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Prior conditions and early international commitment: the mediating role of domestic mindset

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Abstract

Our study investigates why some firms engage in low international commitments such as exports in the early phases of internationalization, whereas others leapfrog the internationalization process and start with high international commitments in the form of foreign direct investment (FDI). Process models of internationalization propose that firms start with low commitment activities and gradually increase their commitments to international markets. However, recent empirical evidence has shown that many firms make high international commitments from the start. Our findings suggest that domestic resources and competitive action propensity affect early international commitments indirectly through domestic mindsets. A domestic mindset refers to the knowledge structures of the top management team prior to starting international activities, based on their managerial experience and learning in domestic markets. Our results suggest that knowledge and learning gained in domestic markets through diverse resource and competitive activities may be crucial in early international commitments.

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Notes

  1. We reran the ordered multinomial analyses using a six-level definition of international commitment: 0, no internationalization; 1, exports; 2, licensing; 3, contractual joint ventures; 4, equity-based joint ventures; and 5, FDI – wholly owned greenfields or brownfields. The results of these analyses were consistent with those reported in Tables 2 and 3. Therefore, we did not report them in the paper. These results are available from the authors upon request.

  2. Thirty-nine firms in our sample engaged in multiple commitment modes in the same year: 22 firms engaged in FDI, exports and/or licensing/joint venture and 17 firms engaged in both licensing/joint venture and exports. As we could not get the exact day and month of the international activity, we found it difficult to identify which commitment mode was first. We conducted two additional analyses to confirm that separating these 39 firms did not alter results. First, we reran the multinomial logit regressions using six levels of commitment (see note 1). Second, we reran the multinomial logit regressions using a four-level variable of commitment to internationalization, omitting the 39 firms that engaged in more than one type of internationalization. As both results were consistent with the original results, we did not include them in our study.

  3. We also conducted sensitivity analysis using 2-, 3- and 4-year lags to see whether there were significant changes in the results of the study. We did not find any major differences between these lags, and hence did not include the results in the paper.

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Acknowledgements

We thank the JIBS departmental editor Lorraine Eden and three anonymous reviewers for their excellent and constructive comments, which helped us immensely in developing this paper. We also like to thank Susan Schneider and Janet Dukerich for their comments on the earlier version of the paper.

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  1. Department of Management, University of Nebraska-Lincoln, Lincoln, USA

    Sucheta Nadkarni

  2. Department of Applied Economics and Management, Cornell University, Ithaca, USA

    Pedro David Perez

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  1. Sucheta Nadkarni
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Correspondence to Sucheta Nadkarni.

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Accepted by Lorraine Eden, Departmental Editor, 24 February 2006. This paper has been with the authors for one revision.

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Nadkarni, S., Perez, P. Prior conditions and early international commitment: the mediating role of domestic mindset. J Int Bus Stud 38, 160–176 (2007). https://doi.org/10.1057/palgrave.jibs.8400248

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