Strategic Entrepreneurial Internationalization: A Normative Framework

• Date: 01 September 2017
• Published date: 01 September 2017
• DOI: http://doi.org/10.1002/sej.1261
• Author: Erkko Autio

Strategic Entrepreneurial Internationalization:

A Normative Framework

Erkko Autio

1,2

*

1

Department of Innovation and Entrepreneurship, Imperial College

Business School, London, U.K.

2

Tilburg University School of Economics and Management, Tilburg,

The Netherlands

Research summary: Much of the literature on international new ventures (INVs)

focuses on early internationalization and views it as an expression of firm-specific

advantages that existed prior to internationalization. This article presents a normative

framework that articulates how INVs can leverage internationalization to drive de novo

competitive advantage. Drawing on the organizational capability and business model

design literatures, the framework of strategic entrepreneurial internationalization (SEI)

argues that INVs that adopt an active learning orientation, harness digital infrastruc-

tures for cross-border business model experimentation, encapsulate cross-border asym-

metries in their activity system, and adopt a niche orientation are more likely to

succeed in building sustainable competitive advantage.

Managerial summary: Internationalization can be used strategically to build competi-

tive advantage in the firm and its business model. This is because internationalization

exposes the firm to different markets and different competitive environments, therefore

providing a potentially rich source of learning and capability development. However,

competitive advantage does not automatically follow internationalization: managers of

internationalizing new ventures must actively experiment with different business models

in different markets to discover ones that work best. The firm also has to make an effort

to distill the lessons learned from foreign markets and adjust its business model accord-

ingly. Learning is more effective in narrow niches. Long-term advantage can be ensured

by cementing cross-border advantages into the cross-border operation. Copyright ©

2017 Strategic Management Society.

Strategic entrepreneurship is the simultaneous pur-

suit of opportunity and competitive advantage

(Hitt, 2011; Hitt, Ireland, Sirmon, & Trahms,

2011). Entrepreneurs behave strategically when

they, for example, create valuable and difficult-to-

replicate resource combinations through opportu-

nity pursuit or when opportunity pursuit also drives

the erection of barriers against competitive entry

(Ozcan & Eisenhardt, 2009). But what becomes of

strategic entrepreneurship when that opportunity

pursuit crosses national borders? Would it make

sense to talk about strategic internationalization? It

seems that international entrepreneurship can meet

the criterion of being strategic when internationali-

zation leads to the creation of unique, valuable, and

difficult-to-imitate resource combinations across

national borders or perhaps when a cross-border

operation drives the creation of organizational cap-

abilities that are more effective and dynamic than

what would normally be possible through a domes-

tic operation (Kuemmerle, 2002; Sapienza, Autio,

George, & Zahra, 2006). Indeed, given how

Keywords: new venture internationalization; strategic interna-

tionalization; competitive advantage; business model

innovation

*Correspondence to: Erkko Autio, Department of Innovation and

Entrepreneurship, Imperial College Business School, London,

U.K. E-mail: erkko.autio@imperial.ac.uk

Copyright © 2017 Strategic Management Society

Strategic Entrepreneurship Journal

Strat. Entrepreneurship J., 11: 211–227 (2017)

Published online 15 September 2017 in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/sej.1261

internationalization challenges capability develop-

ment in new ventures and how the new venture’s

operation in foreign markets increases its exposure

to opportunities, it is surprising that international

entrepreneurship (IE) research has largely side-

stepped the study of internationalization as a

driver, rather than an expression, of competitive

advantage (Autio, 2005). In this article, I explore

how new ventures should behave in order to build

a sustainable competitive advantage through

internationalization.

Research exploring the internationalization of

new and/or small firms has a long history. The first

frameworks explicitly describing the internationali-

zation process of small- and medium-sized compa-

nies data back to the 1970s (Johanson & Vahlne,

1977; Johanson & Wiedersheim-Paul, 1975), and

the phenomenon of early and proactive internation-

alization was recognized by the entrepreneurship

research community in the mid-1990s (McDougall,

Shane, & Oviatt, 1994; Oviatt & McDougall, 1994;

Rennie, 1993). However, while rich and varied, the

research tradition focusing on new and entrepre-

neurial firm internationalization has seldom sought

to elicit normative insights to inform entrepreneurs

on how they should leverage internationalization

for the creation of de novo competitive advantage,

rather than for the exploitation of preexisting com-

petitive advantage. This gap is reflected in the

dearth of IE research on the effect of internationali-

zation on long-term performance. For example, a

fairly recent thematic ontology of international

entrepreneurship research identified a cluster of

studies exploring the effect of performance on

internationalization, but no studies exploring the

effect of internationalization on long-term perfor-

mance (Jones, Coviello, & Tang, 2011). More

recently, Cavusgil and Knight (2015) noted the

same gap. This is a nontrivial gap, since the lack of

evidence on the effect of entrepreneurial interna-

tionalization on long-term performance effectively

means that we do not know whether and when

internationalization is good for the new venture in

the first place and, if so, how the venture should

behave during the internationalization process in

order to create and lock in long-term performance

drivers.

Another gap in the international entrepreneurship

literature compounds this problem. In their review of

foreign market entry mode choices made by small-

and medium-sized companies, Laufs and Schwens

(2014) identified only two studies that focused on

international new ventures. This reflects a broader

dearth in the international entrepreneurship literature

of studies focusing on the governance of the cross-

border operation that results from earl y and proactive

internationalization. This is significant, since any

advantages built during internationalization must be

incorporated into the new venture’s governance sys-

tem in order to convert them into enduring drivers of

superior performance.

1

I propose that these gaps are, at least in part, due

to the focus of the dominant internationalization

frameworks on the process of internationalization,

rather than the outcomes of it (Chetty & Holm,

2000; Johanson & Mattsson, 1988; Johanson &

Vahlne, 1977, 1990, 2009; Jones & Coviello, 2005;

McDougall & Oviatt, 2000; Oviatt & McDougall,

1994).

2

Theoretical frameworks shape empirical

designs. This perhaps explains why most studies

exploring early and proactive internationalization

by entrepreneurial ventures have focused on vari-

ables such as time to internationalization, speed of

international expansion, number of foreign markets

entered and exited, and so on. However, studies

focusing on the process itself can produce only

inferential insights regarding longer-term perfor-

mance outcomes of internationalization, and they

have only limited power to generate normative

insight that informs practicing entrepreneurs. In

effect, the dominant process frameworks typically

ask: “how does the process of entrepreneurial inter-

nationalization unfold,”instead of asking: “what

should entrepreneurs do in order to harness interna-

tionalization for long-term advantage.”

Although important and consequential, I suggest

that these gaps also offer important research

opportunities—and opportunities to increase the

1

In contrast with the international entrepreneurship literature,

research on multinational enterprises has placed significant

emphasis on the governance of cross-border operations. For

example, the “OLI framework”explicitly seeks to define the

“MNE advantage”that arises due to the multinational opera-

tion (Cantwell & Narula, 2007; Dunning, 1977, 2000). How-

ever, since this research focuses on existing multinationals, it

cannot directly inform how a new venture can build a sustain-

able multinational operation.

2

There are also good practical reasons for this gap. Longitu-

dinal archival data on firm-level internationalization remains

rare. There is also a nontrivial problem with endogeneity and

unobserved heterogeneity, as the link between internationali-

zation and organizational performance is subject to multiple

selections: firms self-select to internationalization, and not all

internationalizing ventures survive.

212 E. Autio

Copyright © 2017 Strategic Management Society Strat. Entrepreneurship J., 11: 211–227 (2017)

DOI: 10.1002/sej.1261