Does Firm Strategic International Orientations Synergize?

Abstract

Firm strategic orientations continue to draw scholars’ attention. While research on various aspects of orientations is voluminous and plethora of research has found orientations to contribute to organizational success and performance, little is known about the interplay among orientations, specifically their possible synergistic interactions and how they affect performance. Although scholars have argued that firms should employ multiple orientations, most prior studies have assessed the impacts of individual orientations on performance. Notably, the international context of orientations have been under-researched. Internationalization in a globalizing world is the most common strategy for expanding sales and allows firms to achieve higher levels of performance.

This survey-based study focuses on three orientations (market – IMO, entrepreneurship- IEO and learning – ILO) in an international context. Scales were derived from the literature slightly adjusted to the study’s context. Systematic sampling technique resulted in 103 participating senior managers of international firms. Multiple regression analysis was used. Each set of tests included two models (the first with the individual three orientations, followed by the second that included the orientation interaction terms). The models were significant and the additions of the interaction terms led to a significance change in R². The individual IMO and IEO constructs had significant positive effect on overall performance and its sub-dimensions in both models. However, ILO is almost consistently unrelated to overall performance and its sub-dimensions in both models. When the interaction terms were added, IMOxIEO and IMOxILO were significantly related with the satisfaction sub-dimension only (positively and negatively, respectively). Interestingly, the IEOxILO interaction term was consistently related negatively with overall performance and its sub-dimensions.

The results indicate that the standalone IMO and IEO affect performance individually and play a positive role in enhancing performance interactively. Thus, these two orientations exhibit positive synergy. However, the standalone ILO does not affect performance and it exhibited negative synergy with IMO and IEO. In other words, emphasizing ILO in addition to IMO/IEO diminished the impact of the latter orientations on performance.

We conclude that international orientations have positive and negative synergistic effects on performance. We contend that managers responsible for international operations need to recognize that considering multiple international orientations when setting strategies may carry a potential bounded rationality penalty. Such managers that have been exposed to research documenting a relationship of an individual orientation with performance might incorrectly assume that multiple orientations should be always employed simultaneously. This study argues for caution when combining several orientations, which may result in a sub-optimal approach.