Theoretical Framework

Johanson and Vahlne (1977) proposed that the internationalization process of a company depends on its gradual acquisition of foreign market knowledge, and that this can be accomplished by increasing involvement of the firm in foreign markets via extension of its operations in these markets. The same authors revisited the model (Johanson & Vahlne, 1977), and suggested that the current business environment is to be viewed as a web of relationships, and that outsidership, in relation to a particular network, is a root of uncertainty, on the basis that new knowledge is developed in the context of relationships. Therefore, in this new vision of internationalization, insidership in relevant networks is an essential criterion for successful internationalization.

The international entrepreneurship literature (e.g.,Johanson & Vahlne, 2009; Melen & Nordman, 2009) suggests that born globals are flexible in the internationalization modes that they use, and readily adapting the modes to the needs of individual market and clients. This flexibility is probably especially important for born globals from emerging markets. Persinger, Civi, and Vostina (2007) addressed the born global entrepreneur within the context of an emerging market, and proposed that entrepreneurs with high need for achievement in the global arena are likely to start globally oriented firms. Further, they argued that entrepreneurs with a strong global orientation are more likely to be founders of a born global firm, and concluded that born global entrepreneurs from emerging economies must possess the necessary characteristics to become successful in the turbulent and risky business environment of emerging economies.

Rialp, Rialp, and Knight (2005) studied the phenomenon of early internationalization and suggested that some important factors leading to early internationalization include, among others, managerial global vision from inception; a high degree of previous international experience among managers; and a niche-focused, proactive international strategy in geographically spread lead markets around the world, from the very beginning of the firm’s existence. Thus, an entrepreneurial mind-set is necessary to establish a born global and then to expand using various internationalizing modes.

Integrating these two perspectives, Melen and Nordman (2009) presented a theoretical model dividing born globals into three groups: low committers, incremental committers, and high committers. Low committers rely on low-commitment internationalization modes, such as exporting, to begin and then continue their internationalization processes. Incremental committers begin their internationalization using low-commitment modes, but increase their commitment, at least in some markets, as their internationalization continues. High committers begin internationalization using a variety of internationalization modes, with different levels of commitment, and are flexible during their continued internationalization. See Melen and Nordman (2009) for a graphical representation.

A firm’s choice, with respect to high, incremental, or low-commitment modes is also related to its ego network: direct ties, indirect ties, and structural holes (Ahuja, 2000; Burt, 2000, 2004). While direct ties may be more beneficial, indirect ties help with extending the reach of the focal player in the network, thus improving access to information. The choice of a particular internationalization mode will be influenced by the context of the network in which a firm operates. A born global’s international market entry mode choice is shaped by its formal and informal network relationships (e.g., Coviello & Munro, 1997) . Xiao and Tsui (2007), studying the effect of structural holes in organizations with high- and low-commitment cultures, found that in high-commitment cultures, which emphasize mutual investment among people, organizations are characterized by a great deal of trust, with strong norms of cooperation between employer and employees. Born global firms, which tend to be entrepreneurial and close-knit, arguably have a strong need to replicate this culture in their foreign offices, in order to operate efficiently. In the absence of this ability, such organizations may prefer to rely on their networks, consisting of direct and indirect ties, to create an expanded network and then employ a low-commitment strategy for internationalization. This strategy is especially well-suited for born globals in the textile industry born globals, as the dynamics of product life-cycle force these firms to rely heavily on their networks for guidance pertaining to products and markets.

The key product development challenges in the textile industry (May- Plumlee & Little, 1998) revolve around improving cost effectiveness, shortening the product development life-cycle, and improving market receptiveness of new products. The important performance measures for apparel products are the customer acceptance measures of sales (Sell- through—how the product is selling on the retail floor, Longevity— whether a product has a longer life-cycle extending across many sales seasons or not, and Growth—how much increase in sales the product has experienced) and the financial measure of retail profitability (Jang, Dickerson & Hawley, 2005). In this industry, the product portfolio complexity benefits are often outweighed by increasing costs (Fernhaber & Patel, 2012), which has an effect on the choices facing apparel manufacturers, especially their willingness to create an extensive product portfolio for seasonal and short life-cycle products. Lee and Makhija (2009) studied how two internationalization approaches (international investments through foreign direct investment, and export-related investment, such as investing in export-related infrastructure to respond to demands in international markets) help companies to adapt quickly to such rapid and important changes in their environment. The complexity of the product life-cycle needs to be taken into account when deciding on what internationalization methods to adopt, especially in the apparel industry.

< Prev   CONTENTS   Source   Next >