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Internationalising in small, incremental or larger steps?

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Abstract

We argue that companies may enter foreign environments either incrementally, as suggested by long-established theory, or by taking larger steps that may result in lower initial performance but, through learning and experience, lead to increased performance in future expansions. This idea is corroborated by the experience of Dutch companies entering into Central and Eastern Europe. We also find that expansion steps may be too large, thereby limiting the exploration of foreign environments. Our study suggests that sequential internationalisation strategies do still matter, and that companies have to balance exploitation and exploration in internationalisation.

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Notes

  1. As a robustness check, we also tested models with control variables for size (number of employees), level of ownership (full or shared ownership) and year of founding of the subsidiary. These tests showed the same support for our hypotheses. We also tested whether our results were driven by individual observations. We performed outlier analyses by examining student residuals and using the jackknife procedure (n-1 samples). These analyses showed that our results were not driven by outliers; we found the same significant effects as presented in Table 3.

  2. Despite the fact that ‘a general rule is that the ratio (of sample size to number of independent variables) should never fall below 5:1, meaning that five observations are made for each independent variable in the variate’ (Hair et al., 2006: 196), preferably this ratio should be 10:1 or larger. Models 3 and 4 in Table 4 conform to this more stringent rule. Finally, the same outlier analyses regarding Table 4 as performed earlier for Table 3 showed that our results were not driven by outliers.

  3. We should like to thank the Acting Editor for bringing this to our attention.

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Acknowledgements

We should like to thank Ulf Holm and Mario Schijven for their valuable insights. We are also grateful for the insightful comments of the three anonymous JIBS reviewers, and for the excellent guidance of co-guest editor Thomas Hutzschenreuter and Editor-in-Chief Arie Y. Lewin.

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Correspondence to Harry G Barkema.

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Accepted by Thomas Hutzschenreuter, Torben Pedersen and Henk Volberda, Guest Editors, 19 June 2007. This paper has been with the authors for two revisions.

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Barkema, H., Drogendijk, R. Internationalising in small, incremental or larger steps?. J Int Bus Stud 38, 1132–1148 (2007). https://doi.org/10.1057/palgrave.jibs.8400315

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