Internationalization of Internet-Enabled Entrepreneurial Firms: Evidence from Europe and North America, The

Canadian Journal of Administrative Sciences, Mar 2004 by Loane, Sharon, McNaughton, Rod B, Bell, Jim

Review and Synthesis of the Literature

The internationalization Process

Much of the early literature concludes that the internationalization process involves a series of incremental stages whereby firms gradually become involved in exporting and other forms of international business. As they do so, they commit greater resources to the foreign markets and target countries that are increasingly psychically distant (Bilkey & Tesar, 1977; Cavusgil, 1980; Czinkota, 1982; Johanson & Vahlne, 1977). Although the number of stages differs, a common underlying assumption of extant stage models is that firms are well established in the domestic market prior to developing international strategies.

Despite continued enthusiasm among many researchers for the notion of incremental internationalization (Ellis & Pecotich, 1998; Leonidou & Katsikeas, 1996; Petersen & Pedersen, 1997), criticisms of this view were being made as long ago as the late 1970s. (See for example, Bell, 1995; Buckley, Newbould, & Thurwell, 1979; Cannon & Willis, 1981; Reid, 1983; Rosson, 1984; Turnbull, 1987). Indeed, Andersen's (1993) conceptual critique focused on the weak theoretical underpinning of most models and the lack of congruence between theory and practice. He concluded that their ability to delineate boundaries between stages, or adequately explain the processes that lead to movement between stages, was rather limited.

In the last decade a new stream of research has emerged into '"born global firms'" (Madsen & Servais, 1997; McKinsey & Co, 1993). Also known as '"international new ventures'" (McDougall, Shane, & Oviatt, 1994; Oviatt & McDougall, 1994), '"committed internationalists'" (Bonaccorsi, 1992) and internationally focused '"knowledge-intensive"' firms (Bell, 1995; Boter & Holmquist, 1996; Coviello, 1994; Jones, 1999), these tend to be smaller firms formed by active entrepreneurs. Typically, their offerings involve substantial value added, often due to a significant breakthrough in processes or technology (Knight, Cavusgil, & Tamer, 1996). A characteristic is that management adopts a global focus from the outset and embarks on rapid and dedicated internationalization (McKinsey & Co, 1993). According to Knight et al., the emergence of such firms can be explained by recent trends such as advances in information and communication technologies, the increasing role of niche markets, and the growth of global networks, which are facilitating the development of mutually beneficial relationships with international partners, among others.

Dissatisfaction with incremental stage theories has led many authors to seek alternative frameworks to the internationalization process models. Increasing interest has been shown in network theory and internationalization (Benito & Welch, 1994; Coviello & Munro, 1997; Johanson & Mattsson, 1988; Johanson & Vahine, 1992; Sharma & Johanson, 1987). These authors suggest that this externally driven view of internationalization (the external web of formal and informal relationships) provides additional insights to the internally driven perspective of Johanson and Vahlne (1990). In the latter, the evolution of internationalization is based on managers' cognitive learning and competency development, which gradually increases through experience.