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Routine microprocesses and capability learning in international new ventures

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Abstract

Drawing on the distinction between the ostensive aspects (abstract patterns) and performative aspects (specific actions) of organizational routines, the paper offers a micro-level explanation of capability learning in international new ventures (INVs), that is, firms that internationalize actively from inception. The paper argues that variability in the performative aspects of internationalization routines is associated with improvisational learning and new capability development, whereas variability in the ostensive aspects is associated with trial-and-error learning and existing capability improvement. Furthermore, psychic distance moderates these relationships. Low psychic distance facilitates both improvisation and trial-and-error learning; high psychic distance frustrates learning of both types. Moderate psychic distance makes the success of both learning forms more likely – but only for more experienced INVs. The paper also argues that social capital may mitigate the negative effects of high psychic distance. It contributes to the extant literature by providing a micro-level explanation of how INVs accomplish capability learning and avoid wasteful learning efforts, and by theorizing the moderating effects of psychic distance on the relationships between routine microprocesses and capability learning.

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Notes

  1. An example of resource-intensive learning efforts normally ruled out for INVs would be corporate venturing groups that are isolated from operating units and charged with exploring new opportunities (e.g., McGrath, 2001).

  2. The scope of our theorizing is confined to new ventures, not established firms. We recognize, however, that experimentation might be relevant to established firms that once were INVs.

  3. In general, early in their life cycle, new ventures tend to learn by doing, as implied by Sarasvathy's (2001) work on effectuation (i.e., resources drive goals rather than the other way round).

  4. As noted earlier, in this paper we limit the discussion to experiential learning. Thus the argument assumes that the new venture does not draw on the experience of other ventures (vicarious learning) or of experts such as consultants.

  5. A question may arise as to where moderate psychic distance ends and high psychic distance begins. While acknowledging that the operationalization of psychic distance is not an exact science, we do note that Håkanson and Ambos (2010) helpfully provide indicative measures of psychic distance across 25 major economies of the world. We deem countries at or around the median score for psychic distance to represent moderate psychic distance. For example, taking the US as the focal market, Canada represents low psychic distance (score of 10), western European countries represent moderate psychic distance at or around the median (Germany 42, Italy 46, Spain 47), and China (79) and India (77) represent high psychic distance.

  6. Experienced INVs may lower the psychic distance of entry points into a high psychic distance market by leveraging, for example, returnee entrepreneurs’ ties (Filatotchev, Liu, Buck, & Wright, 2009), co-ethnic overseas ties (Prashantham & Dhanaraj, 2010) and client followership, that is, building relationships in the process of servicing an existing customer in otherwise unknown markets (Bell, 1995).

  7. This theorizing applies to a given routine and capability.

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Acknowledgements

An earlier version of this paper was presented at the 2007 Academy of Management conference, where it won a nomination for the Carolyn Dexter Award. We greatly appreciate thoughtful observations and suggestions from Martha Feldman, Suresh Kotha, Patricia McDougall, Anirvan Pant, Zeki Simsek, JIBS Editor Gabriel Szulanksi and three anonymous reviewers on previous drafts. The first author thanks the University of Glasgow's Community for Internationalization and Enterprise Research (CIER), especially Stephen Young, for the wonderfully stimulating and collegiate environment in which he pursued this research. Both authors thank the ESRC/EPSRC-funded Advanced Institute of Management Research (AIM), and especially Gerry Johnson, for making our collaboration possible.

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  1. Nottingham University Business School China, Ningbo, China

    Shameen Prashantham

  2. Isenberg School of Management, University of Massachusetts, Amherst, USA

    Steven W Floyd

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  1. Shameen Prashantham
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Accepted by Gabriel Szulanski, Area Editor, 11 April 2012. This paper has been with the authors for three revisions.

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Prashantham, S., Floyd, S. Routine microprocesses and capability learning in international new ventures. J Int Bus Stud 43, 544–562 (2012). https://doi.org/10.1057/jibs.2012.13

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