The international commitment of exporting firms: the role of a decision-maker, firm size and competitive intensity in the home market

Abstract

Purpose – The purpose of this study is to explore how cognitive heterogeneity between managers and entrepreneurs-owners of exporting firms and firm size affect internationalization decisions in terms of resource commitment under competitive threat in the home market. Design/methodology/approach – This study applies experimental vignette methodology (EVM) to test the research hypotheses on a sample of 200 participants (100 entrepreneurs and 100 managers). Mann-Whitney U-tests were used to analyze the data. Findings – This study finds that the condition of competitive threat in the home market increases entrepreneurs’ (but decreases managers’) willingness to decrease commitment in foreign markets (de-internationalize) and decreases their (but increases managers’) intention to increase international commitment. Research limitations/implications – As with all experimental studies, the vignette methodology suffers from limited external validity, although it ensures a high level of causal relationship. The relatively simple experimental scenario did not account for other potential factors and their combinations, limiting the reality of the considered situation (the effect of high competitive pressure on decision-making). However, this limited reality opens paths for future research, which could consider additional boundary conditions affecting decision- making in international business. Practical implications – The findings indicate the importance and nature of decision-making in internationalization, driven by cognitive, firm-level and industry factors. How a given event is perceived by a decision-maker depends on the interplay between cognitive factors and the firm’s resources. Our results reveal that organizational design and corporate governance of large diversified firms should account for the alignment of risk preferences between owners and appointed executive managers. Social implications – This study’s findings raise attention to owners–managers relationships in terms of hiring processes in terms of alignment of the owners’ and appointed managers’ risk attitudes. Furthermore, in the case of small firms led by an entrepreneur-owner (CEO), this study raises awareness of his/her potential internationalization choices and associated team building and overall orientation towards foreign vs. home market. Originality/value – This study demonstrates how behavioral theory predictions contribute to the strategy tripod perspective in explaining determinants of resource commitments in foreign markets. It sheds new light on internationalization choices, by demonstrating how differences between the cognitive processes of entrepreneurs and managers and firm size affect their decisions about resource commitment in foreign vs. home market.