 2007). Eisenhardt &

Martin (2000) define dynamic capabilities as “the organizational and strategic

routines by which firms achieve new resource configurations as markets

emerge, collide, split, evolve and die.” While the resource based view argues

that firm performance differs because of different resources and capabilities,

the dynamic capabilities view argues that the difference comes from the

dynamic processes that build firm capabilities which lead to competitive

advantage. These capabilities allow the firm to change routines, its bundle of

resources and competencies (Zollo & Winter, 2002). Through this, the firm is

able to identify and quickly respond to opportunities (Jarvenpaa & Leidner,

1998). Much of dynamic capability building involves knowledge based

processes whereby knowledge is created, integrated and configurated

(Weerawardena et al., 2007). Through sensing, seizing and transforming

valuable knowledge and opportunities, (Teece et al., 1997) dynamic

capabilities involve a conscious development and a systematic choice of

42

actions by the firm’s strategic leaders (Grant, 1991, Teece et al., 1997).

The dynamic capabilities view has been used to explain the

internationalization process and speed of multinational firms (Weerawardena

et al., 2007). With increasing dynamism and complexity of the global

competitive environment, scholars have called for greater attention on

dynamic capabilities in the internationalization context. Pitelis and Teece

(2010) explain that management in the global economy calls for flexibility,

agility, entrepreneurship, learning and smart investment choices.

Environmental dynamism characterizes many foreign markets and the effect

of dynamic capabilities become more prominent in such markets. They

continuously present new opportunities and require flexible and agile firm

action for its exploitation (Ruiz-Ortega et al., 2013). International operations

enables access to new knowledge and learning opportunities which the firm

must incorporate into its strategies and operations. The ability to do so can

reside not only within the firm’s top management but also within processes,

routines and structures (Augier & Teece, 2007). Luo (2002) points out that

while firms can gain advantage by exploiting its distinctive capabilities, it

should also constantly upgrade and reconfigure its capabilities as the firm

learns and accumulates knowledge. The faster the firm is able to do this, the

more it can accelerate its expansion to foreign markets.

Dynamic capabilities are closely related to entrepreneurship and

43

creativity. Many studies on born globals and their dynamic capabilities have

focused on the prominent role of entrepreneurs and their formulation of

strategy and decision making (Helfat & Petraf, 2015, Weeradena et al., 2007).

They showed that top management played decisive roles in developing

managerial and firm capabilities for identifying opportunities, combining and

transforming resources (Evers, 2011, Eisenhardt & Martin, 2000). Also,

dynamic capabilities may already reside in organizations but depend on

leadership for its deployment, promotion and development when operating in

foreign markets (Helfat & Martin, 2015). Ander and Helfat (2003) explained

that dynamic managerial capabilities are rooted in the managerial human

capital, managerial social capital and managerial cognition. Nonaka et al.,

(2016) also focus on the creative aspect of dynamic capabilities. They argued

that the creativity will transform managerial practices which let firms develop

distinct capabilities. The development of new ideas often requires novel

combinations and the best way to make them valuable and useful is usually

unclear (Helfat & Martin, 2015). Firms, especially those operating in foreign

markets full of uncertainties and complexities are likely to face contradictory

knowledge that is hard to process. Such knowledge, usually accumulated by

front line employees at the foreign market, are likely to be subjective,

idiosyncratic and diverse. Greater levels of creativity will improve how such

knowledge is sensed and seized. It will help firms synthesize contradictory

44

knowledge picked up at the front and develop it into new knowledge which

help solve those contradictions. It will allow firms to convert subjective

knowledge to a more objective company vision (Nonaka et al., 2016).

3.3 Firm Level Creativity

Creativity is understood as both an outcome and a process (Amabile,

1988). For the production of creative outcomes, one must engage in certain

processes that help become more creative. This can include an identification

of a problem or opportunity, gathering information, generating ideas and

finally evaluating those ideas (Shalley & Zhou, 2008). Creativity as an

outcome is defined in organizational literature as the generation of novel and

useful ideas (Amabile, 1996). It must be useful in that it is beneficial and

value generating to a firm. Creative outcomes within an organization can

range from suggestions, incremental changes to procedures and routines to

radical breakthroughs (Mumford & Gustafson, 1988). Firm level creativity is

considered a sub area of organizational behavior and understood as the

structure, resources, strategy, culture and rewards and enable the creation of

novel and useful ideas (Woodman, Sawyer & Griffin, 1993). Interest in firm

creativity studies have grown with the need for organizations to adapt to

greater environmental change and increasing strategic concern for innovation

in order to remain competitive (Puccio & Cabra, 2008).

45

Given the importance of creativity in organizations, many studies

have attempted to find individual and contextual factors that could promote

or hinder creativity within organizations (e.g. Perry-Smith & Shalley, 2017).

Due to the complex nature of firm level creativity, scholars have adopted a

systems approach to study the variables that affect creativity. It looks at the

person, process and environment and how the interplay between the three lead

to firm creativity (Puccio & Cabra, 2008). The person aspect looks at how the

individual skills, experiences, backgrounds, knowledge, personalities and

motivations affect creativity. It is also based on the assumption that firm level

creativity is not possible without creativity at the individual level (Amabile,

1988). Individual creativity has received the greatest attention in creativity

studies, mostly stemming from the fields of psychology. The focus on process

regards the various stages of thought when individuals or teams creatively

address problems or opportunities (Puccio & Cabra, 2008). It recognizes the

multipersonal input of the creative process and how this is partially under

organizational control (Policastro & Srivasta, 2017). Firms could for example

encourage creative problem solving (Puccio et al., 2005) or appreciative

inquiry (Cooperrider & Srivastva, 1987) which helps affirmative search for

opportunities. The creative environment acknowledges that the creative

process takes place in a particular environment. The social, cultural and work

environments could all facilitate or inhibit creativity. For example, the

46

organizational structure and culture such as level of autonomy, rewards,

management support for creative action (VanGundy, 1987), resources, trust

and norms (Puccio & Cabra, 2010) could encourage or hinder creative activity.

Recent studies have also focused on the importance of leadership (Shin &

Zhou, 2007). Leader qualities such as tolerance to ambiguity, risk taking, open

mindedness, charisma and transformational leadership can bring about the

full potential of employees that are important for solving complex problems

that many organizations face today (Amabile et al., 2004).

In terms of its relationship with entrepreneurship, creativity and

entrepreneurship actually originate from different worldviews and disciplines.

Creativity literature largely stems from psychology (Guilford, 1950,

Sternberg, 1997), mostly studying the individual, while entrepreneurship is

based on economics (Schumpeter, 1942). However, Schumpeter (1942)

stressed the importance of the innovative entrepreneur, emphasizing creative

destruction, breaking of routines and relationships and introducing novel

solutions. At a glance, it seems that the need for the entrepreneurial firm to be

creative is almost linked to the very nature of entrepreneurship itself

(Manimala, 2009). Some of the common attributes shared by

entrepreneurship and firm level creativity is its concerns on novelty and value.

Entrepreneurship is interested in the novelty of business, and creating new

profitable opportunities in existing business. The creation of something new

47

and useful also translates to finding opportunities in existing or new fields

and the generation of new ideas which is relevant in both creativity and

entrepreneurship literatures (Fillis & Rentscheler, 2010). Moreover, they both

benefit from the depth of knowledge or experiential knowledge, at the same

time not being limited by existing knowledge. The challenge and extension

of previous knowledge and expertise for developing new ideas and processes

is welcome (Matthews, 2007). Also, the two theories recognize that

organizational conditions can enhance or inhibit creativity or

entrepreneurship. Barriers to social and cultural environments, motivation,

lack of management support and lack of resources to name a few (VanGundy,

1987, Puccio & Cabra, 2010). Barriers to entrepreneurship could be attitudes

and perceptions, lack of experiential knowledge or networks and lack of

entrepreneurial intention. Discussions on problem finding and definition in

firm creativity literature is also similar to opportunity finding and opportunity

recognition in entrepreneurship literature (Matthews, 2007). Lastly both

entrepreneurs and creative individuals in organizations must be skilled in

persuasion, to convince people within the frim or outside the firm for the

support or investment in new ideas and opportunities.

Hence although greater empirical investigation is required, a tighter

coupling of the two literatures could be useful for developing a

multidimensional analysis of the firm. For example, entrepreneurship could

48

benefit by the use of creative thinking for the generation of new ideas and

exploring new opportunities. Fillis and Rentschelr (2010) explain that it is

important to understand creativity through the lens of entrepreneurship and

vice versa. For example, an entrepreneurial approach to creativity will allow

scholars to give greater attention to uncertainty and ambiguity issues of the

external environment rather than examining it in the terms of personal

tendencies and preferences. A creativity approach to entrepreneurship on the

other hand will allow a more fine grained in-depth approach to decision

making and problem solving of creative, entrepreneurial individuals.

3.3.1 Assessing firm level creativity

1) Content Analysis

Content analysis is defined as the research technique used for making

inferences through a systematic and objective identification of specified

characters within text (Holsti, 1969). Central to the content analysis approach

is the recognition that language is important to human cognition (Sapir, 1944).

Since language mirrors mental processes, differences in the use of language

reflects the difference in cognition and realities perceived (Sapir, 1956,

Berger & Luckmann,1967). By describing the occurrence of words, sentences

and phrases, it examines their meanings, intentions, consequences and context.

49

Hence content analysis has both a manifest (frequencies and symbol

coincidences) and latent (presence of theme and thematic interrelations)

qualities (Woodrum, 1984). Also, the inferential quality is not an integral part

of the data, rather it comes from the researcher (Downe-Wamboldt, 1992).

Neuendorf (2002) explains that the four primary purposes of content analysis

are descriptive, inferential, psychometric and predictive. Quantitative

analysis is often used to analyze mass data and is deductive, meaning it tests

hypothesis of theories or empirical research. It also requires data to be

gathered through random sampling to ensure the validity of statistical

inference. A qualitative approach is more concerned with the deeper

meanings within text, originally developed from psychology, sociology and

anthropology fields. It is mostly inductive, examining topics or themes and

their possible inferences, sometimes even generating theory (Zhang &

Wildemuth, 2009). Data for content analysis is driven from purposely

selecting texts that fit the research purpose. Content analysis scholars believe

that it is important to combine both quantitative and qualitative approaches

for a replicable and valid inference from text data (Duriau et al., 2007, Li &

Cavusgil, 1995). Smith (1975) suggests that “qualitative analysis deals with

the antecedent-consequent patterns of form, while quantitative analysis deals

with duration and frequency of form.” Hence, qualitative analysis is interested

in the range of meanings and unique themes rather than the statistical

50

significance of frequency and occurrence of certain texts or concepts (Zhang

& Wildemuth, 2009). In short, the potential of content analysis is the explicit

link of qualitative symbol usage with quantitative data (Woodrum, 1984).

2) Content Analysis in Strategic Management

Strategic management research has frequently relied on content

analysis to analyze otherwise hard to examine individual and firm

characteristics. Content analysis is useful for the reconstruction of perceptions

and beliefs of their authors (Holsti, 1986). Rokeach (1979) argued that firms

leave traces of distinctive patterns of value in documents. This is based on the

assumption that language can reflect goals and values that individuals or

collective groups feel are important. The relative frequency of particular

words or phrases is an indication of cognitive centrality (Huff, 1990) or

importance (Abrahamson & Hambrick, 1997). Any source of communication

within the organization can be a good source of data as long as it is a good fit

with the information the study is trying to assess. Letters to shareholders,

press release, annual reports, recordings of meetings, CEO greetings are some

of the many data sources for content analysis. Previous research has used

content analysis for deep access into individual or firm values, attitudes,

perceptions, intentions and cognition (Carley, 1997, Huff, 1990). By

analyzing such cognitive schema, content analysis has been applied to the

research of a variety of organizational phenomena such as corporate social

51

responsibility (Ullmann, 1985), industrial accidents (Gephart, 1993)

managerial cognition (Huff, 1990), corporate reputations (Fombrun &

Shanely, 1990) and product development (Simon & Houghton, 2003) to name

a few. These are topics that are otherwise difficult to study using more

traditional quantitative methods such as financially oriented databases. For

example context analysis has been especially useful when examining

managerial cognition. Since access to a CEO is often difficult, it has been a

great way to gain key insights to top managers and why they make certain

choices (Short & Palmer, 2008).

Besides allowing researchers to access otherwise hard to examine

characteristics, the content analysis approach is beneficial in several ways.

First, it is a replicable method that allows application to a broad range of

organizational phenomena. Also, because of its analytical flexibility, the

contents of the text can be analyzed in various statistical ways which is

suitable for large amounts of data. If researchers are interested in the latent

and deeper meaning within text, an in depth interpretation is also possible.

This means that studies can combine rich meaning within text with powerful

quantitative analysis. For this, content analysis differs from other more

qualitative analysis methods such as hermeneutics or literary interpretation,

(Tesch, 1990). Because comparable firm data such as annual reports are

available over time, longitudinal research designs can be applied. Finally,

52

content analysis is nonintrusive. Hence it does not suffer from researcher

demand bias (Woodrum, 1984) or recall bias (Barr et al., 1992). Access to

nonintrusive data is significant for the study of senior executives where access

to informants is often a serious and important issue (Morris, 1994).

There are three general types of content analysis methods (Morris,

1994). The first is human scored schema. For this method, coders are trained

to classify text according to certain classification categories. First the unit of

analysis, whether it will be a word, phrase of paragraph of full text, is decided.

Then categories are made and coding rules are specified for each category.

Following this, coders are trained, then checked for interrater reliability and

coding rules are revised accordingly to enhance reliability and validity. For

example, Short and Palmer (2008) analyzed letters to shareholders by looking

at sentences as the unit of analysis. It coded for different references to

performance such as using internal comparators which may be previous year

sales for example, and external comparators such as competitor performance.

Although quite labor and time intensive, manual analysis is considered to be

the most context sensitive allowing a fine-grained in depth analysis. However,

it is inflexible compared to other methods thus unsuitable for exploratory

work (Kabanoff et al., 1997). Second is the individual word count method.

This method classifies text according to semantically equivalent categories.

It then uses frequency counts to determine the importance of each category in

53

the text (Weber, 1990). For example, worker, staff, associate or researcher

may all be classified under the employee category. While this may be done

manually, computerized coding systems which have near perfect reliability

and cost effectiveness are often used. This is appropriate for larger amounts

of data. Lastly, artificial intelligence systems consider the syntax and lexicon

of words (Rosenberg et al., 1990). This is different from individual word

count in the way it interprets words that may have several meanings. Through

computer programs, it distinguishes various meanings of the word depending

on the context that it is being used. It aims for greater precision of text

classification by increasing accuracy of coding the symbolic meaning.

However, in management studies this method has not yet been so well

recognized. Many researchers still feel that artificial intelligence systems are

still unreliable for subtle and sophisticated interpretation, useful mostly for

providing simplistic output (Macnamara, 2005).

3) Media and Content analysis

Mass media is closely related to a firm’s activities. It is an important

source of advertising for firms, shapes the reputation of a firm and an

important channel of communication with consumers and society. It also

affects the sale of products, firm stock prices, could cause a firm to collapse

or result to the resignation of senior management (Macnamara, 2005). The

general conclusions of mass communication research in management studies

54

is that the media records and influences public knowledge and opinions about

firms (Deephouse, 2000). Indeed, Fombrun & Shanley (1990) observed that

the media acts as vehicles for advertising and mirrors that reflect the reality

of firms.

Media content analysis is a subset of content analysis. It is

characterized by a broad range of phenomena such as medium, production

techniques, messages, quoted sources and context (Shoemaker & Resse,

1996). A quantitative approach to media content analysis collects data on

topics, issues or volume of mentions. It also determines key words in context,

media circulation (how many audiences are reached) and frequency. Also,

media form such as newspapers, magazines, books and other printed text is

examined. Although some scholars such as Neuendorf (2002) go as far as

saying that media content analysis is quantitative only, others such as

Newbold et al., (2002) note that it would be too simplistic to interpret data

based only on statistical content analysis when understanding the relationship

between media text and their impact. A qualitative approach requires a more

in depth interpretive analysis examining the relationship of the text with its

audience. It tries to determine the meaning of the text to its audience, paying

attention to the audience and the contextual factors present, not focusing only

on the text (Macanamara, 2005). Hence it looks at other factors such as

perceived media credibility, for example it should be interpreted differently if

55

an article was published in a medical journal or just popular press. The context,

a finance article published during a financial crisis will be read differently

than other normal times. Lastly, audience characteristics such as age, gender,

ethnicity, education and socio economic position are all different contextual

factors. This method relies more heavily on the researcher’s interpretation of

texts, is labor intensive and time consuming, hence usually involves a small

sample. In short, just like general content analysis, quantitative content

analysis ensures reliability and replicability over mass data while a qualitative

approach is still necessary for deeper understanding on the interpretations

made by media audiences.

Press release is one of the most routinized methods for firms to gain

access to the media. Firms understand that it is important to play a proactive

role within the media and appoint special press officers that manage business

reporting. This is based on the belief that along with expensive marketing

campaigns, public relations generates free, indirect publicity (Sleurs & Jacobs,

2005). Firms voluntarily speak through media outlets because they believe

that the more they are heard, the better for business. For example,

shareholders will be better informed about the business and become more

loyal. Customers are more likely to know exactly what the company offers,

and thus more likely to buy. Firms can also manage reputations and create

public acceptance (Luesby, 2001). Press release is under the control of the

56

firm, prefabricated with the exact information the firm wishes to convey. They

are meant to be retold by journalists as accurately as possible (Bell, 1991).

Previous studies in management using press release for content analysis have

examined earnings press release or corporate social responsibility articles.

They have examined how firms use certain types of language to signal various

situations and forecast of future of firm performance. For example, Davis et

al., (2012) examines the use of positive and negative words to study attitude

change of managers. Aerts & Cormier (2009) examined press release of

voluntary environmental disclosures as a way of establishing firm legitimacy.

4) Content Analysis in Firm Level Creativity

The use of content analysis in creativity studies have been mostly

focused on the analyzing, understanding and defining of creativity. This is

because to this day, the definition and conceptual frameworks of creativity

still vary. Besides the common requirement of novelty and utility, the

definitions on creativity vary because of its multiple contexts, variations

across industries and cultures (Starko, 2017) and its culture specificity (Craft,

2005). These studies have used content analysis to review definitions of

creativity (Kampylis & Valtanen, 2010), investigate the theoretical

approaches to creativity (Spiel & Korff, 1998) or explore the factors that

affect creativity such as R&D which influence creative output (Amabile &

Sensabaugh, 1992), factors that affect team creativity (Bissola & Imperatori,

57

2011) or assessing determinants of creative output (Pachet, 2006).

The measurement of creativity has been a hot topic of debate for

many creativity researchers (Plucker & Makel, 2010). In part due to the lack

of consensus on the definition of creativity, there exists active ongoing debate

on the reliability and validity of various creativity assessment methods (Park

et al., 2016, Cropely, 2000). A content analysis approach for measuring

creativity is yet uncommon. However, other areas of organizational studies

have employed a content analysis approach to measure various firm

constructs, signaling the potential usefulness and adaptability to creativity

studies. For example, Short et al., (2009) used content analysis to determine

entrepreneurial orientation of family firms. They generated a broad list of

words that capture diverse aspects of entrepreneurship from letters to

shareholders. Jancenelle et al., (2017) investigated the effect of

entrepreneurial tendencies on performance through a content analysis of

conference calls. They examined entrepreneurial cues such as proactiveness,

autonomy, innovativeness, competitive aggressiveness and risk taking.

Amoroso & Eriksson (2000) did an exploratory research to examine the

construct of creativity in technology rich settings. They found that the

construct of creativity was often used in conjunction with words such as

innovate, unique, idea, improve, invent, original, solve, new, value, imagine,

create, think, generate and potential. Hence, if the content analysis method is

58

used to capture qualities such as entrepreneurial orientation and

innovativeness of the firm, it may be possible to extend this to firm creativity

research.

4. Conclusion

The rapid growth and remarkable transformation of multinational

firms over the last few decades have led the field of international business to

explore many theoretical perspectives. Each framework has attempted to

explain the process, entry mode, timing and speed on foreign expansion.

While it is worthwhile to understand how each theory explains international

expansion using different explanatory factors, when interpreted singly, they

fall short in explaining much of the recent internationalization patterns. The

dynamic nature of markets and global competition highlight the potential

limitation of these theories that rely on interpretation in isolation to other

theoretical perspectives. By integrating different theoretical approaches into

a more comprehensive approach and acknowledging the complementarity of

different theories, debates about processes, strategic and network approaches

could be resolved. This will help researchers understand why some firms

deviate from the predicted patterns of internationalization. Through a

comprehensive overview researchers can better understand and monitor

recent internationalization patterns with greater structure and focus.

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CHAPTER III. THE SPEED OF

INTERNATIONALIZATION, THE KNOWLEDGE

LINK AND MODERATING EFFECTS OF

FIRM LEVEL CREATIVITY

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1. Introduction

The speed of internationalization has become an important

competitive advantage for many firms that face increasingly fierce global

competition. Interest in time-based competition in international markets has

greatly increased over the last two decades (Chang, 2007, Guillen & Garcia-

Canal, 2009). Traditional views of international expansion based on the

Uppsala model, suggest and provide evidence for a sequential, gradual and

slow expansion to international markets as resources and international

experience is gradually accumulated, minimizing risk and maximizing

benefits of learning from prior experience (Chang & Rhee, 2011,

Vermmeulen & Barkema 2002, Zeng, Shenkar, Lee & Song, 2013). This

however, falls short in explaining todays international firms that expand early

on and at a fast pace. Nowadays when globalization pressures are high, firms

are increasingly willing to take the risks of expanding to unknown foreign

markets that involve high-commitment investments. Some firms, are forced

to undergo rapid internationalization where gradual expansion is simply not

a viable strategy. Sometimes tapping into multiple foreign markets in a short

period of time (Bell et al., 2003), they seem to consider this secondary to the

risk of becoming a perennial late mover (Chang & Rhee, 2011). While the

sequential gradual approach may be appealing, it fails to consider the

heterogeneity of internationalizing firms. Although there may not be a single

61

straight answer to the speed of internationalization, this study believes that it

is important to consider both internal and external contingencies that firms

face to explain internationalization patterns of recent multinationals. Why do

firms speed up their pace of internationalization? What type of firms would

benefit from a higher speed of internationalization? To address such different

patterns of behavior, this study explores the diverse factors that make

accelerated international expansion a viable strategy for firms.

As firms expand beyond their national borders, they are exposed to

the liability of foreignness (Hymer, 1976, Zaheer, 1995), a fundamental

disadvantage compared to domestic or other well established firms.

Conventional international business literature assumes that this is best

managed by a gradual incremental approach suggested by the Uppsala model

(Johanson & Vahlne, 1977, 1990). Which is described as “a gradual

acquisition, integration and use of knowledge about foreign markets and

operations and a… successively increasing commitment to foreign markets”

(Gankema et al., 2000). They argue that firms should move sequentially, first

from countries perceived culturally, economically and geographically close,

followed by gradual expansion to other markets. However, Oviatt and

McDougall (1994) revolutionized this thinking by investigating born-globals,

which spread internationally and successfully so, at a much earlier and faster

pace. This prompted a growing stream of research that aimed at understanding

62

the causes, processes and outcomes of born globals expanding to foreign

markets.

Born globals were initially associated with countries that have

smaller or underdeveloped domestic markets. However, such firms also began

emerging from countries with large, well established internal markets such as

the United States (Cauvsgil & Knight, 2015). With a strongly international

orientation from the get go, these firms form a sharp contrast to the more

cautious, conservative firms described in conventional international

expansion literature. Moreover, pressures to globalize are not only present for

fledgling new firms but also established firms alike (Garcia-Garcia et al.,

2017). No longer limited to born globals, to understand why some firms are

successful in speeding up their internationalization process while others are

not, it is important to understand the characteristics or advantages that these

firms have over others, and how they help compensate for liabilities when

expanding to new international markets and benefit from an increasing speed

of international expansion.

Central to the literature exploring the international expansion of firms,

is the role of knowledge and learning (Cumming et al., 2009, Keup &

Gassmen, 2009, McDougall & Oviatt, 2000, Mejri & Umemoto, 2010). The

presence or the lack of experiential knowledge from foreign markets was key

to explaining the incremental internationalization of sequential, process-

63

based models (Ericksson et al., 1997, Johanson & Vahlne, 1977, 1990). It is

explained by the behavioral theory of the firm (Cyert and March, 1963) where

the presence or absence of such knowledge determined firm activity. Oviatt

and McDougal (1994) on the other hand, recognized that individual

knowledge factors, prominent in born-global firms, was also important

beyond the knowledge acquired by firms through their foreign expansion

activities. The individual knowledge and experiences of founders and key

managers, allows born gobals to skip many of the sequential incremental

processes (Oviatt & McDougall, 2005). Knowledge plays an important role

in both sequential and born-global approaches but in significantly different

ways. Hence it is important to distinguish these different types of knowledge

and what roles they play in characterizing internationalization pathways of

recent multinational firms.

By developing a theoretical framework based on the knowledge

based view of the firm (Grant, 1996, Kogut & Zander, 1993), this study aims

to identify different types of knowledge assets that will affect the speed of

internationalization. Certain types of knowledge will act as key assets,

incentivizing and pushing a firm’s internationalization pace. Others will help

ease foreign market entry and operations (Kogut & Zander, 1993). This study

focuses on two types of knowledge that is likely to influence a firm’s rapid

internationalization process, prior experiential knowledge and technological

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knowledge. The first one is related to knowledge that firms aim to use in

international markets while the second is knowledge required for firms to

effectively use such knowledge to foreign markets. Prior experiential

knowledge, namely a wider knowledge base on foreign markets will decrease

risks and negative perceptions associated with the liabilities of foreignness,

helping managers decide more quickly a firm’s course of action in

international markets. Also, the study predicts that certain characteristics of

technological knowledge will push the firm to speed up its

internationalization process reaping its benefits before knowledge depreciates

and loses its competitive edge.

To further explain why firms show different internationalization

patterns, this study turns its attention to firm level creativity. Given similar

resource and knowledge levels, firms may react differently to the risks and

new opportunities when they have different levels of firm level creativity.

Inherently complex and full of uncertainties, creativity can improve how

firms deal with the challenges of foreign expansion by strengthening certain

entrepreneurial and learning characteristics. McDougall and Oviatt (2000)

described international entrepreneurship as a process of creatively

discovering and exploiting new opportunities outside a firm’s domestic

market. Heightened entrepreneurship through firm level creativity could help

firms accelerate their expansion to international markets (Autio et al., 2000,

65

McDougall et al., 1994). Firms with higher levels of creativity will also

develop distinctive learning and knowledge creation mechanisms that ease

firm foreign expansion. While size, agility and centrality of control may no

longer be viable options for big established firms, enhancing firm level

creativity could play a significant role in speeding up the internationalization

process of firms.

This study confirms and tests its hypothesis by using a panel data

sample of 186 listed Korean firms from 2009-2018. Whereas many studies on

speed of internationalization focus on samples of young firms or SMEs, few

look at internationalization based on a sample companies with different sizes

in diverse industries and different degrees of internationalization (Chetty &

Martin-Martin, 2014). This adds insight above and beyond prior studies on

the speed of internationalization as it attempts develop a more comprehensive

approach to international expansion. It tries to bridge the gap between former

studies mostly focusing on advanced economies undergoing gradual

expansion and recent approaches that focus on born globals as a special and

unique group of small and young firms in technology intensive industries.

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2. Literature Review

The international business literature has considered knowledge and

learning as drivers of international expansion. According to the knowledge

based view (Grant 1996, Nonaka 1994), knowledge is the most strategically

important resource for a firm. It is used for the creation and application of the

production of good and services (Grant, 1996, Spender, 1996, Kogut &

Zander 1993). Organization learning theory compliments the knowledge

based view by describing the process which organizations integrate existing

knowledge bases with newly acquired knowledge (Cyert & March, 1963). By

accumulating such knowledge, then integrating and applying it to business

strategies, a firm creates value (Grant, 1996, Nelson & Winter, 1982).

Internationalization involves knowledge accumulation, transfer and

adaptation which firms learn to combine their existing knowledge bases with

new knowledge gathered abroad (Garcia-Garcia et al., 2017). It enables the

firm to exploit new opportunities for profit outside its domestic market and

grow (Buckley & Casson, 1976, Lu & Beamish 2001). It is also understood

as a learning process whereby knowledge acquisition leads to increased

international commitment (Andersen, 1993, Johanson & Vahlne, 1990).

67

2.1 The sequential view on knowledge and learning

Insights from the Uppsala school (e.g. Johanson & Vahlne, 1977,

Johanson & Wiedersheim-Paul, 1957) based on incremental expansion

assume that internationalization is a sequence whereby the firm’s

international involvement increases as a result of different types of learning

and accumulation of resources (Ruzzier et al., 2006, Zeng et al., 2013).

Grounded on the theory of growth (Penrose, 1959) and the behavioral theory

of the firm (Cyert & March, 1963), it assumes that firms have imperfect

access to information and they must gradually acquire and accumulate

experiential knowledge in sequential processes (Eriksson et al., 1997).

Managers acquire knowledge through the accumulation of decisions taken

and such repetitive processes thereby increase commitment and the

availability of knowledge and so on (Johanson & Vahlne, 1977). Learning

activity in turn reduces uncertainty and perceived risks on operating in

unknown foreign markets.

The emphasis on a slow and gradual approach builds upon the

concept of time-compression diseconomies (Dierickx & Cool, 1989) and

absorptive capacity (Cohen & Levinthal, 1990). Foreign expansion inherently

requires major investments and key managerial decisions such as when to

establish new foreign presence (Casillas & Moreno-Menedez, 2014), where

(Kraus et al., 2015) and entry modes (Brouthers, 2002). Such decision-

68

making can be rather time consuming whereby learning in foreign markets

can involve several business cycles (Knight & Liesch, 2002, Nonaka &

Takeuchi, 1995). Hence, speeding up this process is likely to result in

diminishing returns due to time-compression diseconomies. Accelerating

expansion will work against managers in correctly acquiring and assimilating

the new knowledges acquired through foreign expansion. Working against the

limited attention of mangers, inefficiencies and additional costs such as

mistakes will occur when things are done too fast (Dierickx & Cool, 1989).

The gradual, sequential approach to international expansion

highlights two fundamental sequences. The first being the availability of

knowledge before expanding to a foreign market and second, the sequences

of stages where the firm increases its commitment in a specific country based

on its previous operations (Casillas et al., 2009). The availability of

knowledge plays a decisive role in the kind of foreign markets the firm begins

to internationalize. Due to the liability of foreignness (Hymer, 1976, Zaheer,

1995) a firm is likely to start internationalization in foreign markets it

perceives as culturally, economically and geographically close (Benito &

Gripsrud, 1992, Davidson, 1980) as a means to minimizing risk of failure

(Barkema, et al., 1996, Johanson & Wiedersheim-Paul, 1975). Based on this,

the firm moves on to its second sequence where it increases commitment

grounded on deep knowledge and experience about a specific country.

69

Under the sequential view, firms that are able to speed up

internationalization are those that have rich expansion experiences. For

example, the breadth of experiences means greater diversity of its experience

base and a greater learning advantage, which makes it easier for a firm to

accelerate it internationalization pace (Johanson & Vahlne, 1977). Chen and

Yeh (2012) empirically showed that accumulation of FDI experience sped up

internationalization. Other studies have shown that the diversity of experience

in foreign markets and entry modes will have a U-shaped influence on speed

(Casillas & Moreno-Mendez, 2014). Studies have also examined effects on

performance showing that international experience positively moderated the

relationship between speed and performance (Mohr & Batsakis, 2017).

However, over time scholars have begun to question the validity of the

sequence-based Uppsala model as it focuses on a single knowledge dimension,

experiential knowledge and learning only through foreign expansion, in

explaining the timing and pace of international expansion (Casillas et al.,

2015). Such path dependent approach falls short in explaining path-breaking

tendencies of recent international expansion patterns (Knight & Cavusgil,

1996) that internationalize without the presence of such experiences. They

have pointed out that this approach focuses on the inertial and reactive nature

of firms overlooking the entrepreneurial choice opportunities of firms (Oviatt

& McDougall, 1994, Autio et al., 2000).

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2.2 International entrepreneurship view on knowledge and learning

In sharp contrast to conventional explanations of sequential

international expansion, born globals (Oviatt & McDougall, 1994) are

characterized by their speed and scope of internationalization. With

practically no experience in foreign markets, they somehow successfully

venture internationally almost immediately. Although originally limited to

newly established international new ventures, attempts to explain the

existence of such firms have led international entrepreneurship scholars to

expand research to firms that show accelerated expansion patterns regardless

of firm age (De Clercq et al., 2012, Zahra, 2015). While the sequential

knowledge view focused primarily on the knowledge accumulated through

foreign expansion experiences, international entrepreneurship scholars began

examining a broad array of possible knowledge and learning sources to

explain how it affects the speed of internationalization (De Clercq et al., 2012).

Previous studies on international entrepreneurship have traced this to

individual level and company level antecedents (Li et al., 2015). Individual

antecedents are mostly associated with entrepreneurs and top management.

While company level antecedents are related to organizational capabilities

(Autio, 2005). At the individual level, the CEO and top management is

fundamental in understanding speed of internationalization. Not only do they

act as unique sources of knowledge on their own, they also greatly affect the

71

propensity to act and risk taking behavior of the firm which allow for fast

paced internationalization. Risk perceptions are negatively related to

knowledge and the presence of such knowledge is critical to explaining how

quickly firms expand (Casillas et al., 2015). According to Huber (1991), firms

can inherit the abilities and experiences of their founders. Through this, firms

that hire managers with the right international experience can make up for the

lack of experience that sequential foreign expansion requires.

Company level antecedents can be organizational capabilities, which

are embedded in a firm’s routines and processes and is derived from multiple

sources. Dynamic capabilities are the organizational and strategic routines

through which firms can newly configure resources and knowledge as

markets emerge and evolve (Eisenhardt & Martin, 2000). This has progressed

from the static resource based view, suggesting that firms need to develop

capabilities that allow them to capture opportunities and respond quickly to

their environments (Jarvenpaa & Leidner 1998). The notion of dynamic

capabilities has been used to explain accelerated foreign expansion of born

globals as it involves knowledge-based processes that are instrumental in

knowledge creation, integration and configuration (Luo et al., 2007). They

argue that young firms are less constrained by past routines and structures and

can more effectively develop capabilities based on their foreign activities.

Weerawardena et al., (2007) explain that market knowledge alone is

72

insufficient. While it will enable the firm to understand market needs, firms

must also develop the capabilities to acquire and learn knowledge from other

sources for developing products that fulfill the market’s needs. For example,

these capabilities may include acquiring, disseminating, unlearning and

integrating external new market knowledge and internally generated

knowledge (Weerawardena et al., 2007) or building and maintaining useful

networks (Liesch et al., 2002). Lastly, the dynamic capabilities view also

recognizes the prominent role of management, explaining that such

capabilities can be developed consciously and willingly by the systematic

choices of the firm’s leaders (Grant, 1991, Teece et al., 1997).

Discourse on dynamic capabilities and internationalization draws on

its foundations on the organizational learning theory which has its own

explanations regarding the speed of internationalization. According to

Saarenketo et al., (2004) rapid internationalization simply demands rapid

learning. This directly contrasts with the gradual, incremental view, which

deems learning as an inherently slow process. Often discussed in born global

literature is the learning advantage of newness (Autio et al., 2000), it argues

that young firms have less rigid organizational routines and structures which

enable them to quickly learn new and different kinds of knowledge. They are

also at an advantage of being less dependent on domestic-market based

routines or relational obligations with local partners, which may not always

73

be optimal for global markets (Zhou et al., 2012). However, not only limited

to born globals, international entrepreneurship scholars have begun to explore

different ways in which firms at various stages of internationalization are able

to accelerate learning. First, firms can accelerate learning through networking.

By participating in knowledge networks either at the individual or firm level

(Coviello & Munro, 1995, Etemad & Lee, 2003) firms can forgo some steps

of gradual experiential learning. Second, firms can also learn from grafting

(Huber, 1991), which is the acquisition of another firm, or recruiting of talent

such as competent managers (Segelod, 2001) allowing access to new

knowledge bases, resources and capabilities. This is often discussed as viable

option for larger firms with greater resources and bargaining power

(Saarenketo et al., 2004). Lastly, firms can also learn through imitation. By

observing other ‘high legitimacy’ firms, they can imitate market entry

behavior (Scott, 1987). These views suggest that learning should not be

considered as an inherently slow process, rather firms that are able to develop

distinctive learning capabilities are more likely to be successfully speed up its

international activities.

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2.3 Speed and the internationalization of the firm

Speed is an important subject for firms entering and expanding to

foreign markets and can be an important aspect to a firm’s international

strategy. The firm’s ability to balance its resources and seize opportunities

abroad will enable faster and more sustainable internationalization. Eden

(2009) pointed out that studies on internationalization are mostly focused in

the ‘why, where and how’ issues with little attention to ‘when and how,’ which

are important for establishing an understanding of a more comprehensive

picture of internationalization. Despite its importance however, the concept

of speed itself is under researched (Casillas & Acedo, 2013, Garcia-Garcia,

2017). Previous studies have provided little guidance and there lacks

consensus regarding the concept of speed and how it should be measured.

Table 1 illustrates how speed has been defined and measured in recent

internationalization studies.

_________________________

Insert Table 1 here

_________________________

As shown in the table, there exists different views as to the definition

of speed. Some studies understand it as the time it takes until a firm begins its

first internationalization (e.g. Hsu et al., 2013, Jantunen et al., 2008). This is

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especially prominent in born-global studies where the earliness of time and

speed are the key concerns (Acedo & Jones 2007, Weerawardena et al., 2007).

Because of such conceptualization, these studies have been mostly concerned

with the antecedents or determinants for the timing of internationalization

dealing more with the pre-internationalization aspects rather than the actual

internationalization process (Autio et al., 2000). The focus on the single

foreign market entry event means that such studies do not consider

subsequent international markets, nor the order or the specificity of markets

that firms will continue to expand to (Hilmerson & Johanson, 2016).

Moreover, narrow focus on initial time of entry meant that sample selection

of firms were focused on young, newly established firms (Chetty et al., 2004,

McDougall et al., 1991, Zahra et al., 2000).

Other studies however, examine what happens after the initial foreign

market expansion (e.g. Chang, 2007, Chang & Rhee 2011, Hilmersson &

Johanson, 2016, Vermulen & Barkema, 2002). This adds more dimensionality

to the concept of speed as it tries to capture the swiftness or rapidity of the

movement (Chetty et al., 2104). This approach allows greater depth of

analysis since speed can be examined through many angles. For example, it

could examine the change of the breadth or scope of international markets

such as the cumulative number of countries or the growth in the intensity on

foreign markets and the speed of a firm’s commitment abroad (Casillas &

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Acedo, 2013). The speed of dispersion could also capture number variety and

distance of foreign markets where the firm is active (Asmusen et al., 2009,

Jones & Coviello, 2005). Scholars have also argued that there needs to be

further distinctions and more rigorous approach to the degree of speed such

as high speed and low speed of internationalization or accelerated

internationalization where change in rapidity in internationalization

throughout the firm’s internationalization process occurs (Tan & Mathews,

2015). This has also been examined in terms of the continuity of speed

(Kutschker et al., 1997). Moreover, a long-term perspective of speed allows

scholars to analyze speed with a sample of companies that are different in size,

age and degrees of internationalization. Such distinction between initial speed

and post-entry speed is critical in determining the success, failure and long

term growth through international expansion (Prashantham & Young, 2011).

Studies have also tried to examine how the two phases, time to

internationalization and subsequent internationalization affects one another.

For example, Autio et al. (2000) examined the effect of the firm’s initial age

of internationalization on subsequent internationalization. This study

examines what happens after initial foreign market expansion. It wanted to

reflect the changes in the global competitive environments where firms that

have already initiated internationalization may feel the need to accelerate

foreign expansion in its later years.

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3. Hypothesis Development

3.1 Prior experiential knowledge and speed

International entrepreneurship highlights the importance of

individual level antecedents that act as important sources of knowledge which

speed up internationalization (Eriksson et al., 2000, Autio & Tontti, 2002,

Knight & Leisch, 2002). Departing from the premise that the CEO and top

management plays a fundamental role in strategy making and implementation

(Westphal & Fredrickson, 2001), it is important to understand how possession

of certain knowledge at the managerial level affects patterns of

internationalization. Involving a process of strategic change (Samiee et al.,

1993) internationalization can be affected by the individual characteristics of

management that play important roles in decision making processes (Wally &

Baum, 1994).

Previous studies have revealed that managerial experience,

orientation and network have a positive impact on the speed of

internationalization (Preece et al., 1998, Ibeh & Young, 2001, Westhead et al.,

2001). Prior international experience can be an important source of

preexisting knowledge and background for managers (Cavusgil & Knight,

2015). Several studies have shown that internationalization patterns of firms

can be traced back to the socio-demographic characteristics of managers

(Bloodgood et al., 1996, Reuber & Fischer, 1997, Anthanassious & Nigh,

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2000). They have examined personal life experiences such as education

backgrounds, work experiences, number of languages spoken, travel

experiences, birth abroad and life abroad (Simmonds & Smith, 1968,

Meisenbock, 1988, Reid, 1981). Such international experiences can translate

into market specific knowledge, foreign market knowledge, institutional

knowledge, knowledge on language, regions, culture and so on. This valuable

knowledge can help reduce the firm’s various risk costs associated with

foreign expansion (Herrman & Datta, 2002, Crick & Jones, 2000) allowing

firms to quickly adapt to diverse cultural and institutional environments

(Ricks et al., 1990). Diversity of experience in management can also be a

foundation to a wide knowledge base letting the firm to rapidly decide a firm’s

course of action on international activities and increase the firm’s absorptive

capacity (Zhou & Guillen, 2015). Moreover, decision makers with prior

international experience may allow the firm to be a step ahead as they are

more likely to consider mechanisms or dynamic capabilities for foreign

expansion early on instead of focusing and setting up routines mostly based

on domestic perspectives (Weerawardena et al., 2007, Reuber & Fischer,

1997). Stocks of foreign knowledge can also be enhanced throughout the

firm’s lifespan by ‘grafting’ on new outside managers. In fact, hired-in

managers may be less affected by established firm routines or attached to

domestic markets and help firms quickly bring greater external focus and

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positive attitudes toward foreign expansion opportunities (Sapienza et al.,

2006).

International backgrounds and experiences of managers are likely to

lead to greater international orientation (Dichtl et al., 1990). They are likely

to be more aware of international opportunities, capable of assessing such

opportunities and favorably disposed to pursuing them (De Clerq et al., 2012).

Such awareness is likely to speed up foreign expansion because managers will

have different risk perceptions (Cavusgil & Naorm, 1987), levels of

proactivity (Crant, 1996) and tolerance for ambiguity (Westerberg et al., 1997)

regarding foreign markets. For example, Acedo and Jones (2002) showed that

high international orientation breeds higher levels of proactivity and lower

risk perceptions on internationalization. Reuber and Fischer (1999) showed

that internationally experienced managers internationalized faster than those

counterparts who do not have such advantage. They explained that the process

of being proactive and taking risks is facilitated by easier agreement between

top decision makers. Hence, the greater presence of internationally

experienced managers is likely to facilitate agreement within top management

regarding the outcome and selection of alternatives for internationalization

activities (Eisendhardt, 1989). Moreover, the liability of foreignness is

sociological in nature (Zaheer, 2002) and increased international orientation

within top management is likely to reduce risk perceptions regarding the

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liabilities of foreignness.

Lastly, international experience of managers can positively affect the

international network approach to internationalization. Early and accelerated

internationalization can be due to previous international social networks that

have been established by management (Johanson & Valhne, 1990). Moreover,

more experienced managers are more likely to form international partnerships

because they have greater ability to know, recognize, attract and engage with

international partners. Such managers are also likely to have observed or

experienced the advantages and benefits of foreign partnerships and

developed the necessary skills required to identify and negotiate with firms in

different cultures and institutions (Reuber & Fischer, 1997). Partnerships with

foreign parties not only provide specific skills or resources but can also be a

source of legitimacy and market power (Schoonhoven, 1996). Considering

such characteristics of managerial experiential knowledge, this study

hypothesizes that:

Hypothesis 1: The prior experiential knowledge accumulated through

international experience of the CEO will positively affect the speed of

internationalization

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Hypothesis 2: The prior experiential knowledge accumulated through

international experience of members of the top management team will

positively affect the speed of internationalization

3.2 Technological knowledge and speed

Technological capabilities are the accumulated technological

knowledge the firm uses when developing new products, services and

improving existing ones. Previous studies have shown that firms possessing

distinct technological knowledge are more likely, and successful at

transferring it across a wide range of countries (Franko, 1989, Lichtenberg &

Siegel, 1991). Technology-based firms, particularly those whose business is

developed around a new technological platform, are likely to be impacted by

globalization, in terms of both pace of innovation and pressures of

competition (Onetti et al., 2012).

When a significant amount of a firm’s competitive advantage is

concentrated on technological knowledge, firms face higher technological

and commercial uncertainty and they are likely to have a greater ambition to

respond quickly to markets and internationalize (Ramos et al., 2011). This is

because technology intensive firms are likely to operate in narrowly defined

markets or niches requiring international expansion for increased sales

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growth (Hitt et al., 1994). By moving fast, firms will try to secure first-mover

advantages by becoming a technology leader, preempt assets and create buyer

switching costs making it harder for late-movers to compete (Lieberman &

Montgoemery, 1988). Moreover, High R&D costs also usually come front end,

before any sales are made, hence firms may be more willing to get back on

the growth track to cover initial expenses (Kylaheko et al., 2011). Firms are

also exposed to technological obsolescence risk. In order to preserve

technological knowledge value, penetration on all markets may be necessary.

According to Garcia-Garcia et al. (2017), rapid expansion will actually help

firms be better prepared to overcome the liability of foreignness as it allows

firms to upgrade and extend the lifecycle of their knowledge before it

becomes outdated. Lastly, the granting of patent protection not only

stimulates innovation and development of products but also the temporal

monopoly allows the firm to recoup R&D expenses and take advantage of the

risks the firm has taken. Thus, firms may want to speed up foreign expansion

before such protective advantage disappears.

In comparison to other types of assets, technological knowledge has

greater mobility (McDougall et al., 1994). This allows the firm to codify it,

for example in the form of patents, and transfer it on a global scale for the

combination with other assets at a relatively lower cost (McDougall, 1989,

Autio et al., 2000) compared to other firms who for example, that derive

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competitive advantage from fixed assets alone. The public good character

(Arrow, 1962) of knowledge intensive resources also enables the firm to

develop products with a universal demand, allowing firms to reach customers

in foreign markets at a lower cost (Chang & Rhee, 2011). Lastly, if the

technology itself is a superior resource to the firm, it may likely be enough to

overcome liabilities of foreignness, easing international expansion (Shrader

et al., 2000).

The intensity of technological knowledge also provides learning

advantages. Technological knowledge includes assets such as patents,

technological skills of individuals and also organizational processes and

routines such as R&D know how, together forming the firm’s technology

potential. It is argued that such knowledge intensive firms are more likely to

develop skills related to the creation, transformation and exploitation of

knowledge (Autio et al., 2000, Zahra et al., 2000). Firms with already strong

R&D capabilities are more likely to pursue innovation based growth,

constantly launching new products and services (Schumpeter, 1942). This

comes from their ability recognize, absorb and learn from both internal and

external sources of knowledge. Hence R&D enhances organizational

capability as well as generating new knowledge. The development of

technology requires a vision not only for accumulation but also the generation

of alternatives which is how firms identify and pursue opportunities (Teece,

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2000). Thus when exposed to new knowledge from foreign markets, networks

and ties, knowledge intensive firms are more likely to benefit from its

knowledge augmenting process (Hitt, et al., 1997, Kuemmerle, 2002) by

effectively exploiting and combining it with their existing knowledge bases.

Through internationalization, firms will be able to learn new skills, modify its

existing products while also developing new ones (Kylaheiko et al., 2011).

This can also be important for firms in developing economies that experience

constraints on assimilation capabilities or policy distortions (Young et al.,

1996).

Until recently, many studies on technology and internationalization

have been focused on technology intensive sectors (Autio et al., 2000,

Sapienza et al., 2006). However, there are also studies demonstrating firms

which emphasize technology, regardless of the characteristics of the sector,

also show accelerated internationalization (Knight & Cauvsgil, 2006, Madsen

& Servais, 1997). Furthermore, it can be said that strategic orientation of the

board when managing technology can lead to certain results, regardless of

sector characteristics (Ramos et al., 2011). Thus, we can hypothesize that the

presence of technological knowledge can lead to enterprising behavior that

facilitates speed on internationalization in a wide range of industries.

Considering the distinctive characteristics of technological knowledge, this

study hypothesizes that:

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Hypothesis 3: Technological knowledge from patents will have a positive

impact on the speed of internationalization

Hypothesis 4: Technological knowledge from R&D activity will have a

positive impact on the speed of internationalization

3.3 Firm level creativity and speed

Turbulent global competitive environments require firms to

continuously think and act in creative, innovative ways, have the willingness

to take risks and search for new opportunities (Kirca et al., 2012). Firm level

creativity could explain why firms with similar knowledge bases and

resources may show different patterns of internationalization. Defined as the

creation of something novel and useful (Amabile, 1966) creativity can affect

how firms perceive and react to opportunities in foreign markets and how

firms learn from such new knowledge. Creativity at the firm level concerns

the firm’s routines, tools and resources that encourage novel and useful

behaviors. Firms with high levels of creativity are more likely to have

individuals with creative characteristics working in a supportive environment

free from threats or pressure, where members are open to new and improved

ideas (West & Richer, 2009). Different levels of creativity will affect how

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organizations deal with the new challenges of foreign markets and further

explain differences in the speed of internationalization.

Expansion to foreign markets full of uncertainty requires

international entrepreneurial characteristics such as risk taking and

opportunity seeking. Firm level creativity could act as an important element

strengthening or bringing about such qualities of the firm. International

entrepreneurship as aforementioned is an important quality for explaining the

fast paced internationalization of born global firms. Creativity is highly

correlated with several dimensions of international entrepreneurship (Onetti,

2012, Carvalho & Williams, 2014, Lee et al., 2004). Creativity, while not a

sufficient condition, it has often been discussed as a necessary condition for

entrepreneurship (Farzaneh et al., 2010). Although there are differences in

meanings between being entrepreneurial and creative, there certainly exists

an overlap. Previous studies have actively discussed entrepreneurship in

terms of three central underlying dimensions, innovation, risk-taking and

proactiveness (Kaufman & Dant, 1999, Covin & Slevin, 1989, Miller &

Friesen, 1984). Creativity is understood as the precondition of innovation,

involving the thinking process that helps the generation of ideas while

innovation is the implementation of such ideas (Amabile, 1988). The test of

innovation is based on its success in the marketplace. However, it would not

exist if there was no creative novel idea to begin with. In regards to risk taking,

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research shows that decision making involves risk and normally people tend

to avoid risk preferring more certain outcomes (Bazerman, 1994). Being

creative can be risky (Tesluk et al., 1997). However, a creative climate

through increased levels of firm creativity is likely to motivate employees to

take greater risks. When creative actions are encouraged, employees feel that

failure from creative actions are less likely to lead to personal consequences.

Proactiveness describes the tendency to initiate change, take-action and

influence the environment (Bateman & Crant, 1993). It is an important quality

that helps firms avoid competency traps (Levitt & March, 1988) and allow

diverse, non-redundant knowledge to produce overall higher organizational

knowledge (Ford & Ogilvie, 1996). Proactive people have a greater tendency

to identify opportunities, new work processes and actively engage in updating

their knowledge and skills (Kong et al., 2012, Kim & Hon, 2010). Studies

show that such personalities are more likely to emerge when situational

factors, job requirements and supervisor support are present (Kim & Hon,

2010). Like risk taking propensity, higher levels of firm level creativity is

likely to support proactive behavior. Hence it can be said that higher firm

level creativity will help develop and amplify entrepreneurial qualities such

as innovation, proactivity and risk taking. Moreover, it is important to

recognize that entrepreneurial tendencies exist prior, during and after the

lifetime of a business (Fillis & Rentscheler, 2006) meaning it is relevant to

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firms in all stages, size and age.

Creativity also closely affects how organizations accumulate and

learn new knowledge (Amabile, 1996, 1988). Huber (1998) explains that

creating is a form of learning whereby firms process, combine and assimilate

knowledge from information rich environments to create value and improve

performance. Creative thinking acknowledges the importance of convergent

and divergent thinking (Cropley, 2006, Runco, 2003). Convergent thinking

involves the manipulation of existing knowledge converging into a single

useful idea while divergent thinking involves the production of multiple and

alternative answers making unexpected combinations and links (Cropley,

2006). Such thinking requires ideational fluency and flexibility (Guilford,

1957) which will help large established firms whose inertia has often been an

obstacle for speeding up internationalization (Casillas, 2009). These firms are

more likely to have deeper rooted knowledge creation and learning regimes

which hinders fast learning, important for speeding up internationalization.

Hence, heightened levels of firm level creativity, will act as a catalyst for

knowledge creation and organizational learning. With increasing tendency to

think out of the box, firms will be able to combine their existing knowledge

stock with new, non-redundant or seemingly unrelated knowledge in foreign

markets in novel and useful ways (Ford & Ogilvie, 1996). Creative firms are

also more likely to increase efforts in consciously designing and managing

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information sensing systems that help sense novel and valuable knowledge

(Huber, 1998). This will lead to distinctive knowledge creation and learning

capabilities. Such distinctive knowledge could take form of technological

knowledge that enhances firm competitive advantage or dynamic capabilities

that ease firm foreign expansion.

Lastly it is important that the level of creativity is examined at the

firm level. While certain creative CEOs or top management teams can most

definitely steer the firm to a creative direction, they cannot manage this alone.

This is especially true when the firm gets bigger and more complex. Much of

the sensing, seizing and transformation of valuable knowledge and

opportunities in foreign markets happen through front line employees

(Nonaka et al., 2016). For example, intricate details of valuable technology

augmentation opportunities in foreign markets are more likely to be

recognized by frontline engineers. Contradictory knowledge is likely to exist

at the frontline levels. Firm level creativity could affect how this is processed

and travels upwards the firm. The entrepreneur, whether that be top

management or a middle manager, will then have to make tough decisions on

the contradictory knowledge picked up by the front (Nonaka & Takeuchi,

1995). Higher levels of firm creativity will change how employees sense seize

and transform knowledge into valuable opportunities. Considering the effects

of firm level creativity on knowledge, learning and entrepreneurship, this

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study hypothesizes that:

Hypothesis 5: Firm level creativity will positively moderate the relationship

between prior experiential knowledge and speed of internationalization

Hypothesis 6: Firm level creativity will positively moderate the relationship

between technological knowledge and speed of internationalization.

4. Research Method

4.1 Sample and data collection

The samples used in this study comprises of 186 companies listed in

the Korean Stock Exchange, over a period of 10 years. The period of

examination was from 2009 to 2018, which was selected because it was a

period following the global financial crisis in 2008 when firms were actively

seeking for ways to overcome the crisis. This study purposely selected 10

industries where active internationalization was likely to occur since selecting

based on firm size alone was likely to lead to the neglect of firms with smaller

sales volumes. The 10 industries were chosen based on the Korea Standard

Industry Classification (KSIC) and it includes a wide range of industries such

as 1) food manufacturing 2) textiles manufacturing 3) chemical

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manufacturing 4) wood and furniture manufacturing 5) non-metal and metal

manufacturing 6) automobile manufacturing 7) electronics manufacturing 8)

construction 9) wholesale and retail 10) other services. From each one of the

10 industries, the top 20 firms based on total sales was selected which meant

200 firms per year and a total sample 2000. Excluding incomplete data and

delisted firms throughout the examined period led to the final sample 1860

firm-year observations for 186 firms.

Primary sources for data collection were TS2000 from the Korea

Listed Companies Association, KISVALUE and KIS-LINE from the Korean

Credit Rating Agency and business reports from DART by the Financial

Supervisory Service. Patent data was collected from WIPSon and newspaper

big data was accessed through BigKINDS serviced by the Korea Press

Foundation. Information on CEO and top management’s international

experience was cross checked with ‘Joins’ and ‘Naver’ people search

(http://people.joins.com, http://people.search.naver.com) or other

newspapers and media when verification was necessary.

4.2 Measures

4.2.1. Prior experiential knowledge

Experiential knowledge in this study concerns the individual’s

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international experience prior to the target period. Hence CEO experiential

knowledge examined whether the CEO had a foreign degree (university of

higher) or work experience abroad (Herrman & Datta, 2002) before 2009.

Separate weights were not assigned to whether the experience came from a

foreign degree or work experience, only assigning a value of 1 when the CEO

had either a foreign degree or work experience and 0 when none. It is also

important to point out that CEOs in this study’s sample were not always the

founders of the firm as is the case in many born global studies. This study

defined CEOs as those legally responsible for the preparation of the business

report (Kim, 2019) and in the case of two CEOs, the event was recognized

when either one of them had international experience (Park et al., 2014). Top

management international experience, like CEOs looked at foreign degrees of

registered board members. Since it does not look at a single individual,

percentage of foreign degree in top management was examined.

4.2.2 Technological knowledge

Technological knowledge of a firm is measured by the total number

of patents and R&D intensity. Patents have been commonly used to measure

a firm’s stock of technological knowledge in many studies (Song et al., 2003,

Ramos et al., 2011). Studies have demonstrated that patents are among the

firm’s key assets with regards to internationalization (Lanjouw &

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Shankenrman, 2001, Ramos et al., 2011). Also, Cohen and Walsh (2000)

emphasize that technological knowledge is developed by engaging in R&D

activity which leads to unique routines for knowledge creation and enhanced

absorptive capacity for organizational learning. This study follows their

suggestion and looks at R&D intensity (percentage of R&D expenditure from

total sales) as part of firm technological knowledge.

4.2.3 Speed of internationalization

Following previous studies (Chang & Rhee, 2011, Mohr et al., 2014,

Vermeulen & Barkema, 2002, Garcia-Garcia, 2017) this study measures the

speed of internationalization average number of foreign direct investments

per year, a method particularly well suited for studying the

internationalization of large MNEs (Mohr & Batsakis, 2017). Speed is

calculated by the number of foreign subsidiaries divided by the number of

years since the first foreign expansion. This is a time varying construct,

updated each year t reflecting the number of subsidiaries in new countries in

relation to year the of initial investment. The larger the average number, the

faster the speed of internationalization. In the case of an M&A during the

sample period, the foreign countries entered by the target became part of the

accumulated foreign countries of the acquirer. It looked at foreign direct

investment because it is an inherently risky commitment with long term pay

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offs compared to other modes such as export or sales. Firms are exposed to

maximum environmental and uncertainty risk and the role of firm knowledge

and learning capabilities are likely to be important and greater.

4.2.4 Firm creativity

Firm level creativity was measured through content analysis of press

releases by a word-frequency count. It calculated the yearly percentage of

press releases by the company of interest mentioning the word creativity. This

study used BIGKinds, a newspaper database which is provided by the Korea

Press Foundation. Focusing on the main national newspapers (Kyung Hyang,

Joong Ang, Kookmin, Naeil, Donga, Munwha, Seoul, Seagye, Chosun,

Hankyorae, Hankook) and business newspapers (Maeil, MoneyToday,

SeoulDaily, AsiaE, Financial News, Hankyung, Herald) it calculated the

percentage of news articles that mentioned the word ‘creativity’. It used 5

versions of the word creativity in Korean to account for possible synonyms.

These were selected and cross checked for agreement with graduate school

students for whether they correctly described the construct in question.

BIGKinds also provides a special algorithm service which shows users

keywords that have high semantic similarities which allows to check whether

the articles searched are indeed a good representation of business activities

that relate to firm creativity.

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Content analysis has often been used in management scholarship to

examine organizational behavior (Duriau et al., 2007). Letters to shareholders

and annual reports have been used to analyze CEO cognition and attention,

values, commitment to status quo etc. (Eggers & Kaplan, 2009, Nadkarni &

Barr, 2008, Daly et al., 2004, McClelland et al., 2010). Press releases are also

important mediums that firms use to communicate with the media and general

public about the firm’s activities (Sleurs et al., 2003). As Fombrun & Shalley

(1990) note, the media acts as a mirror reflecting the reality of the firm’s

actions. They are typically prefabricated in an appropriate style with the

intention of disseminating specific information that the firm wishes to convey

(Bell, 1991). Previous studies have used content analysis to measure

creativity. For example, Amoroso & Eriksson (2000) measured creativity of

IT solutions using content analysis of journal articles by looking at the total

number of occurrences for IT related keywords on creativity. One of the most

common methods in qualitative content analysis is a word-frequency count.

It is based on the assumption that the most frequently mentioned words reflect

the greatest concerns and matter of importance (Gamache et al., 2015).

Following this line of thought, this study assumed that the frequency of the

word creativity, means greater organizational attention, concern and business

activities that relate to creativity.

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4.2.5 Control Variables

This study uses several control variables which are as follows. Firm

size which was measured as the total number of employees at time t, was log-

transformed to control for its high correlation with firm performance. Next, it

controlled for firm age by the taking the natural log function. Studies have

shown that an increase in firm age can affect firm performance due to the

increase of resources over time (Zang et al., 2007, Chang & Rhee, 2011).

Debt ratio was controlled for effects of financial constraints on financial

structure. Return on assets was also controlled since the firm’s prior short

term performance can influence long term performance (Cho & Puick, 2005).

Many firms in this sample are affiliated with large business groups which are

known as chaebols in Korea. Business group firms (chaebols) are more likely

to be active in international activities, and was controlled, assigning a value

of 1 for chaebol and 0 if not so. Chaebol firms are disclosed each year by the

Fair Trade Commission in order to prevent anti-competitive behaviors.

Industrial characteristics were controlled by grouping the ten industries into

five major categories which are as follows 1) food, wood and furniture, 2)

textiles, chemicals 3) non-metal and metal, automobile, electronics 4)

construction, wholesale and retail 5) other services. Finally, year dummies

were added to control for time series effects.

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5. Results

Table 2 and 3 displays the descriptive statistics and correlations for

the main variables of the study and table 4 and 5 show the regression results.

The main effects and moderating variables were mean-centered to avoid high

correlation issues (Jaccard & Turrisi, 2003). Most of the correlations were at

moderate range. The Variance Inflation Factors (VIF) was also examined for

the baseline model to account for possible multicollinearity issues. All VIFs

were below 10, the recommended cutoff value (Chatterjee & Price, 1991).

_________________________

Insert Table 2 here

_________________________

_________________________

Insert Table 3 here

_________________________

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5.1 The effect of prior experiential and technological knowledge on

speed of internationalization

Table 4 displays the regression results examining the effect of prior

experiential knowledge on speed of internationalization and effect of

technological knowledge on speed of internationalization. Stage one ran

regressions including only the control variables and showed that firm size

(B=0.457, p<.001) affects speed of internationalization in a positive

significant way while firm age (B=-0.006, p=0.001) affects speed of

internationalization in a negatively significant manner. Stage 2 shows

regression results including independent variables. Regarding prior

experiential knowledge, results show that prior CEO international experience

(B=0.192, p=0.039) top management international experience (B=0.632,

p=0.008) positively and significantly affected the speed of

internationalization supporting hypothesis 1 and 2. Regarding technological

knowledge, number of patents (B=0.002, p<.001) positively and significantly

affects speed of internationalization supporting hypothesis 3. R&D intensity

however, showed no significant relationship hence, hypothesis 4 was not

supported. This shows that there was full support for prior experiential

knowledge (hypothesis 1,2) and only partial support on the effects for some

aspects of technological knowledge (hypothesis 3,4).

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_________________________

Insert Table 4 here

_________________________

5.2 The moderating effect of firm level creativity

Hypothesis 6 and 7 examines how firm level creativity will moderate

the relationship between prior experiential knowledge and technological

knowledge on speed. As shown in Table 5, following Baron & Kenny (1986)

this study examined the moderating effect of creativity by first including only

the independent variables in model 1, then including both independent and

control variables in model 2 and finally examining the moderating effects in

model 3~6. After controlling for variables that were likely to affect speed of

internationalization other than the independent variable, it was mean centered

to avoid possible issue of multicollinearity.

Model 3 shows a statistically significant interaction term between

prior CEO international experience and firm level creativity (B=0.004,

p<.001), hence firm level creativity positively moderated the relationship

between prior CEO international experience and speed of internationalization.

Likewise, model 4 shows a significant interaction term between TMT

international experience foreign degree and firm creativity (B=0.008, p<.01),

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hence firm level creativity positively moderated the relationship between

TMT international experience and speed of internationalization. Thus, it can

be said that firm level creativity positively moderates the relationship between

prior experiential knowledge and the speed of internationalization, supporting

hypothesis 5. Model 5 shows a statistically significant interaction term at the

p<.001 level, hence firm level creativity positively moderated the relationship

between patents and speed of internationalization. Finally Model 6 shows a

statistically significant interaction term at the p<.001 level, hence firm level

creativity positively moderated the relationship between R&D intensity and

speed of internationalization. Thus, it can be said that firm level creativity

positively moderates the relationship between technological knowledge and

the speed of internationalization, supporting hypothesis 6.

_________________________

Insert Table 5 here

_________________________

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6. Discussion and conclusion

Studies on the speed of internationalization has been divided between

sequential path-dependent models focusing on established multinational

firms and emerging path-breaking models of born global firms. Recent studies

increasingly show that contrary to the traditional sequential view, established

multinationals can also benefit from accelerated internationalization

(Hilmersson & Johanson, 2016, Wagner, 2004). Moreover, changes in the

global competitive environment is an eminent reality pressuring not only born

globals but established firms alike. Despite distinctively different approaches

between the two models, this study believes there are certain qualities that

overlap, and a balanced, integration of the two views is important (Li, 2007)

for understanding the speed of recently internationalizing firms.

Based on an integrated theoretical model founded in the knowledge

based view and organizational learning theory, this study focused on their

long-term effects on the speed of internationalization. Tan and Mathews

(2015) emphasize the importance of dynamic frameworks for studying

variables affected by time. The study focused on two types of knowledge.

Technological knowledge and prior experiential knowledge and how these

two types of knowledge are moderated by firm level creativity to affect speed

of internationalization. Results of this study showed that management’s prior

experiential knowledge in the form of prior international experience of the

102

CEO and top management positively affected the speed of

internationalization. Moreover, firm level creativity positively moderated this

relationship. This shows that management’s prior experiential knowledge

could help firms skip and speed up some of the sequential processes for

learning through possible experiential, international orientation and networks

effect. Established firms whose founders lack such experiential learning can

compensate the void by hiring such mangers from the outside.

Technological knowledge in the form of patents and R&D capability

may be in and of themselves enough reasons for firms to internationalize

quickly despite risks associated with liabilities of foreignness. Sometimes the

value of the technology itself guarantees enough competitive advantage while

at other times presence of technology obsolescence risk can be a strong

motivator for speeding up internationalization. Moreover, a wide interaction

with new foreign market knowledge bases may be necessary to continue

developing and extending the technology’s life cycle. Results of the study

showed that patents had a positively significant effect on speed of

internationalization while R&D intensity did not. However, the relationship

between both patents and R&D with speed of internationalization was

positively moderated by firm level creativity. This shows that firm level

creativity can play an important role in the relationship between technological

knowledge and speed of internationalization. For the case of R&D, higher

103

levels of firm level creativity is important for enhancing a firm’s ability to

acquire and accumulate knowledge. In short, it can be concluded that certain

types of knowledge are important in accelerating the speed of

internationalization. Interestingly, firm level creativity plays an important role

in amplifying the effect such types of knowledge have on foreign expansion

speed. This goes to show that changes in the global competitive landscape

increasingly call attention to the importance of firm creativity. Speed of

internationalization is rarely discussed in terms of creativity. Results of this

study show that creativity can have important effects on enhancing

entrepreneurial qualities and on the knowledge accumulation and learning

processes that are critical in accelerating internationalization. Moving further

on from the knowledge based view, creativity aspects of the firm may be

important determinants of successful international expansion. Creativity can

help the firm act on market opportunities in ways which result in competitive

advantage and business growth of the firm. Considering that this study

examined established multinationals, although such firms may no longer

possess the newness and agility of younger newfound born globals, they can

compensate this with an enhanced level of firm level creativity. This will

amplify the benefits of existing technological and experiential knowledge as

well as help firms develop and generate organizational routines and processes

that create such knowledge.

104

Future studies could expand upon these findings by incorporating a

more fine grained approach. Whereas this study only looks at the number of

new countries when measuring internationalization speed, it can also take into

account scope and breadth aspects by looking at the geographical proximity

of new foreign expansion. This may be a better approach to examine the

adaptation efforts to host countries. Breadth could also consider the type or

markets such as firms from emerging markets expanding fast to other

emerging markets or previously largely domestic firms form developed

markets internationalizing fast to emerging markets. Also, as briefly

mentioned, there can be different levels of speed such as low, moderate and

high speed. Future studies could examine what sort of firm characteristics is

likely to lead to low, moderate or a high speed of internationalization.

Although this study primarily looked at foreign direct investment through

subsidiaries due to the availability of data, future studies could look at

different types of entry modes such as green field or acquisitions which could

lead to different implications regarding the speed of internationalization. The

measurement of firm level creativity still lacks general consensus. Because

what is considered novel and useful can be industry specific, this study

adopted a content analysis approach in attempts to examine the increase of

decrease of firm level creativity within a given period over a wide variety of

industries. Studies have proposed the importance of combining various

105

objective and subjective methods for a more reliable and unbiased

measurement of creativity (Park et al., 2016). Future studies could explore

other ways to measure firm level creativity when it involves multiple

industries and types of firms. While this study used Korean data which is

classified as a newly industrialized economy, future studies could incorporate

data from emerging economies to examine what factors overlap or what

factors are different. For example, firms from emerging economies may be

equally affected by late movers, presence of global rivals, fast changes in

technologies but may also face domestic institutional constraints. For

example, governments may inhibit or promote accelerated

internationalization.

From a managerial perspective, firms may have to decide at which

speed it would want to develop internationally. Speed can be one of the key

aspects of international strategy and the ability to balance the firm’s resources

and international opportunities will be important. Based on the availability of

specific types of knowledge and firm capabilities, speed of

internationalization can be an important managerial challenge that determines

the long term international success of the firm (Chetty & Campbell-Hunt,

2003, Wagner, 2004). To speed up internationalization, firms could hire

outside managers with experiential knowledge or design R&D routines with

the help of creativity, specifically so that it enhances learning and absorptive

106

capabilities. The research setting of this study is also interesting in that it

examines established multinationals in Korea. By demonstrating how

established firms can keep up with new trends of internationalization,

qualities associated with speed, previously deemed as distinctive for born-

global firms can be achieved by enhancing certain types of knowledge bases

and firm capabilities. This insight will help established firms deal with

challenges to their global leadership which may be threatened or undermined

by born globals and newcomers in the international scene.

107

Table 1. Definition and measurement of speed of internationalization in recent

studies

Author Definition of Speed Measurement Role of

Speed

Hilmersson &

Johanson (2016)

Degree of

internationalization that a

firm achieves during a

specific period

Measured in three dimensions

breadth: number of markets exported

to by time, intensity: exports and total

sales by time, change: proportion of

firm’s assets held abroad by time

Independent

variable

Casillas & Acedo

(2013)

Relationship between

time and the company's

international expansion

events

Quotient between a specific variation

and a specific unit of time

Both

dependent

and

independent

variable

Zhou et al. (2012) Timing of international

market entry

Firm’s age for first international

expansion

Independent

variable

Chang & Rhee

(2011)

FDI expansion at an

accelerated speed

Average number of FDIs per year since

first FDI

Independent

variable

Mohr & et al.

(2014)

Foreign entry timing Number of new foreign outlets per

year since internationalization

Moderating

variable

Kiss & Danis

(2008)

Speed with which a

venture enters a specified

target country or achieves

a certain level of

international performance

Difference between year of founding

and year of international sale

Dependent

variable

Acedo & Jones

(2007)

The amount of time

passed to achieve a

specific target

Age of the firm at the entry of foreign

market (export)

Dependent

variable

Weerawardena et

al., (2007)

Should consider speed of

first activity and scope of

subsequent expansion

Time to the first international activity

(exporting or sourcing), number of

countries entered in exports

Dependent

variable

Coeurderoy &

Murray (2014)

Timing of first

international expansion

activity

Number of years between startup and

entry in foreign market

Dependent

variable

Oviatt &

McDougall

(2005)

Three dimensions of

speed: first market entry,

speed, post entry speed,

how fast commitments are

made

Time between discovery of

opportunity and first foreign market

entry, how fast entries to foreign

markets accumulate, how fast

percentage of foreign revenue

increases

Dependent

variable

Wagner (2004) Change in the degree of

internationalization

Change of foreign sales to total sales

ratio

Independent

Variable

Zeng et al. (2016) How rapidly a firm

expands into a foreign

market during a certain

period

Average number of FDIs per year Moderating

variable

Vermulen &

Barkema (2002)

Pace of international

expansion

Average number of FDIs per year

(number of foreign subsidiaries

divided by number of years since

firm’s foreign expansion)

Moderating

Variable

Chang (2007) Pace of international

expansion

Average number of FDIs per year Moderating

Variable

108

Table 2 Descriptive Statistics

Variables Mean Std. Dev. Min Max

Speed of Int 0.54 1.12 0.00 10.22

Firm Creativity 44.544 109.06 0.00 1109

Frim Size 7.35 1.49 2.89 11.54

Firm Age 38.77 18.07 1.00 94

Debt Ratio 179.39 626.63 5.41 11500.91

ROA 0.03 0.12 -1.51 1.42

CEO Int Experience 0.41 0.46 0.00 1.00

TMT Int Experience 0.33 0.24 0.00 1.00

Patents 357.17 1172.98 0.00 13483

R&D Intensity 2.18 3.35 0.00 48.31

109

Table 3. Correlation Matrix

Variables 1 2 3 4 5 6 7 8 9 10

1. Speed of Int. 1

2. Firm Creativity 0.409*** 1

3. Firm Size 0.394*** 0.480*** 1

4. Firm Age -0.063* 0.010 -0.016 1

5. Debt Ratio 0.001 -0.051 -0.050 -0.069* 1

6. ROA 0.004 0.128*** 0.050 -0.052 -0.172*** 1

8. CEO Int Experience 0.109*** 0.200*** 0.304*** 0.052 -0.100*** 0.084** 1

9. TMT Int Experience 0.069* 0.126*** 0.155*** 0.029 -0.016 -0.056* 0.148*** 1

10. Patents 0.308*** 0.509*** 0.245*** 0.069* -0.051 0.054* 0.212*** 0.083** 1

10. R&D Intensity 0.144*** 0.268*** 0.321*** 0.001 -0.043 0.129*** 0.200*** 0.123*** 0.160*** 1

*p<.05, **p<.01, ***p<.001

110

Table 4. Regression analysis of internationalization speed on prior

experiential knowledge and technological knowledge

Variables

1 2

B t p VIF B t p VIF

Control

Variables

Firm Size 0.457 11.69 0.000*** 1.033 0.215 4.73 0.000*** 1.813

Frim Age -0.006 -3.13 0.000*** 1.037 -0.006 -2.30 0.005** 1.047

Debt

Ratio 0.000 0.65 0.532 1.102 0.000 0.02 0.998 1.146

ROA -0.156 -0.21 0.487 1.098 -0.332 -0.53 0.493 1.175

Independent

Variables

CEO Int.

Experience - - - - 0.192 2.13 0.021* 1.407

TMT Int

Experience - - - - 0.632 2.89 0.007** 1.534

Patents - - - - 0.002 9.65 0.000*** 1.675

R&D

Intensity - - - - 0.009 0.79 0.456 1.301

F 35.12*** 27.04***

R² 16.77% 26.47%

△R² - 9.72%

*p<.05, **p<.01, ***p<.001

111

Table 5. Regression analysis of the moderating effects of firm level creativity

Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

B t B t B t B t B t B t

Firm Size 0.215 4.73*** 0.232 4.76*** 0.189 3.72*** 0.173 3.78*** 0.163 2.85** 0.158 3.45***

Firm Age -0.006 -2.30** -0.005 -2.32** -0.006 -2.31** -0.004 -2.51** -0.003 -2.12* -0.007 -3.01**

Debt Ratio 0.000 0.02 0.000 0.02 0.001 0.05 0.001 0.35 0.001 -0.02 0.000 0.02

ROA -0.332 -0.53 -0.310 -0.66 -0.321 -0.45 -0.289 -0.42 -0.371 -1.06 -0.410 -0.89

CEO Int. Experience 0.192 2.13* 0.256 1.89 0.382 3.33** 0.205 1.97 0.269 2.08* 0.181 1.77

TMT Int. Experience 0.632 2.89** 0.700 2.98** 0.685 2.79** 0.323 1.36 0.789 3.43*** 0.682 3.03**

Patents 0.002 9.65*** 0.001 6.93*** 0.002 7.75*** 0.001 7.32*** 0.003 7.97*** 0.001 7.60***

R&D Intensity 0.009 0.79 0.014 0.73 0.009 0.55 0.011 0.73 0.004 0.53 -0.025 -1.45

Firm Creativity 0.001 0.56 0.004 3.75** 0.005 2.92** 0.005 3.67*** 0.002 3.13**

CEO Int. Experience × Firm Creativity 0.004 3.99***

TMT Int. Experience × Firm Creativity 0.008 2.97**

Patents × Firm Creativity 0.000 5.93***

R&D Intensity × Firm Creativity 0.001 4.41***

Business Group Dummies yes yes yes yes yes yes

Industry Dummies yes yes yes yes yes yes

Year Dummies yes yes yes yes yes yes

F 27.04*** 24.32*** 23.97*** 23.08*** 25.76*** 24.25***

R² 26.47% 26.46% 28.11% 27.39% 29.57% 28.33%

△R² - 0.02% 1.63% 0.77% 0.40% 1.25%

*p<.05, **p<.01, ***p<.001

112

CHAPTER IV. CONCLUSION

113

This dissertation aimed to investigate the knowledge link to the speed

of internationalization. Speed, while an important aspect of international

expansion strategy, has received relatively little attention compared to other

areas of international business. The traditional and dominant view for

established multinationals only discusses speed as a sequential process which

unfolds at a gradual slow manner. Most studies focusing on speed concern

young and small born globals and fail to recognize that internationalization

patterns are evolving even among big established multinationals. If any, the

majority of studies regarding the speed of internationalization focuses on the

time it takes until initial internationalization after its founding, failing to

discuss what happens afterwards. In an increasingly borderless global market

facilitated by information and communication technologies the need to

expand globally is equally important for small and young firms as well as

established firms alike. Nowadays the liabilities of foreignness considered

secondary to becoming a perennial late mover.

To address this issue, this study sought to broaden the understanding

of speed in internationalization by first doing an extensive investigation of

previous literature on international expansion. It begins by understanding the

role of knowledge and learning and how this can speed up internationalization.

These are two essential pillars behind explaining why and how firms are able

114

to internationalize, which is also again discussed in the empirical section of

this dissertation. To provide a comprehensive overview the study also

examines other theoretical frameworks such as the product lifecycle theory

(Vernon, 1966), market imperfections theory (Hymer, 1976), resource

advantage theory (Anderson et al., 1999), transaction cost theory (Williamson,

1987), eclectic theory (Dunning, 1998), internationalization theory (Johanson

& Vahlne, 1990) and network theory (Johanson and Mattson, 1988). It also

examines in greater detail more recent theories on internationalization such

as international entrepreneurship (McDougall & Oviatt, 1999), dynamic

capabilities (Weerawardena et al., 2007) and firm level creativity. Although

not yet actively discussed in relation to the speed of internationalization, this

study believes that creativity aspects of the firm can provide useful insights

to how firms deal with unforeseen challenges and opportunities.

The second part of this dissertation is an empirical study that

examines how certain types of knowledge significantly affect the speed of

internationalization and how this relationship is moderated by firm level

creativity. First it examined the importance of prior experiential knowledge.

While the sequential view believes that only experiences that the firm gains

through foreign market experiences are important, this study showed that

prior experiential knowledge of the CEO and top management could

115

significantly impact the speed of internationalization. This goes to show that

firms with no prior foreign market experience could speed up

internationalization if they hire managers that have prior international

experience, skipping the rather slow and time consuming sequential process

of learning by doing in foreign markets. They could also pay significant

attention in developing such managerial competencies for example by

providing opportunities for work or academic experiences abroad. The study

also looked at the role of technological knowledge in accelerating the speed

of internationalization. Certain characteristics of technology such as the need

to recoup high investment costs quickly, importance of first mover advantage,

operation in narrow niche markets, technology obsolescence risk, expansion

of the technology life cycle, ease of mobility and the universal demand of

technology to name a few are strong enough incentives to accelerate

internationalization. Technology intensive firms also characteristically have

distinctive learning and knowledge creation routines that helps speed up the

learning process when firms are exposed to new or contradictory knowledge

in foreign markets. Interestingly, while technological knowledge in the form

of patent positively affected the speed of internationalization, in the form of

R&D intensity, it failed to show a significant relationship. It was only when

considered with the moderating effect of firm level creativity that it showed

116

a significant relationship.

This brings to light the discussion on firm level creativity as a

possible dimension to further explain the speed of internationalization. While

endowed with similar resources and knowledge, firms may show different

speeds of internationalization when they have different levels of creativity.

Because firms are challenged with sensemaking and opportunity seeking in

uncertain foreign markets, greater levels of creativity can help firms combine

their existing knowledge and new knowledge form foreign markets into

something novel and useful much quicker than their counterparts. While the

presence of a talented and creative top management team may be definitely

important, an overall high level of firm creativity is important. This is because

much of the sensing and seizing of new information happens through front

line employees who are the actual subjects exposed to foreign markets.

Information will travel upwards management through their sensemaking,

processing and transformation of knowledge, directly affecting what is

learned in foreign markets. For this, it is important to examine how firm level

creativity affects the relationship between knowledge and speed of

internationalization.

Recent internationalization patterns of established firms raise

questions on the applicability of existing theories on speed. With increased

117

opportunities in the global market, new players such as ‘born again’ or ‘late

globals’ who have been largely domestic since foundation but decide to

internationalize suddenly and at a rapid pace, or multinationals from emerging

economies who often internationalize fast and aggressively are challenging

the dynamics of global competition. In an era when even the smallest firms

compete with the largest multinationals, heightened awareness on how and

why certain firms are able to speed up internationalization is needed. Thus,

conventional international expansion theories must be augmented with other

frameworks to fully explain recent internationalization patterns of firms.

Acknowledging the shortcomings of the two most discussed perspectives on

speed, namely the sequential view and the international entrepreneurship view,

this dissertation aimed to bridge the gap by identifying certain knowledge

characteristics and firm characteristics that help accelerate

internationalization. It has also enriched the empirical context by using a large

sample study of 186 firms over a period of ten years in 10 different industries.

It hopes that it will be one of the many attempts to a more comprehensive

understanding of the speed aspect of multinational firms, providing better

description and insight into why and what causes firms to accelerate their

expansion to foreign markets.

Further research could explore different dimensions of speed,

118

examining it from a breadth and scope perspective or different levels of speed

such as low, medium and fast speed. This could also be extended to different

patterns of speed where firms may accelerate their pace of internationalization

to a certain point followed by a decrease in speed. Firms could show a U curve,

or S curve depending on resource or market characteristics. Also this should

be followed up by studies on the relationship between speed and performance.

The concept of speed is certainly becoming an increasingly important aspect

in the internationalization strategy of firms and the ability to manage this

could play an important role in the sustained competitive advantage and

survival of the firm.

119

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국문초록

국제화 속도의 결정요인,

지식 특성과 기업 창의성

전 영 신

서울대학교 대학원

경영학과 경영학 전공

치열한 글로벌 경쟁 시대에 맞서, 국제화 속도(speed of

internationalization)는 기업들에게 있어 중요한 전략적 고려사항

이 되고 있다. 하지만 해외시장 경영 위험을 감소시키기 위한 점

진적 시장 진출을 기본으로 하는 전통적인 기존의 국제화 이론들

은 최근 기업들의 빠른 국제화 현상을 설명하는 데에 한계를 보인

다. 또한 국제화 속도를 집중적으로 분석하는 연구들은 창업초기

부터 빠르게 국제화를 진행하는 주로 본 글로벌 (born globals) 이

라고 일컫는 신생기업을 집중적으로 연구, 속도 또한 첫 설립일로

부터 최초 해외시장 진출까지 걸리는 도달 시간에 대한 연구가 주

143

를 이었으며, 첫 해외 시장 진출 이후의 과정에 대한 연구는 상대

적으로 부족하다. 따라서 오랜 시간 자국 시장에 집중하다가, 급변

하는 국제환경에 맞서 새롭게 빠른 속도로 해외 시장에 진출하는

중견 또는 대기업, 이미 국제화 경험은 있으나 최근 들어 다시 빠

르게 해외 시장 진출에 박차를 가하는 기업들의 국제화 속도에 대

한 설명은 적극적으로 이루어지지 않고 있다. 본 연구는 이러한

부분을 보완하기 위해, 신생기업 뿐만이 아닌 중견기업 이상의 또

는 대기업 역시 빠른 국제화의 니즈가 있음을 인지, 이들 역시 점

진적 해외시장 진출이 아닌, 빠른 국제화 속도를 보이고 있음에

주목하고 있으며, 이러한 기업들의 국제화 속도에 영향을 미칠 수

있는 다양한 요소들을 관찰하고자 한다.

본 연구의 첫 번째 파트는 국제화 과정의 전통적 이론을

살펴본다. 어떠한 요소들이 기업을 국제시장에 뛰어들게 하며 이

들 이론에서 국제화 속도는 어떻게 다루어 지고 있는지 살펴본다.

다양한 이론적 관점을 이해하고 각 설명요소를 살펴보는 것도 중

요하지만, 단일 이론으로써 기존 이론들은 현재의 기업 국제화 속

도를 충분히 설명하기에는 부족함이 있다. 따라서 보다 종합적인

접근으로 국제화 속도를 연구할 필요가 있으며, 각 이론들의 다름

144

보다는, 어떻게 이를 통합하여 기업의 국제화 속도를 보다 체계적

이고 효과적으로 이해하고 기존 이론의 예측과 다른 방향의 국제

화 과정을 보이는 기업을 설명할 수 있는지에 대한 고민을 해볼

필요가 있음을 살펴보고 있다.

본 연구의 두 번째 파트는 국제화 속도에 영향을 미치는

지식 및 기업특성에 대한 실증연구를 실시하였다. 한국상장사협의

회에 상장된 10개 산업군의 186개 기업을 대상으로 2009년에서

2018년 사이 10년치 자료를 관찰, 이전 경험지식 (prior

experiential knowledge)과 기술지식 (technological knowledge)

이 국제화 속도에 긍정적인 영향을 미치고 있으며 기업창의성은

(firm level creativity) 이를 정의 방향으로 조절하고 있음을 알 수

있었다. 이는 어떠한 지식과 기업 특성이 기업의 국제화 속도에

긍정적인 영향을 미치는지 봄으로써 해외 시장 진출 속도를 증가

하고자 하는 기업들이 집중하고 양성해야 하는 지식 및 기업특성

을 파악하는데 도움을 주며, 기존의 속도 연구에서 집중되어 왔던

신생기업, 그리고 기술집약적 산업의 연구 맥락을 보다 넓혀, 국제

화 속도에 대한 포괄적인 접근을 시도했다는 데에 의의를 둘 수

있다.

145

주요어 : 국제화 속도, 본글로벌, 지식기반관점, 국제기업가정신,

창의성, 기업창의성

학번: 2014-30160