Navigating through the Value Landscape

Prior internationalization process theory has typically focused on how firms learn from foreign experience. We model, in addition, how firms identify and select valuable expansion opportunities. More specifically, we develop theory and hypotheses on how internationalizing firms travel through a value landscape using international joint ventures (IJVs): identifying, evaluating, and selecting minority or majority IJVs along the way, in their quest to build a valuable MNC. The hypotheses are tested using event study methodology and multiple regression analysis on data on 162 IJVs of 23 Dutch firms over the last two decades (1980-1998). 2 The key challenge for managers of internationalizing firms is to build a successful multinational corporation (MNC). One problem, recognized since the early days of International Business, is that firms need to learn to operate in foreign environments (Hymer, 1976). However, firms are internationalizing in a complex and changing world, with new technologies emerging, new political hazards and opportunities (e.g., new markets opening up), and often race with competitors to get to new foreign Some firms become successful MNCs, create value through series of expansion steps, and develop as global competitors in their industry. Many fail, however, never realize valuable expansion opportunities, and disappear. Hence, the key question for internationalizing firms is how to navigate strategically, in a complex and changing world, to create a valuable MNC? Prior internationalization process theory has recognized that firms expand through sequences of incremental expansion steps (cf. Aharoni, 1966; Root, 1987): first, in nearby countries and using few resources, then gradually investing more and further away, as they gain more experience and reduce their uncertainty about foreign 1977). A strong point of this theory – perhaps explaining its popularity today – is its dynamic nature; i.e., that it helps to understand the path-dependency of subsequent expansion steps as firms learn from experience how to operate abroad. However, prior research has several important limitations. First, it has typically emphasized learning from past experience. At best, it recognized expansion opportunities in the immediate foreign environment of firms (cf. Cyert & March, 1963; e.g., Johanson & Vahlne, 1977), but neglected the strategic process of searching 3 for and identifying novel expansion opportunities, close by and further away, which seems to be vital for many firms today. In this respect, the research is backward-looking rather than forward-looking. Second, prior research has typically been " descriptive, " and aimed to predict what strategic choices were actually …