The Contingent Effect of TMT International Experience on Firms’ Internationalization Speed
| Author | Alex Mohr,Georgios Batsakis |
| DOI | http://doi.org/10.1111/1467-8551.12293 |
| Published date | 01 October 2019 |
| Date | 01 October 2019 |
British Journal of Management, Vol. 30, 869–887 (2019)
DOI: 10.1111/1467-8551.12293
The Contingent Eect of TMT
International Experience on Firms’
Internationalization Speed
Alex Mohr and Georgios Batsakis1,2
WU Vienna, University of Economics and Business, Welthandelsplatz 1, 1020, Vienna, Austria, 1ALBA
Graduate Business School, The American College of Greece, 6–8 Xenias Str, 115 28, Athens, Greece, and
2Brunel University London, Brunel Business School, Kingston Lane, Uxbridge UB8 3PH, UK
Corresponding author email: gbatsakis@alba.acg.edu
Drawing on upper echelons theory,we argue that there will be an inverted U-curve-shaped
relationship between the top management team’s (TMT’s) level of international experi-
ence and a firm’s internationalization speed. Accounting for the role of executive job de-
mands highlighted in upper echelons theory,we further suggest that competitive pressure,
product diversification and geographic scope moderate the relationship between TMT
international experience and internationalization speed by increasing the demands of
TMT managers’ jobs. Using data on the international expansion of 91 retailers between
2003 and 2012, we find empirical support for the inverted U-curve-shapedeect of TMT
international experience and the moderating role of competitive pressure. We find no
moderating eect of product diversification or geographics cope.
Introduction
In recent years, researchers have begun to study
the internationalization of firms from an upper
echelons (UE) perspective. UE theory explains
firms’ strategic decisions as influenced by the
characteristics of the firms’ CEO or top man-
agement team (TMT) (Hambrick and Mason,
1984). Accordingly,UE-based research explaining
the nature of firm internationalization, as one
such strategic decision, explores how TMT char-
acteristics aect various dimensions of a firm’s
internationalization. This research has studied
TMT characteristics such as TMT size (Sanders
and Carpenter, 1998), the average age of TMT
members (Lee and Park, 2008), TMT members’
level of education (Datta and Rajagopalan, 1998),
TMT tenure (Tihanyi et al., 2000) and TMT
international experience (Lee and Park, 2008;
Reuber and Fischer, 1997) and has related them
to various dimensions of firms’ internationaliza-
tion, including firms’ international diversification
(Tihanyi et al., 2000), their choice of foreignentry-
mode markets (Nielsen and Nielsen, 2011), their
formation of international strategic alliances (Lee
and Park, 2008) and their overall global strategic
posture (Carpenter and Fredrickson, 2001).
In line with the central role of firms’ inter-
national experience in explaining the pattern of
firm internationalization (e.g. Clarke, Tamaschke
and Liesch, 2013), UE-based research on firm
internationalization considers the international
experience of TMTs as particularly important for
firm internationalization (e.g. Athanassiou and
Nigh, 2000; Reuber and Fischer, 1997; Samb-
harya, 1996; Tihanyi et al., 2000). This approach
is because internationally experienced TMTs are
more likely to be oriented towards – and know
more about – international markets, influencing
decisions related to firm internationalization.
Confirming this basic assumption, the first stream
of studies has focused on the eect of TMT
international experience on the general level of
firm internationalization, which it has captured
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870 A. Mohr and G. Batsakis
in several dierent ways. Research has shown
that TMT international experience is related in a
positive and linear way to the average of the three
ratios of firms’ international sales, employees and
assets to firms’ total sales, total employees and
total assets, respectively (Athanassiou and Nigh,
2002). Similarly, Sambharya (1996) finds that
TMT international experience has positive eects
on firms’ foreign-to-total sales and assets, whereas
Tihanyi et al. (2000) observe that TMT interna-
tional experience has a positive eect on firm’s
foreign-to-total sales and the number of countries
in which they operate. Using an entropy measure
of international diversification, Herrmann and
Datta (2005) find that international diversification
is positively associated with TMT international
experience. Although these studies find linear
eects of TMT international experience on firms’
level of internationalization, Lee and Park (2006)
find that TMT international exposure has an
inverted U-curve-shaped eect on the average of
the ratio of foreign sales to total sales and the
ratio of foreign subsidiaries to total subsidiaries.
A closely related stream of research has ex-
plored the role of TMT/CEO international expe-
rience in shaping firms’ foreign entry-mode deci-
sions. This research has shown that the greater
the international experience of a firm’s TMT
(Nielsen and Nielsen, 2011) or CEO (Herrmann
and Datta, 2002, 2006), the more likely it is
to choose full-control over partial-control entry
modes. Focusing on small and medium-sized en-
terprises’ (SMEs’) choice between non-equity and
equity entry modes, Laufs, Bembom and Schwens
(2016) argue for a (moderated) positive eect of
CEO international experience on the choice of
equity entry modes.
Overall, prior research has thus shown that
TMT international experience plays a central role
in explaining various facets of firm internation-
alization. We contribute to this research in two
important ways. First, recent evidence has high-
lighted the increasing occurrence and the perfor-
mance eects of rapid internationalizationby firms
in dierent industries and from dierentgeograph-
ical regions (e.g. Casillas and Moreno-Men´
endez,
2014; Chang and Rhee, 2011; Luo and Tung, 2007;
Mohr and Batsakis, 2017). Research into Born
Globals and International New Ventures has often
conceptualized a firm’s internationalization speed
as the time between its founding and its first in-
ternational expansion (e.g.Oviatt and McDougall,
2005; Reuber and Fischer, 1997). However, this
conceptualization of speed ‘in reality, deals more
with the pre-internationalization period than the
internationalization process per se [italics in origi-
nal]’ and accordingly, there is a need to study the
speed of internationalization ‘once it is underway’
(Casillas and Acedo, 2013, p.15). Conceptualizing
a firm’s internationalizationspeed as the pace with
which firms internationalize after their first inter-
nationalization also seems more relevant in the
case of mature firms (the focus of our study) that
may start internationalizing only relatively late in
their life, and therefore have been used to study-
ing the internationalization speed of mature firms
(Chang and Rhee, 2011; Mohr and Batsakis, 2017;
Vermeulen and Barkema, 2002).
Research has not studied the role of TMT in-
ternational experience as a potential driver of the
speed with which firms expand internationally.
This lack of research is surprising, given the role
that prior research has attributed to TMT inter-
national experience in shaping other facets of firm
internationalization. Drawingon the UE logic, we
therefore investigate how TMT international expe-
rience aects firms’ internationalization speed. By
accounting for the speed of internationalization,
we extend the current knowledge on the eects
of TMT international experience on the patternsof
firm internationalization. Clarifying the drivers of
rapid internationalization is not only theoretically
important, but also practically relevant. Firms’
decisions to internationalize rapidly rather than
slowly may have more to do with TMTs’ interna-
tional experience than with a careful analysis of
the benefits and drawbacks of rapid vs. slow inter-
nationalization, potentiallyleading to sub-optimal
decisions and detrimental performance eects.
Second, UE-based research suggests that the
eects of dierent TMT characteristics on strate-
gic decision-making are likely to depend on other
factors, for example, the nature of the team leader
or the team’s cohesion (e.g. Buyl et al., 2011; Wei
and Wu, 2013), a firm’s industry (Finkelstein and
Hambrick, 1990) or an organization’s macro-
environment (Crossland and Hambrick, 2007).
Research adopting UE logic to study the factors
explaining the nature of firm internationalization
has begun to identify numerous contingencies
in the relationship between TMT characteristics
and firm internationalization (e.g. Carpenter and
Fredrickson, 2001; Laufs, Bembom and Schwens,
2016). Despite these advances, we still know very
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