A time-based process model of international ... · PDF fileA time-based process model of international entrepreneurial opportunity evaluation ... the decision-making process ... derived

A time-based process model of international

entrepreneurial opportunity evaluation

Yanto Chandra

Department of Public Policy, City University of

Hong Kong, Tat Chee Avenue, Kowloon, HongKong

Correspondence:Y Chandra, Department of Public Policy, CityUniversity of Hong Kong, Tat Chee Avenue,Kowloon, Hong Kong.Tel: (852) 3442 2403;e-mail: [email protected]

AbstractThis article investigates two important research gaps in international business

(IB): how entrepreneurs evaluate international entrepreneurial opportunities(IEOs) and the role of time in the evaluation process. Drawing on the literature

on decision-making models and the philosophical foundation of opportunity,

this study employs Gioia’s methodology and content analysis to examine howthe founders of 15 early-internationalizing firms evaluated IEOs in the early- and

late-stage of internationalization. The findings reveal that the interaction of time

and three general rules of IEO evaluation that I coin ‘simple’, ‘revised’, and‘complex’ influenced the entrepreneurs’ decisions. The findings show that the

founders transitioned from simple to revised and to complex rules in the IEO

evaluation process and that various contingent factors such as time pressure,

resource availability, and type of stakeholders drove these transitions. The threegeneral rules correspond to what I label as ‘opportunity actualization’, ‘revision’,

and ‘development maximization’ processes, respectively. I propose a Time-

based Process model that reconciles extant internationalization models’ (i.e.,Process, Network, Economics, and Entrepreneurship) different explanations

regarding why and how firms internationalize.

Journal of International Business Studies (2017) 48, 423–451.doi:10.1057/s41267-017-0068-x

Keywords: internationalization; opportunity evaluation; decision-making; decision rule;case theoretic approaches; content analysis

The online version of this article is available Open Access

INTRODUCTIONA growing consensus in the international business (IB) literature isthat internationalization is, in essence, an entrepreneurial behaviorprocess that occurs over time (Jones & Coviello, 2005; Middleton,Liesch, & Steen, 2011). The internationalization process is basedon assumptions about (1) the opportunity to create and captureeconomic value, (2) the decision-making process underpinning theevaluation of international entrepreneurial opportunities (IEOs),and (3) time, against which all decision-making processes can beexplained (Chandra, Styles, & Wilkinson, 2009; Jones & Coviello,2005; Maitland & Sammartino, 2015; Zahra, Korri, & Yu, 2005).Despite the burgeoning research on internationalization over thepast four decades, decision-makers’ cognitive processes in interna-tionalization decisions, and how the processes evolve over time,remain underexplored and poorly understood (Benito, Petersen, &

Received: 3 July 2014Revised: 1 February 2017Accepted: 6 February 2017Online publication date: 21 March 2017

Journal of International Business Studies (2017) 48, 423–451ª 2017 The Author(s) All rights reserved 0047-2506/17

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Welch, 2009; Hennart & Slangen, 2015; Maitland &Sammartino, 2015; Zahra, Korri, & Yu, 2005). Agrowing number of IB scholars have repeatedlyhighlighted the need to study decision-makers’decision styles, biases and cognitive processes(e.g., Barkema & Shvyrkov, 2007; Hennart, 2009;Hutzschenreuter, Pedersen, & Volberda, 2007; Wil-liams & Gregoire, 2015) and ‘‘to explicitly incorpo-rate the role and influence of time’’ (Jones &Coviello, 2005: 290) in internationalizationresearch. However, empirical studies remain scarce.

Research on internationalization and on deci-sion-making models underpinning opportunityevaluation has proceeded along fairly divergenttracks, although researchers have recognized theutility of conceptually linking them (Jones &Casulli, 2014; Maitland & Sammartino, 2015; Saras-vathy, Kumar, York, & Bhagavatula, 2014; Zahraet al., 2005). Among the three stages of interna-tionalization, discovery ? evaluation ? exploita-tion (Oviatt & McDougall, 2005; Coviello, 2015),the evaluation process is central to the study of theentrepreneur’s decision-making and, arguably, themost critical construct in studies that will advanceinternationalization research and practices.Research on opportunity evaluation could helpbridge the critical gap between opportunities andaction (McMullen & Shepherd, 2006; Williams &Wood, 2015). This can reconcile the inconsistentfindings in IB research regarding why and how firmsinternationalize (Axinn & Matthyssens, 2002; Ben-ito, Petersen, & Welch, 2009; Buckley, Devinney, &Louviere, 2007; McDougall, Shane, & Oviatt, 1994)and to explain the emerging IB phenomena (e.g.,‘born globals’ from emerging markets, Cavusgil &Knight, 2015; Uner, Kocak, Cavusgil, & Cavusgil,2013; ‘consumers as international entrepreneurs’,Chandra & Coviello, 2010; and the globalization ofsharing-economy models like Uber, Laamanen,Pfeffer, & Van de Ven, 2016). Moreover, opportu-nity evaluation research entails a critical examina-tion of the worldviews (i.e., philosophy orontology) of IEOs, which could advance interna-tionalization research through a new interpretationof ‘opportunity’ and its underlying assumptions ininternationalization models. The lack of research onopportunity evaluation also plagues entrepreneur-ship research where scholarship has ‘‘advanced verylittle in our knowledge of how entrepreneurs eval-uate [opportunities] … their decisions to exploitopportunities … [and that] entrepreneurship shouldbe studied as a process’’ (Shane, 2012: 4).

One approach to exploring the opportunity eval-uation gap employs the effectuation perspective(Sarasvathy, 2001). The effectuation perspective,derived from the entrepreneurial decision-makingresearch, is a problem-solving approach that eschewsprediction or planning and uses practices aimed tocontrol uncertainty, including the affordable-lossprinciple, contingency leveraging, and market co-creation with stakeholders (Sarasvathy et al., 2014;Sarasvathy, 2001). The small body of international-ization research that employs the effectuation lenshas studied the extent of effectuation in interna-tional new venture creation (Harms & Schiele, 2012),the application of effectuation on internationaliza-tion (Chetty, Ojala, & Leppaaho, 2015; Andersson,2011), and the implications of effectuation on theinternationalization process (Kalinic, Sarasvathy, &Forza, 2014). Despite their valuable contributions tointernationalization research, these studies largelyimpose the effectuation concept on data (rather than‘letting the data speak’ to inform theory develop-ment), and they focus on the static, atemporal aspectof the entrepreneur’s decision-making. Time is, firstand foremost, a primary conceptual dimension towhich explicit behavior may be understood (Ancona,Goodman, Lawrence, & Tushman, 2001). Time isfundamental to internationalization researchbecause ‘‘each firm has a history … of international-isation events occurring at specific points in time’’(Jones & Coviello, 2005: 289–290). As a form ofentrepreneurial behavior, internationalization is anaccumulation of entrepreneurs’ actions over time(Covin & Slevin, 1991). Internationalization is sub-ject to time and the influence of the wider environ-ment. This raises the question as to whether and howentrepreneurs utilize decision-making models (e.g.,effectuation, causation) to evaluate IEOs, and in whatway(s) time influences the opportunity–evaluationprocesses. This also raises questions of whether andhow entrepreneurs consider the different worldviewsof IEOs (Ramoglou & Tsang, 2016).

These are key research questions, and provide anopportunity to advance IB scholarship. Accord-ingly, this study asks: How do entrepreneurs evaluateinternational entrepreneurial opportunities? What roledoes time play in international entrepreneurial oppor-tunity evaluation?

This article first reviews the influential interna-tionalization models, which reveals that opportu-nity evaluation and temporal effects on decision-making remain unexplored. To fill this gap, thisarticle places evaluation and temporal effects front

A time-based process model Yanto Chandra

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Journal of International Business Studies

and center. It does not assume, like most studies, thatinternationalization is a simple sequential process(i.e., IEO discovery ? evaluation ? exploitation).It also allows for a flexible interpretation of decision-making models to inform the IEO evaluation pro-cesses. In addition, the article explores the philo-sophical foundation of opportunity to understandthe why and how of IEO evaluation processes.

This study’s empirical data are derived frominterviews with the founders of 15 early-interna-tionalizing (i.e., firms that internationalize betweenone to six years after firm inception) small- andmedium-sized enterprises (SMEs) and their evalua-tions of 94 early- and late-stage IEOs. ‘Early stage’refers to the entrepreneur’s evaluation of his/her firstinternationalization opportunity, plus other oppor-tunities from 2 weeks to 2 months after initiatingthe first IEO. ‘Late stage’ refers to the entrepreneur’sevaluation of a subsequent internationalizationopportunity from 3 to 15 years after the first inter-nationalization. The aim of capturing the early vslate stage IEOs was to see if there are differences inhow entrepreneurs evaluated opportunities acrosstime and, if so, why. I conducted the in-depthinterviews at multiple time intervals between 2005and 2012 using both retrospective questions thatrequired them to look back and discuss why andhow they evaluated IEOs, and longitudinally totrack their evaluation of opportunities ‘as they werehappening.’ The interviews were supplemented withother primary and secondary data. The Gioiamethodology, a process of coding and aggregatingdata into theoretical concepts using a data structure,along with a content analysis were employed toexamine the founders’ IEO evaluation processes.

This study enhances the IB literature in twoimportant ways. First, by placing opportunity evalu-ation and time as the central constructs in interna-tionalization research, this article advances ourunderstanding of entrepreneurs’ decision-makingprocess for internationalization (Chetty et al., 2015;Harms & Schiele, 2012; Kalinic et al., 2014; Williams& Gregoire, 2015). This research offers deeply con-textualized findings that identify three rules of IEOevaluation employed by early-internationalizingentrepreneurs. It also explains not only how timeand the decision rules interact in IEO evaluation butwhy. Based on the data I collected, the entrepreneurs’evaluation of early-stage IEOs involves much uncer-tainty and thus necessitates ‘simple rules’ to help indecision-making. The entrepreneurs used basic ‘orsimple rules’ to transform unmet foreign marketdemand into actual opportunities, a process that I

label ‘opportunity actualization’. For example, thesesimple rules include ‘Exploit any IEO that arises andsee if it pays off’ and ‘Rely on the opinions of otherentrepreneurial actors (e.g., suppliers, strangers, andbusiness contacts)’. As entrepreneurs learn and makemistakes, they revise their rules. These are called‘revised rules’ and enable them to differentiatebetween ‘possibly successful’ and ‘likely unsuccess-ful’ IEOs, and between major (highly promising)from minor (less promising) IEOs, a process that Ilabel ‘opportunity revision’. For example, theserevised rules include ‘The licensee didn’t pay hislicense fees’ and ‘The agents lost focus and didn’t sellanything’ which prompted them to emphasize ontrust and performance as key evaluation criteria. Theevaluation of late-stage IEOs, following the actual-ization and revision of opportunities, gives entrepre-neurs a more objective view of the world, and theirnext step which requires the deploymentof ‘complexrules’ that are based on finer heuristics-based andeconomic-driven criteria, a process that I label asopportunity ‘development maximization’. The sim-ple rules, revised rules, and complex rules form thethree general rules of IEO evaluation.

Second, this article develops new insights thatreconcile and integrate the various assumptions ofinternationalization models using the general rulesand the ontology of IEOs. In particular, the corelogic of the Network model resembles the ‘oppor-tunity actualization process’ of IEOs (following thecritical realist view) through the use of the ‘simplerules.’ The simple rules found in this study con-tribute 10 new types of rules to the Network model,rules that can be categorized as heuristics-, emo-tion-, and action-based. The core logic of theProcess model resembles what I term the ‘revisedrules’ of IEOs or the ‘opportunity revision process’,which entrepreneurs need to separate the possiblefrom unlikely IEOs and the major from minor IEOs.The core logics of the Economics and Entrepre-neurial models of internationalization resemblewhat I label as the ‘opportunity developmentmaximization’ process (following empiricist andconstructivist views) of IEOs through the use of‘complex rules.’ These models focus on the lessmysterious state of IEOs so that entrepreneurs canbetter evaluate, search for, maximize and co-de-velop the IEOs. It demonstrates the workings of thedifferent schools of opportunity in the internation-alization process, offering a solution to the puzzleof the ontology of opportunity.

The next section presents the study’s theoreticalbackground. It then discusses the methodology and


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findings that emerge, and presents a Time-basedProcess model of IEO evaluation. It discusses theresults in light of the internationalization modelsand offers implications for theory, practice andfuture IB research.

THEORETICAL BACKGROUNDIn this section, I will discuss various decision-making models in IB, the ontology of opportunityin IB and re-interpret the InternationalizationModels using the decision-making models andontology of opportunity.

Decision-Making Models in IB: Effectuation,Causation, Rule-Based ReasoningDecision-making is the core of all IB activities. Assuch, an understanding of the assumptions andelements of decision-making models is critical toadvance IB research. Effectuation is an importantdecision-making model that lends insight into howentrepreneurs evaluate opportunities. It focuses oncontrolling uncertainty (rather than predicting orplanning) and leveraging contingencies, andemploys the affordable-loss principle and satis-ficing as evaluation criteria (Sarasvathy et al.,2014; Sarasvathy, 2001; Wiltbank, Dew, Read, &Sarasvathy, 2006). Effectuators start with the exist-ing means (e.g., identity, knowledge, networks,resources) and ask how these can be transformedinto products, organizations, markets and the like,by engaging stakeholder networks that help shapethe means and goals.

Effectuators initiate the decision-making processby analyzing ‘Who am I?’ (e.g., a seasoned entrepre-neur with a passion for high tech products), ‘Whatdo I know?’ (e.g., I always relied on intuition to makedecisions), ‘Whom I know?’ (e.g., my businesscontacts, A, B and C are in country X, Y, and Z andin the fields of D, E, and F) and ‘What I can do?’ (e.g.,I can pursue a global opportunity by commercializ-ing a new software developed by A and using theresources owned by B and C). In contrast, thecausation approach aims to maximize expectedreturns, avoid surprises through careful prediction,planning and opportunity analysis. Those practicingthe causal approach start with a goal and workbackwards to find the means to achieve it. Causalthinkers analyze ‘What is my goal?’ (e.g., I need tomake X amount of profit within Y number of years),‘How do I optimize outcomes?’ (e.g., choose partnerB and country Z as to get the best result), and ‘Whichdecision is less risky?’ (e.g., option A is better than

other options based on data available; developing acareful market survey or business plan is a less riskyapproach to doing IB). Therefore, effectuation andcausation are exact opposites. Entrepreneurs whoespouse effectuation tend to (1) weigh predictiveinformation (e.g., market research, demand esti-mates) more critically than causation adherents, and(2) draw on personal experience more than causa-tion adherents, and iii) aim for affordability (Dew,Read, Sarasvathy, & Wiltbank, 2009; Jones & Casulli,2014) more than causation types.Rule-based reasoning, a more recent theoretical

approach in entrepreneurship scholarship, is astructured approach to opportunity evaluation. Itrelies on rules so as to reduce uncertainty and toassess opportunities against specific criteria (e.g.,financial return, competition level) to help decide ifan opportunity is exploitable (Wood & Williams,2014; Williams & Wood, 2015). Rules serve as‘‘analytical knowledge structures’’ (Williams &Wood, 2015: 221) to make logical inferences (e.g.,if S, then A, then C (S = situation, A = antecedent,and C = consequences)). For example, a rule-basedthinker analyzes the IB market by asking: If countrymarket A is too competitive then I will pursuecountry Y or Z (i.e., competition as a rule); ifdemand in country market B is lower thanexpected, then I will use approach X to succeed inthat market (market demand as a rule). Despite itspromise, few empirical studies show how rule-basedreasoning occurs ‘over time’ (Williams & Wood,2015: 230; Wood & Williams, 2014). As will beshown later, the rule-based reasoning literatureoffers a point of departure in developing a processmodel of the IEO evaluation process.

The Ontology of Opportunity in IB: Empiricism,Constructivism, Critical RealismOpportunity is a central construct in entrepreneur-ship (Shane, 2012) and in IB because operating aninternational business involves the discovery, eval-uation and exploitation of opportunities (Jones &Coviello, 2005). An understanding of the world-views (i.e., ontological views, Harre, 2002; Tsoukas& Knudsen, 2003) of opportunity is critical toadvancing IB research. The empiricist view (Ramo-glou & Tsang, 2016; Ramoglou, 2013) is based onan objective view of the world and assumes thatopportunities ‘exist out there’ in internationalmarkets. Because opportunity exists in an objectiverealm, it can be evaluated based on its variousattributes (e.g., production costs, labor supply, andstability of foreign government). In contrast, the


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constructivist view (Ramoglou & Tsang, 2016) sub-scribes to a socially constructed (subjective) world-view and portrays opportunities as ‘created and orco-created’ through relationships and interactionsamong stakeholders in international markets. Anongoing debate between the two ontological viewsof opportunity focuses on whether opportunity isin actuality an objective or subjective phenomenon(Ramoglou & Tsang, 2016; Suddaby, Bruton, & Si,2015). The critical realist view (Ramoglou & Tsang,2016; Ramoglou, 2013), which recently entered thediscourse, argues that opportunities are unrealizedabstract possibilities that need to be concretized.This view recognizes that reality in IB is structuredon three assumptions: (1) endless possibilities exist,represented by ‘the real world’, which offers thelargest set of possibilities and where raw opportu-nities can be found internationally, (2) un-actual-ized possibilities exist, represented by ‘the actualworld’, which contains unexploited IB opportuni-ties and is a subset of ‘the real world’ and (3)observable reality, seen as ‘the empirical world’,which contains possible and unlikely IB opportu-nities as the smallest subsets. Hence, realistsacknowledge unactualized opportunities that canbe ‘evaluated’ and prospects that can be enhancedthrough market intervention (e.g., creating anentrepreneurship hub such as Silicon Valley) andthat they also recognize that entrepreneurs’ effortsare necessary (e.g., mobilizing resources, creativemarketing efforts) to actualize IB opportunities.Realists emphasize ‘opportunity belief’ (e.g., thedegree of confidence about the presence of anopportunity) and the subsequent revision of suchbelief, and they consider failure as either anunidentified opportunity or un-actualized oppor-tunity due to faults in the execution (i.e., failuredue to a lack of competence or commitment or thewrong resource mix to realize an opportunity).

Re-Interpreting the Internationalization ModelsInternationalization models essentially assume thatopportunities are key for creating economic valueand that certain decision-making logics underpinopportunity evaluation. The influential models ofinternationalization (Economics, Process, Network,and Entrepreneurship) ask different questionsabout IB opportunities and focus on differentontologies and decision-making aspects in oppor-tunity evaluation. The Economics model (i.e.,Ownership-Location-Internalization (OLI) advan-tages) of opportunity evaluation focuses on deci-sions that produce the best economic outcomes

(e.g., location choice and entry mode), based onwhat a firm owns (e.g., products, brands, people)(Dunning, 1988, 2000). Those using the Economicsmodel focus on firm-market fit and embrace opti-mization thinking in IEO evaluation. A typicalquestion asked by a CEO or manager making aninternationalization decision under the Economicsmodel is ‘‘How can I optimize my company’s choiceof location and entry mode given what this com-pany owns, its aspirations and vision?’’ The Eco-nomics model is parallel to the Empiricist view ofopportunity (Ramoglou & Tsang, 2016; Ramoglou,2013), which assumes that opportunities ‘exist outthere’ in foreign markets and can therefore beevaluated objectively based on various criteria, suchas market demand, raw materials supply, and costfactors. This objective view of foreign marketopportunities means that firms can choose whatthey assess to be the best location and type of entrymode to optimally exploit such opportunities. TheEconomics model is also parallel to the Causationapproach as it maximizes expected returns fromoperating internationally, avoids surprises throughcareful prediction strategies (e.g., cost–benefit anal-ysis, optimization analysis) and thoroughly plansits steps and analyzes all current and possibleproblems. However, the Economics model lacksthe time effects of opportunity evaluation. Forinstance, it does not explain whether and how afirm should evaluate early-stage IEOs (i.e., the firstand second IEOs) and late-stage IEOs (e.g., IEOsconsidered many years after the first IEO).

The Process model (Johanson & Vahlne,1977, 1990) focuses on learning and risk mitiga-tion. It focuses on ways that firms can internation-alize to new markets from culturally similar toculturally different markets (i.e., successivelygreater psychic distance) and/or to riskier and morecommitted entry modes (e.g., from exporting toforeign direct investment). It implies a loop in theevaluation of IEOs at time 1, which feeds into theevaluation at time 2, 3, 4 and so on. A typicalquestion that a CEO or manager using the Processmodel asks is ‘‘How can my company take a safe,incremental approach to succeed in internationalmarkets?’’, ‘‘Based on what we learn from threeyears of internationalization in the neighboringmarket X, how can we continue to expand toslightly different foreign markets or employ ariskier entry mode?’’ This model parallels theCritical Realist view of opportunity (Ramoglou &Tsang, 2016; Ramoglou, 2013), which assumes thatopportunities are unrealized possibilities in foreign


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markets but cannot be discovered (realized) unless afocal firm takes action to actualize them. It recog-nizes endless possibilities, un-actualized IEOs, andthe importance of distinguishing between possibleand unlikely IEOs as firms learn from foreignmarkets. The Process model is similar to rule-basedreasoning where those evaluating opportunities useknowledge and commitment level as judgmentrules. The model positions learning processes ascentral to the IEO evaluation but does not wellexplain how IEO evaluation evolves. For instance,do the IEO evaluation rules change across time,from the firm’s startup, growth and mature periods?If so, why and how? If not, why and how? Likewise,the Process model does not fully explain how IEOevaluation rules drive early internationalization.

According to Johanson and Mattsson(1986, 1988), the Network model sees markets asnetworks; they theorize that firms internationalizeby networking with organizations through theirformal and informal relationships and that the(often unintended) effects of these relationshipshelp advance the internationalization process. Atypical example of the Network model is anentrepreneur meeting a business person on atranscontinental plane trip and discovering anopportunity worth exploring through a long discus-sion ranging from their common interests, insightsand experience. Like the Process model, the Networkmodel aligns with the Critical Realist view ofopportunity (Ramoglou & Tsang, 2016) and viewsnetworks as providing endless possibilities discov-ered through interactions with local and foreignnetworks. This model also aligns with the Effectua-tion approach as it emphasizes the unintentionalprocess of networking and market entry, particularlyfor smaller firms. Despite its relevance to SMEs, theNetwork model lacks the time-sensitive aspects ofIEOs evaluation. For instance, it does not explain therole of networks in the early vs late stages of IEOevaluation. Nor does it explain the logic behind theprevalent use of relationships in identifying IEOs.

The Entrepreneurship model (Coviello, 2015;Jones & Coviello, 2005; McDougall & Oviatt,2000) shifts the discourse on internationalizationto opportunities as it attempts to explain IB devel-opment patterns such as early or fast internation-alization and international new ventures. It viewsinternationalization as a process and outcome ofentrepreneurial action under uncertainty. A typicalquestion an entrepreneur using the Entrepreneur-ship model asks is ‘‘How do I make this newinvention into a global business opportunity?’’,

‘‘How can I work with partners to collaborativelypursue this opportunity as quickly as possible?’’ Thismodel see opportunities as created or co-created byactors and their peers (Constructivist view) anddiscovered as realities ‘out there’ in foreign markets(Empiricist view; see Alvarez, Barney, & Anderson,2013; Ramoglou & Tsang, 2016). Of the fourinternationalization models, the Entrepreneurshipmodel is the only one to identify the opportunity-identification and exploitation-stages of opportu-nity (Chetty et al., 2015; Zahra et al., 2005).

As discussed above, the temporal aspect of IEOevaluation is largely overlooked in internationaliza-tion research. Importantly, very little researchunpacks the decision-making models to explain howentrepreneurs evaluate international opportunities.

METHOD

Data CollectionSince the decision-making process used in evaluat-ing IEOs is complex, we need to ‘‘unravel theunderlying dynamics of phenomena that play outover time’’ (Siggelkow, 2007: 22). This suggests aneed to gather rich, in-depth data. This study usesinductive research because it can help answer thecore question of internationalization research: Howdo entrepreneurs evaluate opportunities? Thisstudy employs a process-oriented approach toexamine multiple cases with an embedded design(Van de Ven & Engleman, 2004; Yin, 2003). That is,to study entrepreneurs’ evaluation processes, Igathered information from informants on themultiple IEOs that each considered.

Conducting multiple case studies, like conduct-ing multiple experiments, enables replication thatcan enrich insights or challenge assumptions(Eisenhardt, 1989). Accordingly, it can advancetheory-building research such as this. The theoret-ical constructs of interest – IEO evaluation and time– and the derivable insights influenced the choiceof sampling for this research. A review of the extantresearch on decision-making models in IB (e.g.,effectuation) reveals a lack of research beyond theEuropean-focused context (e.g., Finland, Germany,Sweden; Andersson, 2011; Chetty et al., 2015;Harms & Schiele, 2012; Kalinic et al., 2014; Galkina& Chetty, 2015). Australia, the focal country in thisstudy, has a relatively small open economy that isheavily reliant on export. As such, it offers a newcomparative context to study IB decision-makingmodels to help enrich, extend and even challenge


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existing knowledge – an important considerationfor theory-building research.

For this study’s theoretical sampling, I selectedcases that were early internationalizers (i.e., thoseinternationalizing within 6 years after inception;Coviello, 2015; Zahra, Ireland, & Hitt, 2000) andassessed whether and how their evaluation of early-and late-stage IEOs differed, and why. I selected thecases from a pool of SMEs based in Australia usingbusiness and government directories (i.e., Kompassdatabase, Australian Technology Showcase, Aus-tralian Trade Commission), three leading Aus-tralian business magazines, Business Review Weekly,Australian Business Solutions, Business First Magazine,and three major Australian newspapers, The Aus-tralian, Sydney Morning Herald, Australian FinancialReview. The cases contain well-experienced entre-preneurs and novice entrepreneurs from the knowl-edge-based (KB) and non-knowledge-based (NKB)economic sectors in an effort to rule out thepossibility that experience and sector differencesaffect IEO evaluation. This purposeful samplingincluded locally owned small- to medium-sizedenterprises (SMEs) (less than 200 employees) thatwere Proprietary Limited and/or Partnership enti-ties (but not publicly traded or government-ownedfirms), in which the founders or key executivesinstrumental in the internationalization processwere still at the helm and agreed to participate inthe study.

Of the 60 firms contacted from the firm databasedescribed above, 15 firms responded positively andbecame the focus of this study. They comprise eightcases from the KB and seven cases from the NKB sectors.All 15 firms internationalized between 1 to 6 years afterstart-up. Table 1 offers a summary of these 15 cases.In total, I conducted 59 interviews with 39 individ-uals between 2005 and 2012 and tracked all thefirms’ IEO evaluation over this period of time. Thesecomprise 33 founders who were also CEOs of thefocal cases and their close associates (i.e., co-founders, high-level managers), plus six expertinformants outside the companies who were famil-iar with the founders (i.e., venture capitalists, gov-ernment officials) to gain deeper insights into thecases. In addition, I collected 603 pages of internaldocuments (e.g., business contracts, business plans,product sheets) and conducted 40 on-site visits. Thefieldwork generated 99 h of taped verbal data,transcribed verbatim by a professional transcriber. AsTable 1 shows, the cases include entrepreneurs in thehealthcare, manufacturing, software, fashion and bever-age businesses. To provide anonymity, all of the firm’s

names used here (e.g., OdorCo, SportCo) are pseudo-nyms. These pseudonyms also serve to aid recall andanalyses; for instance, ‘OdorCo’ refers to a firm thatmanufactures chemicals for odor control, while ‘SportCo’refers to a firm that manufactures sportswear.

The primary data were supplemented by on-siteobservations, email exchanges, phone and Skypeconversations, and company public web-basedmaterials and news articles. Specifically, I askedeach informant to discuss how they evaluatedinternational opportunities, specifically: (1) timingand considerations (i.e., earlyvs late-stage oppor-tunities: ‘‘What was your first (next, recent) inter-national opportunity? What factors or issues didyou consider when pursuing opportunity X? Didyou consider other opportunities?’’), (2) magnitude(i.e., ‘‘Was an opportunity a significant for you ornot?’’), and (3) failure/success (i.e., ‘‘What is diffi-cult about doing business internationally? Did youever fail, or make mistakes? Of all of your ventures,what was the most successful?’’). I then probed fordeeper meaning with follow-up questions such as‘‘What do you mean by that? Can you provideexamples of this?’’ (Lamb, Sandberg, & Liesch,2011). I asked ‘who, when, where, what, which, how,why’ questions (Pettigrew, Woodman, & Cameron,2001: 700) to stimulate narratives that reveal thethinking behind decisions, actions, events and relation-ships. I also asked the entrepreneurs to indicate theirfirms’ overall performance over the period of the studyusing an ordinal scale of ‘low, medium, high, to veryhigh.’ This information was cross-checked for consis-tency using the interviewees’ verbal responses on theoverall state of the firms, the presence/absence of majordeals and or financial losses and gains, and theirconfidence about the business.

The interviews were both retrospective and lon-gitudinal for two reasons: first, to capture pastinternationalization events, decisions, actions thathad occurred prior to the first interviews, andsecond, to follow each case’s important interna-tionalization event ‘as it was happening’ (as muchas possible), along with the informants’ thoughts,feelings, and perceptions (McMullen & Dimov,2013). Rapport building with the interviewees wascritical and so I frequently emailed them to say‘Hello’ and to convey information about the studyand its goals to enhance their willingness to shareinformation throughout the 7-year period. For all15 cases, interviews took place within a few days toone week after the internationalization event,defined as any signature inked on a deal or legallybinding commitment (made on paper) made by the


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Table

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ase

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430


focal firm. This timely follow-up was made possibledue to the close rapport developed between theresearcher and informants. This step helped tomitigate recall bias. The interviews range fromthree to five times, except for two cases (i.e.,WaterCo and SportCo, which had two interviewseach; see Table 1), because the informants werebusy. I promised anonymity and confidentiality(via a written and signed agreement) and was ableto obtain a high level of candor and access toprivileged documents and detailed informationrelated to internationalization decisions. Irequested and collected concrete evidence of inter-nationalization (i.e., transaction sheets, client/part-ner’s specific name, year and significance of theinternationalization event or decision, photos ofproducts and the physical firms, sample products,and IB correspondence) again, with assurance offull confidentiality. The first-round of interviews(15 interviews for the 15 cases) were face-to-faceand lasted 1 to 3 h and adhered to a semi-structured interview protocol. The subsequentinterviews were conducted by telephone (19 inter-views) or Skype (10 interviews) and others wereface-to-face (15 interviews) and lasted between30 min to 1 h. The multiple sources of evidence andinformants’ confirmation of data content helped ensureresearch validity and reliability (Yin, 2003). Addition-ally, I asked the informants to review the interviewtranscript and confirm that the information, eventsand decisions were correct.

Data AnalysisThe data collection and initial stages of dataanalysis overlapped over seven years during whichtime I cycled between the data, themes, concepts,dimensions and the relevant literature (Gioia, Cor-ley, & Hamilton, 2013; Nag & Gioia, 2012). Thusthe data and theory were considered together(Alvesson & Karreman, 2007). The data analysisfocused on the entrepreneur’s or his/her leadershipteam’s actions and/or decisions in pursuit of IEOs. Istarted with within-case analyses and proceededwith cross-case analyses.

I coded all the data using computer-aided qualita-tive data analysis (RQDA) software, an open-sourceprogram within the R statistical computing environ-ment (Chandra & Shang, 2017; Huang, 2014). Icoded conservatively by including only what wasexplicit in the data; that is, I did not infer intention-ality. For analytic clarity, ‘early stage’ IEO refers tothe entrepreneur’s evaluation of his/her first inter-nationalization opportunity. For entrepreneurs who

evaluated a second (different) IEO near the first IEO,‘early stage’ refers to doing so from 2 weeks to2 months after initiating his/her first IEO. A ‘latestage’ IEO refers to the entrepreneur’s evaluation ofsubsequent internationalization between three and15 years after his/her initial internationalization.

I identified and examined the decisions and/orevents based on the primary and secondary datasources, with two IB experts critiquing the inter-pretation process (Gioia et al., 2013). I conductedconsistency checks (Weber, 1990) and carefullycoded all textual data, allowing multiple coding ofeach textual unit. For example, the response, ‘‘wesigned up any agents and decided later if they weregood for us’’ could be coded as the ‘exploit-then-evaluate’ rule because the action preceded evalua-tion, or as the ‘least-effort’ rule if the coder felt thateasy-to-pass criteria were used).

Subsequently, I conducted a cross-case analysisand coded the textual data as first-level codes andfurther aggregated them to second-level codes andaggregate dimensions following Gioia’s methodol-ogy (e.g., Gioia et al., 2013; Nag & Gioia, 2012). Forinstance, during the data analysis ‘‘I target the mostrecognizable trade fairs, multinational companies, orlocations’’, ‘‘I just pursued whichever opportunitiesthat came first’’, ‘‘We don’t have a strategy like thosetaught in the textbook’’ were emerging in the first-level codes and coded respectively as ‘recognitionrule,’ ‘least-effort rule,’ and ‘no-rule’ which Iaggregated into ‘heuristics-based’ rules as a sec-ond-level code. This, along with other second-levelcodes such as ‘emotion-based, action-based andoutside-opinion based’ rules were then abstractedas ‘simple’ rules (see Table 2). Following a peerreview by two IB experts, the data structure wasfinally simplified into 30 first-level codes whichwere aggregated into 10 s-level codes – containing10 IEO evaluation rules – and finally three aggre-gate dimensions – comprising three general IEOevaluation rules (Table 2). I then probed the data tofind when in the decision process the entrepreneursused each evaluation rule (i.e., early or late stage),and the drivers and outcomes of the rules used, asshown in Table 2.

Next, I formed two teams, myself and two IBexperts on one team and two PhD students whohad been trained to code on other team, toindependently analyze the IEO-relevant data usingthe inductively derived variables (e.g., rules basedon heuristics, emotions, or action) as the codingscheme. Collectively, the research team assessed 94IEOs evaluated by the informants and coded 151


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Table 2 Characteristics of the evaluation of international entrepreneurial opportunities (IEOs)

General

rules

Elements of the rules in IEOs evaluation (and

representative quotes)

When Enablers

Simple

rules

Heuristic-based rules (What shortcut can I use?) Evaluation of early-stage IEOs Time constraint

Recognition (e.g., ‘‘prefer the recognizable largest int’l

players, events)

Least-effort (e.g., ‘‘pursue IEOs that comes first, no frame

of reference’’)

Resource constraint/

No-rules (e.g., ‘‘no strategy, being naıve’’) conservation

Simple calculus (e.g., ‘‘pre-commitment from int’l

buyers’’)

Fit (e.g., ‘‘cultural familiarity, replicate prior entry modes’’) Being a specialist

provider/producerLow-transaction cost (e.g., ‘‘free resources from int’l

partners, less costly option’’)

Emotion-based rules (What do I feel?) Entrepreneurs solely

influence the decision-

making process

Gut feeling (e.g., ‘‘it feels right, it seemed right’’)

People-driven (e.g., ‘‘attracted to the personality of the

int’l partners’’)

Action-based rules (What can I do?)

Give-then-receive (e.g., ‘‘free services to attract int’l

buyers’’)

Exploit-then-evaluate (e.g., ‘‘sign up first then assess

agents’ performance’’)

Outside-opinion-based rules (What do others say?)

Evaluated by others (e.g., ‘‘new suppliers/buyers chose to

be our int’l agents’’)

Relationship as positive cue (e.g., ‘‘one int’l agent refer us

to other global agents’’)

Leveraging others’ resources (e.g., ‘‘follow int’l partner’s

route to new a market’’)

Revised

rules

Externally-driven rules (What do they help me learn?) Evaluation of early-stage IEOs to

the first three years of

internationalization

Simple rules cannot filter

out unlikely IEOs

Ethics and trust criteria (e.g., ‘‘cheated by agents,

dishonest licensees’’)

Commitment criteria (e.g., ‘‘buyers were touting for

others, not committed to us’’)

High environmental

uncertainty

Non-opportunity criteria (e.g., ‘‘ethnocentrism, religious

barrier, lazy agents’’)

Situation-driven rules (Is it beyond my control?)

Ownership criteria (e.g., ‘‘negative effects of a change in

ownership, management’’)

Performance criteria (e.g., ‘‘clients’ low sales performance,

ignorant new CEO’’)

Internally-driven rules (I wish I had known that in advance)

Marketing and planning (e.g., ‘‘int’l marketing failure

lessons; re-think, re-plan’’)

Logistics criteria (e.g., ‘‘wrong way of serving int’l clients;

project mismanagement’’)

Complex

rules

Finer heuristics-based rules (Which option is better for us?) Evaluation of late-stage IEOs More time to make

decisions

Learned and tested rules (e.g., ‘‘quick calculation tells if X

is a good opportunity’’)

Leverage contingencies (e.g., search and then discover

int’l opportunities’’)

Increases in firm

resources


432


evaluative dimensions (see Table 3). The detailedcase-by-case analysis, along with their IEO evalua-tion rules used across time are available in WebAppendices 4 and 5. Finally, I developed agrounded model that linked the various conceptsand patterns that emerged.

FINDINGSThis study revealed three central findings detailedin Figure 1. First, entrepreneurs’ decision-makingmodels for developing IB centered on three gen-eral IEO evaluation rules labeled simple, revisedand complex. Each general rule contains sub-rules,which offer more specific nuances of the types ofopportunity evaluation used by the entrepreneurs(cf. Table 2). Second, time and other contingenciesinfluenced IEO evaluation rules use, where entre-preneurs transitioned from simple to revised tocomplex rules over time. Third, there is a parallelbetween the three general IEO evaluation rulesand each of the influential internationalizationmodels (i.e., Process, Network, Economics, andEntrepreneurship) such that each model mayguide entrepreneurs’ use of different IEO evalua-tion rules and their worldviews about opportuni-ties. In the next section, I first report importantcontextual background and then present the most

representative findings from each theme thatemerged in the study.

First, all of the serial and novice entrepreneursinterviewed had substantial business and manage-ment and/or entrepreneurial experience (Table 1).None were fresh university graduates when theystarted the business. Half of the informants had noexperience in the IEO business sector they entered(e.g., one had a background in accounting andanother in biotechnology, SeaweedCo and Bioac-tiveCo, respectively) and the rest had low to highexperience in the business sector they entered (e.g.,one had managed a cafe and started a grilledchicken restaurant (GrillCo) and another had SAPprogramming experience and entered SAP consult-ing (SAPCo)). Their IB experience ranged from highamong the eight serial entrepreneurs to low amongthe seven novice entrepreneurs.

Second, during the startup phase, none of theentrepreneurs relied heavily on personal resourcesbut embraced the bricolage principle (making dowith what is at hand; Baker & Nelson, 2005) to startup the business. One entrepreneur, for example,repurposed machines previously used to manufac-ture industrial brushes for wine cork production(CorkCo), another used a management consultingoffice space he/she rented to start a DNA diagnosisequipment business (DNACo), and an another

Table 2 (Continued)

General rules Elements of the rules in IEOs evaluation (and

representative quotes)

When Enablers

Strategic fit (e.g., ‘‘complimentary with int’l partner in

various aspects’’)

Outside-opinion-based rule (Carefully scrutinize what others

say)

Growth in the type and

number of stakeholders (e.g.,

partners, investors, managers)Being known and selected by others (e.g., ‘‘we are expert

so int’l clients came to us’’)

Economics-based rules (Which option is the best for us?)

More complex calculus (e.g., ‘‘use business plan, very

selective, 5 criteria’’)

Ideal opportunity (e.g., ‘‘OEM, Mr X model is the best way

to grow globally’’)

Large scale IEO search (e.g., ‘‘looking for big clients in

major markets’’)

Large scale IEO development (e.g., ‘‘develop large

opportunities with major clients’’)

Professional managers influence

the decision-making process

Efficiency and resource seeking (e.g., ‘‘go to China, it’s

cheaper, big market’’)

Long term commitment (e.g., ‘‘we wouldn’t’ walk away

even in tough times’’)


433


entrepreneur used a rent-free salon whose leaseterm was about to expire to experiment with a newno-frills salon concept (HairCo).

Third, all of the entrepreneurs internationalizedearly on – within 6 years after inception (seeTable 1). Their early internationalization was dri-ven by various factors including the time pressureto recoup investment amid their recognition ofglobal opportunities (e.g., BioactiveCo, CorkCo,DNACo, SeaweedCo), serendipitous discovery byforeign businesses (e.g., OdorCo, HairCo, RipeCo,SportCo, ClothCo), the founder’s or co-founder’sexisting contacts with foreign business players (e.g.,ColorCo, SAPCo, TelcoCo, GrillCo), and familiarity

with the IB environment such as Europe (e.g.,WaterCo and JuiceCo).

In general, this study found differences in howthe entrepreneurs evaluated IEOs across time (‘earlyvs late-stage’ IEOs) and that the evaluation rules toassess IEOs had influenced the firm’s performance.For the early-stage IEOs, the entrepreneurs weremore focused on actualizing non-existent opportu-nities into actual opportunities and in so doing theyrelied on ‘simple’, ‘fast’ and ‘frugal’ approaches. Atthis stage, achieving high firm performance (i.e.,sales and profit) was not on the entrepreneurs’agenda, in fact 11 cases had ‘low’ firm perfor-mance (see Web Appendices 4 and 5). Through

Table 3 A content analysis of the evaluation of international entrepreneurial opportunities (IEOs)

Panel A: Overall summaryEvaluation of early stage IEOs Early stage internationalization mistakes Evaluation of late stage IEOs

and the development of revised rulesHeuristics-based rules 11 Externally-driven rules 21 Heuristics-based rules 4Emotion-based rules 2 Situation-driven rules 11 Emotion-based rules 1Action-based rules 10 Internally-driven rules 6 Action-based rules 11Outside-opinion based rules 10 Outside-opinion based rules 15Finer heuristics-based rules 0 Finer heuristics-based rules 16Economics-based rules 0 Economics-based rules 33

33dedocselur# 38 80 Grand total # rules coded 151# IEOs observed 22 24 48 Grand total # IEOs observed 94

Panel B: Breakdown (by experience and sector)

Evaluation of early stage IEOs Early stage internationalization mistakes Evaluation of late stage IEOsand the development of revised rules

Serial & IB experience Heuristics-based rules 6 Externally-driven rules 9 Heuristics-based rules 4Emotion-based rules 1 Situation-driven rules 6 Emotion-based rules 1Action-based rules 6 Internally-driven rules 1 Action-based rules 0Outside-opinion based rules 4 Outside-opinion based rules 7Finer heuristics-based rules 0 Finer heuristics-based rules 7Economics-based rules 0 Economics-based rules 18

71dedocselur# 16 37 Total # rules coded 70# IEOs observed 12 12 27 Total # IEOs observed 51

Novice & no IB experience Heuristics-based rules 5 Externally-driven rules 12 Heuristics-based rules 0Emotion-based rules 1 Situation-driven rules 5 Emotion-based rules 0Action-based rules 4 Internally-driven rules 5 Action-based rules 11Outside-opinion based rules 6 Outside-opinion based rules 8Finer heuristics-based rules 0 Finer heuristics-based rules 9Economics-based rules 0 Economics-based rules 15


Grand total # rules coded 151Grand total # IEOs evaluated 94

Evaluation of early stage IEOs Early stage internationalization mistakes Evaluation of late stage IEOsand the development of revised rules

KB Sector Heuristics-based rules 8 Externally-driven rules 10 Heuristics-based rules 4Emotion-based rules 0 Situation-driven rules 10 Emotion-based rules 0Action-based rules 8 Internally-driven rules 5 Action-based rules 6Outside-opinion based rules 4 Outside-opinion based rules 10Finer heuristics-based rules 0 Finer heuristics-based rules 12Economics-based rules 0 Economics-based rules 19


NKB Sector Heuristics-based rules 3 Externally-driven rules 11 Heuristics-based rules 0Emotion-based rules 2 Situation-driven rules 1 Emotion-based rules 1Action-based rules 2 Internally-driven rules 1 Action-based rules 5Outside-opinion based rules 6 Outside-opinion based rules 5Finer heuristics-based rules 0 Finer heuristics-based rules 4Economics-based rules 0 Economics-based rules 14

31dedocselur# 13 29 Total # rules coded 558devresbosOEI# 13 13 Total # IEOs observed 34

Grand total # rules coded 151Grand total # IEOs evaluated 94


434


mistakes and learning in internationalizing theirbusinesses, the entrepreneurs were able to refinethe ways they evaluated IEOs and weed outpromising from unlikely IEOs. In the late-stageIEOs, as the international markets had become lessmysterious to the entrepreneurs, the entrepre-neurs generally relied on ‘prudent’, ‘calculative’,and ‘optimizing’ approaches. In 10 cases, this ledto ‘high and very high’ firm performance (see WebAppendices 4 and 5). Overall, the data suggest thatthe entrepreneurs engaged in ‘finding’ and ‘beingfound by’ opportunities. Regardless of the sourceof opportunities (finding or being found), whatwere the entrepreneurs’ decision-making processesin shaping the IEOs that led to firm internation-alization? The next section discusses these pro-cesses in greater depth.

Simple Rules When Evaluating Early-Stage IEOsAll entrepreneurs employed ‘simple rules’ to evaluateearly-stage IEOs. The data revealed that all

entrepreneurs used 13 simple rules aggregated intofour broad categories: (1) heuristic-based (‘‘Whatshortcut can I use?’’); (2) emotion-based (‘‘What do Ifeel?’’); (3) action-based (‘‘What I can do?’’); and (4)outside-opinion-based (‘‘What do others say?’’),described below. These revealed a mixture of use ofrules of thumb, emotion, action, and opinions ofother entrepreneurial actors to evaluate IEOs. Table 2offers a broad overview of each of the 13 simple rules(along with other 17 rules in the study) and WebAppendix 1 shows detailed examples for the simplerules. Due to space limitations, I describe only themost important evaluation rules for each category.

Heuristics-Based Rules (‘‘What Shortcut Can I Use’’?)The Recognition rule is a heuristics-based evaluationrule that refers to targeting the largest entities suchas international clients, producers and tradeshows(see Table 2 and Web Appendix 1). For instance,the founders of DNACo and CorkCo referred to‘‘the top three DNA labs in the US’’ and ‘‘the top 20

Heuristics-based rules(what shortcut can I use?)

Emotion-based rules(what do I feel?)

Action-based rules (what I can do?)

Outside-opinion based rules(what do others say?)

Evaluation of early stage IEOs

Finer heuristics-based rules(which option is better for us?)

Outside-opinion based rule(carefully scrutinize what others

say)

Economics-based rules(which option is the best for us?)

Evaluation of late stage IEOs

Externally-driven rules(what do they help me learn?)

Situation-driven rules(is it beyond my control?)

Internally-driven rules(I wish I had known that in

advance)

REVISED RULES

Opp

ortu

nity

max

imiz

atio

n +

deve

lopm

ent

Opp

ortu

nity

rev

isio

n

SIMPLE RULES

Opp

ortu

nity

act

ualiz

atio

n

COMPLEX RULES

Early stage internationalization mistakes and the development of revised rules

(Low) (High)

Accidental/unplanned internationalization,Network model of internationalization Process model of internationalization Economics model of internationalization

Time, resource availability; type of stakeholders, professional managers’ influence in firm decision-making

Entrepreneurship model of internationalization

Figure 1 A time-based process model of international entrepreneurial opportunity evaluation.


435


wine makers in the world’’ respectively as the mainevaluation criteria of their early-stage IEOs. Thesefounders relied on such evaluation criteria becausethe largest biotechnology and wine producer mar-kets are centered in the US, Southern Europe andSouth America; so the targets were easily identifi-able and recognizable. As well-illustrated by thefounder of DNACo: ‘‘We focused on the largestconferences and trade exhibitions … our originalthinking was to target the top three largest labs inthe US … there were only 50 labs in the 50 US statesand they all already had an older style of equip-ment.’’ This reflects the well-known recognitionheuristic, where if individuals are presented withtwo objects to rate, and recognize only one, theywill give a higher rating to the recognized object(Goldstein & Gigerenzer, 2002).

I developed the ‘no-rules rule,’ which uses nosystematic structure or criteria in opportunity eval-uation, by how the respondents described theirapproach as ‘‘embracing luck, having no strategyand being naıve’’ (OdorCo and BioactiveCo). Thefounders of OdorCo, an anti-odor chemical manu-facturer, relied on the ‘no-rules’ rule in evaluatingtheir first IEO. A few months before they foundedOdorCo, they were approached by a US businessmanwho was looking for innovative odor control solu-tions for the US market. At that time, they did nothave any experience or criteria upon which toevaluate the opportunity but believed that thepotential US partner could sell some of the productto US consumers. This led to their early (and initial)internationalization. They also relied on simplecalculus (having a pre-commitment from a foreignbuyer) and the ‘fit’ rules (a match in productavailability, quality and timing between two parties)and the pre-existing distribution networks of a USpartner (a ‘low-cost’ solution to expand quickly withlittle risk). Therefore, the entrepreneurs relied onmultiple rules. As an OdorCo founder commented:

I think it was just pure sheer dumb luck with us the way we

have approached things [the international markets] because

we weren’t following a strategy based on a Salesman 101

course. We are keeping it simple. … Just by coincidence an

American businessman had come out to Australia looking

for odor control and heard about us [via [an online] bulletin

board system], probably via the university. So he placed an

order with us … before we even named the product. We

didn’t have anything [done] except the testing…. It’s really

funny what happened. He’s a businessman and had an

extensive distribution network in the US based on his

existing business.

Emotion-Based Rules (‘‘What Do I Feel?’’)This study found that some entrepreneursappeared to be more emotion-driven than othersin making decisions about IEOs. The use of emo-tion in evaluating IEOs comprises gut feelings,which is intuition-based, such as ‘‘This agent wasthe first person I met in China and it felt right’’(ClothCo); and people-driven rule, evaluation basedon personal characteristics, by being ‘‘attracted tosomeone’s personality’’ (HairCo), suggesting some-one may be easy and enjoyable to work with. Therole of emotion could have influenced entrepre-neurs who did not plan to internationalize theirbusinesses but encountered by chance a favorablesituation or business people who they resonatedwith. Importantly, profit was not at the top of theiragenda. A representative example of the emotion-based rule is shown by the founder of HairCo, asalon owner, who decided to start his first inter-national franchisee when he met a businessman ata yoga retreat whom he felt good about. AsHairCo’s founder described it:

I must say that I was attracted by the personality of this

person [the first international franchisee, a New Zealander].

It wasn’t necessarily the dollars. I met him at a yoga retreat

and we got chatting and that’s how it happened really. It was

fate and I know that he had … people skills.

Action-Based Rules (‘‘What I Can Do?’’)The data show that entrepreneurs also relied on realactions to make opportunities happen (i.e., ‘action-based’ rules) instead of waiting for IEOs to appear.The entrepreneurs who relied on these action-basedrules appeared to be much more aggressive (asobserved in their body language and tone duringthe interviews) and had lengthy entrepreneurialexperience. The action-based rules comprise the‘give-then-receive’ rule, by ‘‘giving free services soas to sell profitable products’’ (TelcoCo) or investingmany months and sending product samples andemails to develop a conversation with foreignbuyers (WaterCo) before their IEOs were actualized.Another frequently used action-based rule is the‘exploit-then-evaluate’ rule, as exemplified by thefounder of CorkCo, a new entrant in the syntheticwine cork business who acted first before makingan evaluation and later used the outcome to decidewhich opportunities to focus on. This rule enabledhim to find promising IEOs (i.e., high-performingagents) by the ‘process of elimination,’ as illus-trated by his statement:


436


We signed up any agents who were interested in us and so

once we had agents, we were pushing them to start selling. I

think they [the first two foreign agents] just said ‘‘Yes we are

trying very hard’’ but in the end they didn’t sell anywhere

near enough so we had to say ‘Goodbye’. We made the

change [hired a new agent] and the new guy is selling 10

times what they were selling.

Outside-Opinion-Based Rules (‘‘What do others say?’’)Outside-opinion-based rules, or the reliance onothers’ opinions, in this case, the opinion of otherentrepreneurial actors in the evaluation of early-stage IEOs, also emerged. The data reveal thereliance on the ‘evaluated-by-others’ rule; forinstance, as the respondents stated, ‘‘a manager ofthe Japanese firm watched the Davis Cup and sawwe sponsored a team’s sportswear and enquiredabout our product’’ (SportCo) and ‘‘the Taiwanesesupplier showed interest in being our agent’’(OdorCo). Another rule, the ‘relationship-as-posi-tive-cue,’ or treating an existing contact’s strong tiesas a favorable opportunity signal; this is reflected inthe narratives of our respondents, such as ‘‘one Fujioffice introduced us to other Fuji offices’’ (ColorCo)and ‘‘our local franchisee’s brother in New Zealandwas interested in us’’ (GrillCo). Another rule type isthe leveraging others’ resources, where others’resources are seen as a favorable opportunity signal,such as ‘‘we followed our German buyer’s route toenter the nutraceutical markets,’’ which revealed anew way of internationalizing (BioactiveCo).

The following illustrates how the evaluation byother actors (i.e., a new foreign supplier) positivelyinfluenced the entrepreneurs’ decision. It showshow a search for a foreign supplier (to develop aspecialist product) led to a positive evaluation bythe supplier, which led to a partnership in China.As the founder of ClothCo, a children’s fashionmanufacturer, explained:

We had a presentation of our first [product line] of clothes.

The [Chinese] manufacturer came and saw the [product line]

in its entirety and was so impressed that she said that this

would sell very well in China. So she approached us to go

into partnership [with her] in China. It sort of fell into place

because the Chinese [manufacturing] company approached

us and said, ‘‘You should open a store in China.… Do you

want to be a partner?’’ She was convinced it would sell very

well, as it was a low-cost, [and had] no initial outlay.… It’s

good for her because she manufactures the goods. I basically

don’t have to do much, I will get a cut from the wholesaler.

Counting the Simple Rules UseTable 3 provides the content analysis of the IEOevaluations (see also Web Appendices 4 and 5 formore details). This study finds no clear pattern in

terms of the frequency and tendency to use partic-ular types of simple rules that distinguish theknowledge-based from the non-knowledge-basedsectors or the experienced vs less experiencedentrepreneurs; they used all 13 simple rules. Someentrepreneurs used multiple simple rules to evalu-ate an IEO while others used one simple rule (seeWeb Appendices 4 and 5). The most observabledifference is the substantially greater use of finerheuristics-based and economics-based rules in theevaluation of late-stage IEOs; these rules were notused in the early-stage IEOs – instead heuristics-,emotion-, action-based, and outside-opinion-basedrules were used (to be discussed in more depthunder the ‘Complex Rules’ subheading below).

The location and entry-mode decisions for early-stage IEOs across all 15 cases were based on thesimple rules (see Table 3, Web Appendices 4 and 5).In terms of location decisions, no systematic andstructured sequence of decision-making in foreignmarket selection was found (e.g., ‘‘choose foreignlocation first then pick the right entry mode,’’ orvice versa). Thus the location of internationaliza-tion was unpredictable, ranging from distant mar-kets to culturally-similar markets. In terms of entry-mode, exporting, licensing and distributorship –essentially low-risk, low-commitment entry modes– were widely used in the cases because they areeasy, not complicated (i.e., BioactiveCo, OdorCo,ColorCo, DNACo, WaterCo, SportCo), can fulfillthe desire/request of the buyers/partners (i.e., OdorCo,SeaweedCo, RipeCo, SportCo, JuiceCo), and to tapthe resources of buyers/partners (i.e., ColorCo,ClothCo). The reasoning behind the use of otherentry modes includes letting the local experts sellquickly (i.e., master franchising model by HairCoand GrillCo; partnership by ClothCo) and match thefocal firm’s business model (i.e., project-based modefor SAPCo and TelcoCo (both software developers)).

Why were the simple rules predominant in theevaluation of early-stage IEOs? Although priorknowledge of the sector (i.e., domain familiarity)did not appear to influence the IEO evaluationprocess, the findings reveal that entrepreneurs wereinfluenced by time pressure to generate cash flow forsurvival, as they were running out of or lackingresources (i.e., SeaweedCo, BioactiveCo, WaterCo,DNACo, JuiceCo, SAPCo, TelcoCo, RipeCo,ClothCo, SportCo), or conserving resources (i.e.,BioactiveCo, DNACo, WaterCo, OdorCo, ColorCo),which could have discouraged the use of thecomplex rules. Additionally, the entrepreneurs alsoadmitted that they hate or do not trust market


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research (i.e., WaterCo, JuiceCo), and were science-,not marketing-driven – a belief in that they asscientists-turned-entrepreneurs do not follow busi-ness textbook recommendations (i.e., OdorCo).Moreover, some reported that they are specialists(producers of unique products not offered bymainstream players or unique market positioning)and therefore easily searched and evaluated byinternational players to which the entrepreneursresponded positively and quickly (i.e., BioactiveCo,JuiceCo, GrillCo, OdorCo, ColorCo, RipeCo,ClothCo, and SportCo) (see Web Appendices 4and 5). For example, the founder of RipeCo, amaternity wear producer, stated that ‘‘When you’reselling a niche product … most countries don’thave that many suppliers. Like in Dubai forinstance, they [an Australian woman] approachedus [after fortuitously seeing their display in Queens-land]. Being in a niche I think has helped [stimu-late] people to have more interest in us.’’

The above findings led to insights which aresummarized in the following propositions:

Proposition 1: Entrepreneurs of early interna-tionalizing firms are more likely to use simple rules intheir early-stage of internationalization.

Proposition 2: The use of simple rules by entre-preneurs of early internationalizing firms is morelikely to lead to unpredictable choice of location ofinternationalization, including distant and culturallysimilar markets, and the tendency to use low-risk andlow-commitment entry modes.

Proposition 3: The use of simple rules by entre-preneurs of early internationalizing firms is influencedby time pressure, entrepreneurs’ prior decision-makingmodels, and the firms’ unique market positioning thatenable the firms to be found by opportunities thansystematically analyzing them.

Revised Rules When Evaluating Early-stage IEOsDuring the first three years of internationalization,the data show that when evaluating early-stageIEOs, the entrepreneurs often made major mistakesor encountered setbacks in international markets.These experiences offer rich learning opportunitiesbut most importantly, they allow the entrepreneursto revise the simple rules to improve their IEOevaluation. The data reveal seven types of rulesthat the entrepreneurs revised that fall into threecategories – externally- (‘‘What do others help melearn?’’), situation- (‘‘Is it beyond my control?’’), and

internally-driven (‘‘I wish I had known that inadvance’’) rules (see Table 2, Web Appendices 2, 4and 5), described below.

Externally-Driven Rules (‘‘What Do They Help MeLearn?’’)The externally-driven rules for the IEO evaluationinclude criteria based on problems caused by otherplayers (e.g., false representations by agents) cate-gorized into ethics and trust, commitment, and non-opportunity (Table 2). The problems forced theentrepreneurs to learn new things that they didnot consider earlier in IB. The problems ended outcausing significant financial losses for many firms(e.g., SeaweedCo, JuiceCo, HairCo, GrillCo,OdorCo, ColorCo, SAPCo, RipeCo, and SportCo;see Web Appendices 2, 4 and 5). These externally-driven rules include ethics and trust because someentrepreneurs were ‘‘cheated by foreign agents’’(e.g., an old friend of a Taiwanese agent misrepre-sented himself as the agent and signed a newcontract with OdorCo) or ‘‘dishonest licensees’’(e.g., an Irish licensee refused to pay the licensefees owed to SportsCo). They also include commit-ment criterion, that is avoiding those ‘‘not commit-ted to the focal entrepreneur’’ (e.g., preferringpotential foreign franchisees who are committedto do business together and willing to come andlearn about the franchise; HairCo and GrillCo) andnon-opportunity criteria, because certain markets areperceived as having an ethnocentric bias (e.g., somebuyers question the quality of Australian products;SAPCo and SeaweedCo), presenting religious barriers(e.g., negative public reaction to an image of abrand perceived as obscene in a Muslim country;JuiceCo), or lazy agents (e.g., ‘‘the UK guys take ourproducts, buried us but no one sells’’; ColorCo andRipeCo). The following case described by theSportCo’s founder illustrates how new rules, addedover time, such as those pertaining to ethics andtrust, became important rules for the IEO evalua-tion as mistakes occurred that caused setbacks andsubstantial financial losses.

The first guy [a firm licensed to manufacture SportCo’s

sportswear], got greedy so I had to then withdraw the license

because he didn’t pay his license fee. Then I got another

company to take over the license and … he had a partner

who was a manufacturer and they had an argument

12 months into the joint venture. Everything was going

alright and it was personal … he [got] involved with women

or whatever and I lost the manufacturing arm. His partner

was the person who had all the machines. So it nearly went

under. (SportCo founder)


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Situation-Driven Rules (‘‘Is It Beyond My Control?’’)The second category of revised rules is situation-driven rules, and their criteria are temporal. Theserules are driven by problems beyond the entrepre-neurs’ control. These rules emerged after theentrepreneurs experienced financial or opportunitylosses (e.g., SeaweedCo, BioactiveCo, CorkCo,DNACo, JuiceCo, OdorCo, ColorCo, and SAPCo;see Web Appendices 2, 4 and 5). One of the revisedrules is ownership criteria which include stability inthe ownership or management of foreign businesseswhich often affect IEOs (e.g., ‘‘the [major] licensingdeal with XYZ [a multinational firm] fell off becauseour new management prefers a new direction,’’JuiceCo; or ‘‘It went nowhere because the potentialclient was sold to a competitor,’’ DNACo). Anotherrevised rule is performance criteria (e.g., ‘‘they [for-eign agents] lost focus and didn’t sell anything,’’ColorCo; ‘‘the [US] client’s son who took over thebusiness was too busy with Ferraris and ignored us,’’SeaweedCo). A representative example of thesetypes of revised decision-making rules is the caseof ColorCo, a software developer. The founder’ssalesperson (a business partner who set up a separatecompany as a marketing arm) signed up resellersbased on relationships from his 30 years in theprinting industry. However he kept failing to findthe right opportunities in certain foreign markets,losing the opportunity to generate internationalsales. As the ColorCo founder recalled:

[It] was a disaster—really useless. We were so excited in the

beginning and then [the British reseller] just lost focus. So

then we went to another dealer there who did nothing and

then we had another dealer and another one. I think we are

on to the 8th or 9th or 10th [resellers in the UK] one now.

Internally-Driven Rules (‘‘I Wish I Had Knownthat in Advance’’)The third revised rule category is internally-drivenrules, derived from the founders’ mistakes, some ofwhich caused significant financial losses and evennear-bankruptcy for some entrepreneurs (e.g.,OdorCo, SAPCo, TelcoCo, and WaterCo; see WebAppendices 2, 4 and 5). These rules emerged from theentrepreneurs’ utter ignorance of what they weresupposed toknowtodo IBsuccessfully.These includemarketing and planning criteria (e.g., ‘‘We didn’t knowwhat we could say or couldn’t say’’ when marketingand labelling chemicals in international markets,OdorCo; ‘‘we felt naıve about this first foray [intoEurope] and said we’d better re-think, re-plan and bea lot more patient,’’ SAPCo). The other revised rulesalso included logistics criteria (e.g., ‘‘we should have

used a [local] reseller,’’ TelcoCo; ‘‘We mismanaged[the manpower and client servicing], it nearly put usout of business,’’ WaterCo). The case of TelcoCo, asoftware developer, illustrates how internally-drivenrules changed how some entrepreneurs evaluatedIEOs into the future. In the first three years ofoperation, the TelcoCo founder and his engineersrealized that they lacked international logistics andoperations knowledge (e.g., contract knowledge, theeffects of time differences on service operations,failure to have their own employees at the client site)when servicing a large Hong Kong client. Thisresulted in near-bankruptcy. The setbacks enabledthe founder to revise the rules for IEO evaluation andin turn, this enabled the firm to recover and success-fully establish itself several years later. As TelcoCo’sfounder stated:

We should have had local support on the ground—we lost

day-to-day contact with the client and little problems were

not resolved quickly enough. So we ended up with an

unhappy client. You really need to be on the ground with

local teams there to just smooth out some of those teething

problems and work through them and we didn’t do that. So

we learned our lesson.… So now we sign a Teaming

Agreement on an opportunity-by-opportunity basis.

Counting the Revised Rules Use

A content analysis of the revised decision-makingrules from the early-stage IEOs until the initial yearsof internationalization reveals that externally-dri-ven rules develop with higher frequency than thesituation- and internally-driven rules (see Table 3,and Web Appendices 4 and 5 for more detail). Thismay reflect the founders’ inability to control prob-lems caused by other actors and illustrate whyfeedback and lessons learned from business interac-tions can help the founders improve their IEOevaluation. Overall, 11 out of the 15 firms had low-level firm performance in the early stage of interna-tionalization. Those that had medium-level perfor-mance (e.g., CorkCo, JuiceCo, GrillCo, HairCo)were assisted by the relatively large domestic marketdemand compared to those that were more andfully dependent on international markets (see WebAppendices 4 and 5). These show that, for entre-preneurs of early internationalizing firms, the initialyears of internationalization is more about learningabout IEOs rather than ‘building wealth or making alot of profit’ and a desire to improved decision-making rules for future success. In this IEO learningprocess, the entrepreneurs often stumble and faceproblems that they cannot control and cannot


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know of earlier leading to suboptimal selection ofIEOs and eventually unfavorable firm performance.This insight led to the next proposition:

Proposition 4: Entrepreneurs’ ability to reviseopportunity evaluation rules during firm internation-alization is more likely to lead to better selection offuture opportunities.

Complex Rules When Evaluating Late-Stage IEOsTurning to late-stage IEOs, the cross-case findingsreveal that entrepreneurs’ evaluation of late-stageIEOs relies on nine types of rules categorized as finerheuristics-based (‘‘Which option is better for us?’’) andeconomics-based (‘‘Which option is the best for us?’’)rules (see Tables 2–3 and Web Appendices 3–5 formore detail), described below. However, for somecases, entrepreneurs use simple rules such as theoutside-opinion-based rule (e.g., being approached byother entrepreneurial actors for their expertise)albeit in a more discerning way (‘‘Carefully scruti-nize what others say’’). As shown below, many ofthese complex rules resemble the optimization andcalculative logic used in the Economics model ofinternationalization.

Finer Heuristics-Based Rules (‘‘Which Option is Betterfor Us?’’)The finer heuristics-based rules are refinements ofthe rules learned in a current venture; they areessentially more strategic than the simple rules(see Web Appendix 3 and Tables 2–3). The first ofthe three types of finer heuristics-based rules is thelearned-and-tested rule, a rule that has passed ‘thetest of time’ across multiple IEOs. This rule helpedentrepreneurs to recognize ‘possible’ vs ‘unlikely’IEOs. It reflects the entrepreneurs’ mental modelabout IEOs. As a consequence of this rule use, sixof the 15 entrepreneurs found highly promisingIEOs (see Web Appendices 4 and 5). For instance,after a decade of internationalization and fivemajor setbacks with IB activities, the founder ofColorCo found the rule of ‘two distributors percountry’ the most efficient approach to interna-tionalization because it creates competition andtherefore boosts the distributors’ motivation tosell more. The founder of WaterCo, a producer ofbranded mineral water, illustrates this rule. Heinitially used ‘simple’ rules (i.e., ‘give-then-re-ceive’ and ‘good fit’) to evaluate early-stage IEOs,but after five years of internationalization, andafter confronting buyers for their lack of

commitment and high logistics costs, he devel-oped a more precise and effective rule to assesslate-stage IEOs:

I will do quick calculations saying, ‘‘Well there has got to be

a 50% margin for the retailer, 30% margin for the distrib-

utor…’’ I do a quick conversion of your cost price … and I

have a simple spreadsheet that I just plug those figures into

and I can tell you whether I’m going to do business or not,

whether we can be competitive against Evian, etcetera.

There are two other types of finer heuristics-basedrules: ‘leveraging contingencies’ and ‘strategic fit’.The ‘leveraging contingencies’ rule is more calcu-lative than the simple rules because the entrepre-neurs, over time, become more knowledgeableabout the ‘possible’ vs ‘unlikely’ IEOs. The ‘strategicfit’ rule is also more calculative than the ‘fit rule’ asthe entrepreneurs emphasize the strategic match(e.g., products, business model, supply chain, firmsize, and priority) between existing and new IEOs.One example is TelcoCo, a software developer,whose CEO realized that an optimal approachwould be to partner with smaller firms that prior-itized his firm’s needs because earlier, a large globalconsulting firm had locked them out from partner-ing with other firms. These rules helped nine of the15 entrepreneurs to identify highly promising IEOs(see Web Appendices 4 and 5). A good example ofthe ‘more calculative leveraging contingency’ rulecomes from OdorCo, the odor chemical manufac-turer. After 15 years of internationalization, andafter confronting several dishonest foreign agents,which led to lawsuits, its founders stated that theirlate-stage IEOs emerged from careful evaluation ofunsolicited inquiries from overseas to ensure thatonly honest and capable agents were hired and thatthey strategically developed only existing IEOsbecause the existing agents had already proventheir honesty and capability. As the OdorCofounder explains:

We no longer signed up anyone who found us [on Google]

after all the mistakes we made. We have to be very careful

[now] … there are many dishonest and horrible people … so

finding the right agents takes time.… It’s easier to work with

those we already know.

Outside-Opinion-Based Rule (‘‘Carefully ScrutinizeWhat Others Say’’)The data also reveal that nine of the 15 entrepre-neurs used the outside-opinion-based rule – whenapproached (e.g., for a partnership) by a foreignfirm based on these firm’s positive reputation,credibility, expertise, and/or specialty, do a thorough


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assessment of the outside fir – as an evaluationapproach in late-stage IEOs (see Table 3, and WebAppendices 4 and 5). Although the outside-opinion-based rule can take place in late-stage IEO evalua-tion, the founders tend to be ‘‘more discerning’’ inresponding to such opportunities compared withearly-stage IEOs. SeaweedCo, a manufacturer ofseaweed-based medicinal products, illustrates thisrule. After internationalizing for five years andrecognizing that it had a special advantage inselling seaweed as medical ingredients in the USand Japan, the SeaweedCo founder agreed to part-ner with a Canadian pharmaceutical company thatapproached them and offered a large, long-termcontract manufacturing business:

The way we extract our GFS [a chemical element from

seaweed] compound is [by] using a proprietary … process

that retains the natural properties of [the seaweed], while

competitors use solvents in their processes to extract it.

That’s a big advantage [for us].… They [a large Canadian

buyer] picked us and we had never even heard of them … it

was a large, 15-year contract to develop the ingredients.

Economics-Based Rules (‘‘Which Option is Bestfor Us?’’)Use of economics-based rules is the most explicitdistinction between late- vs early-stage IEO evalua-tion across the cases. Twelve out of the 15 late-stageIEO evaluation cases used systematic and economicallydriven rules (see Tables 2, 3 and Web Appendices3–5). As a consequence of the use of these rules,eight entrepreneurs found highly promising IEOs andfour found promising IEOs (see Web Appendices 4and 5). The data reveal six types of economics-basedrules: complex calculus, ideal opportunity, large scaleIEO search, large scale IEO development, efficiency andresource seeking, and long-term commitment rules (seeTables 2, 3). These rules all focus on identifying thebest IB opportunity out of many opportunities thatthe entrepreneurs had exploited in the currentventure. I discuss the most representative examplesof economics-based rules below.

The ‘complex calculus’ rule requires the use of amore calculative approach to evaluating IEOs suchas using business plans, conducting marketresearch, analyzing multiple criteria, performingcost–benefit analyses, and identifying large IEOsand well-known foreign businesses in order toincrease revenues. RipeCo, a maternity fashionwearmanufacturer, offers an example of how the ‘com-plex calculus’ rule was used to evaluate a late-stageIEO. In its first internationalization to the MiddleEast, the founders of RipeCo relied on the ‘no-rules’

rule (e.g., ‘‘we pursued whichever opportunitiesthat came first’’) to export their maternity fashion-wear, after an Australian mother from Dubai inad-vertently found RipeCo in a department store inBrisbane. In contrast, after five years of interna-tionalizing, RipeCo founders evaluated IEOs in aremarkably different way, relying on the complexcalculus rule; they conducted market research andcost–benefit analysis as described by RipeCo’sfounder:

After our entry into the US and the difficulties we [had] faced

[earlier in the UK, Ireland, New Zealand], we became a quite

serious exporter, so from that time [onwards] everything was

different. Every time you enter a market now [you must be]

much more calculating [about cost and benefits] and [do] a

lot more research [on market demand, competition, logis-

tics]. And we … have to weigh all of the other things when

going into that market. We are quite strategic about new

markets.

The ‘ideal-opportunity rule’ pertains to a type ofopportunity that enables accelerated firm growth forrevenue and cash flow. This is another type ofeconomics-based rule. In late-stage evaluation, as aresult of accumulated learning and an ability todistinguish possible vs unlikely IEOs, many of theentrepreneurs had recognized the ‘ideal’ opportunity– one that ultimately enabled them to become moreeconomically driven in choosing IEOs. An exampleof this rule is ColorCo, the software developer,whose founder learned that being an OEM (originalequipment manufacturer) for large multinationalfirms is a fruitful route for development and growthas it requires few resources and almost guaranteesstrong sales. ColorCo founder learned this after adecade of actively pursuing many IEOs (and makingplenty of mistakes), as illustrated below:

Find more OEMs because it’s an easy way to grow, you don’t

need any more staff, you don’t need any more people, it’s like

you buy that company, it becomes yours and they sell your

product. But because it’s got their name and once someone is

an OEM they have to buy huge amounts from you each time

and then they sell them. We discovered that recently.

The ‘large-scale international search’ rule isanother important economics-based rule. The datashow that as the entrepreneurs gained more IBknowledge and resources and had more time tomake decisions, they were increasingly able toobjectively assess IEOs and therefore conductlarge-scale IEO searches. A good example of theuse of this rule is HairCo, a hair salon franchise.HairCo conducted a large-scale opportunity searchto expand into lucrative international markets with


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large populations (they wanted to optimize prof-itability and cash flow using population size as aproxy). They were not in a hurry to pursue largescale IEOs because the firm had accumulated sub-stantial resources after several years of growth. Thefounder did not search for IEOs nor prioritizeprofits in the evaluation of early-stage IEOs. Inthe late-stage however, about eight years after thefirst internationalization, profits began to matter.As the HairCo founder revealed:

We are now actively looking [to internationalize] overseas

[in the US and China]. We are putting together a package for

potential master franchisees in territories around the world

and I would probably do it the same way as I did it in New

Zealand [using master franchising for larger markets].… We

use the size of the population and calculate a percentage

value based on our experience to see if we should open a

franchise in a country or city.… Also with our 21-haircuts-

per week model [franchise fees based on a weekly fixed fee,

not a percentage of sales] we don’t have to worry about cash

flow or having to audit the franchisees’ books.

A rule focused on ‘efficiency and resource-seeking’also emerged for the late-stage IEOs (see Tables 2, 3,Web Appendices 4–5). For example, SportCo startedoutsourcing its garment manufacturing to China(previously manufactured in Australia), as manu-facturing costs were lower. In its late-stage ofdevelopment, the SeaweedCo founder began secur-ing sources of seaweed from pristine environmentsin Southern Patagonia and started investing equityin seaweed suppliers there as opposed to harvestingseaweed from local (less clean) waters as he haddone in the initial years of internationalization.Another case of the ‘efficiency and resource-seek-ing’ rule is the CorkCo case, a synthetic corkmanufacturer based in South Australia. After sevenyears of fast growth, the founder felt that the firmneeded to be closer to major wine markets besidesAustralia’s so as to supply its buyers more efficientlyand obtain better face-to-face feedback from buy-ers. The CorkCo founder explains:

We stayed the way we were until a year ago when we opened

up a printing facility.… We felt [that] the delay in getting to

overseas markets was too long. People in the wine industry

want corks tomorrow or next week. So we now have a [cork

manufacturing] facility in France and we are just about to

build a big facility in Spain.

Counting the Complex Rules UseThis study generally found that the evaluation offoreign market location and entry mode for late-stage IEOs tended to follow the finer heuristics-based rules and economics-based rules (see content

analyses in Table 3 and Web Appendices 4 and 5).The interviews revealed that, in the evaluation oflate-stage IEOs, most entrepreneurs had gainedinsights about how best to identify promising IEOs,such as choosing to work with the most honest andcapable foreign partners, and ramping up analysis,and research when an opportunity emerges (vsexploring ‘unlikely’ IEOs, such as those in foreignlocations with trade, logistics or cultural barriers,and potentially problematic partners, buyers,agents, and distributors, and with questionableentrepreneurial practices). We also found that forlate-stage IEOs, most entrepreneurs were highlymotivated to pursue more economically rewardinglocations, such as those that provide access to largeconsumer markets, high quality raw materials sup-ply, and/or proximity to major industrial buyers.

Moreover, the more experienced entrepreneurshad become more focused on using riskier and morecommitted entry modes through further developmentof existing IEOs, or by continuing with existing entrymodes but focusing on more lucrative foreign mar-kets. Many of this study’s 15 entrepreneurs adoptedglobal contracting practices and offered licensing toselect large buyers (i.e., SeaweedCo and Bioac-tiveCo), global OEM manufacturing (i.e., sub-man-ufacturing for large companies such as DNACo andColorCo), foreign direct investment by establishingfactories or offices (i.e., CorkCo and SAPCo), andpartnerships with large firms (i.e., TelcoCo,ClothCo, SportCo). Across the 15 cases, this shiftoccurred no earlier than three years after the initialinternationalization.

As the experienced entrepreneurs were better ableto select promising IEOs in various markets and useriskier entry modes, 10 of the 15 case firms’ overallperformance increased substantially to a ‘high orvery high’ level. Of the five others, four firms’performance increased to a ‘medium’ level (seeWeb Appendices 4 and 5). The fifth firm, JuiceCo,had a ‘very low’ performance.

What explains the increasing use, over time, ofthe complex rules in the evaluation of late-stageIEOs? The findings reveal that, in general, 14 of the15 case firms (94%) substantially increased theirfirm resources (see Web Appendices 4 and 5 andTable 2). JuiceCo is a special case as it experiencedtwo factory fires and hence nearly went bankrupt; itwas eventually taken over by a venture capital firm.In seven cases (47%), the entrepreneurs hiredprofessional CEOs and managers to join the ven-ture, which reduced the entrepreneurs’ role in theinternationalization decision-making processes


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and increased the decision-making involvement ofnew stakeholders such as venture capitalists andinvestors (who provided new and needed sources offinancing) (see ‘qualitative remarks’, Web Appen-dices 4 and 5 and Table 2). Unlike the entrepre-neurs’ evaluation of early-stage IEOs, theirevaluation of late-stage IEOs seems to show noevidence of time pressure to generate cash flow asthe firms by then generally had attained moreresources via venture capitalists and investors, andmore opportunities. Also, at the late stage, withprofessional CEOs and managers at the helm andnew stakeholders influencing decision-making, thedecision-making styles changed. The CEOs, man-agers and investors preferred to use analyticaland systematic (i.e., normative) decision-makingapproaches. These conditions (e.g., having firmresources, more decision-makers in the firm) reflectthe presence of internationalization slack, an adap-tation of the organizational slack concept (Bour-geois, 1981), which influenced IEO evaluationrules. The above findings led to additional insightssummarized in the following propositions:

Proposition 5: The use of complex rules in late-stage firm internationalization correlates with increasesin firm resources, decision-making time, the involve-ment of professional managers as the main decision-makers in firm internationalization, and new stake-holders highly concerned with firm performance(profits).

Proposition 6: The use of complex rules in thelate-stage of firm internationalization is more likely toidentify successful opportunities and therefore achievehigher firm performance.

DISCUSSIONInternationalization, an entrepreneurial behaviorand process that occurs in real time, and over time,entails opportunity discovery, evaluation andexploitation processes (Coviello, 2015; Jones &Coviello, 2005; Oviatt & McDougall, 2005). Oppor-tunity evaluation is central to the study of theentrepreneur’s cognitive processes in internationaldecisions and, arguably, remains underexploredand poorly understood (Lamb et al., 2011; Maitland& Sammartino, 2015; Zahra et al., 2005). Scholarshave recently begun to link internationalizationand effectuation theory (e.g., Kalinic et al., 2014;Chetty et al., 2015) yet very little research explicitlystudies the role of time and its impact on interna-tional entrepreneurial opportunity (IEO) evaluation

and actualization. By interviewing the founders of15 early-internationalizing small to medium sizedfirms in Australia from 2005 to 2012, this studyexplores and answers the primary research question:How do entrepreneurs evaluate international entre-preneurial opportunities (IEOs)? This study adds adimension to this exploration, time. What role doestime play in IEO evaluation? By focusing on time inthe opportunity evaluation process, we learn howentrepreneurs of early-internationalized firms (i.e.,those that internationalize within 6 years afterinception) evaluate IEOs – what they evaluate, andhow and why. This study also examines the variousways these entrepreneurs evaluate internationalopportunities over time, and looks at how theirevaluation processes evolve with experience in theinternational entrepreneurial arena. In general, thestudy uncovers the three general rules of IEOevaluation, which I term simple, revised, and com-plex. The findings offer a solid foundation for thedevelopment of a Time-based Process model ofinternational entrepreneurial opportunity evalua-tion (Figure 1).

As depicted in Figure 1, entrepreneurs’ evalua-tion of early-stage IEOs is characterized by thepredominant use of unstructured, minimalist sim-ple rules that reflect a simple, fast and frugalapproach. These simple rules category has 13 sub-rules that can be categorized into heuristics- (‘‘Whatshortcut can I use?’’), emotion- (‘‘What do I feel?’’),and action-based (‘‘What can I do?’’), and outside-opinion based (‘‘What do others say?’’) evaluationrules (see Tables 2, 3). The entrepreneurs’ evalua-tion of the early-stage IEOs throughout the first fewyears of internationalization can be characterized asrevised rules, with seven sub-rules that can becategorized into externally-driven (‘‘What do theyhelp me learn?’’), situation-driven (‘‘Is it beyond mycontrol?’’), and internally-driven (‘‘I wish I hadknown that in advance’’) evaluation rules (seeTable 2). The most important part of the model ishow the evaluation of early- to late-stage IEOstransitions as the entrepreneurs gain knowledge,have more resources in the firm, have more time tomake decisions, and are influenced by professionalmanagers and new stakeholders (e.g., investors)who join the firm. As seen in Figure 1, the evalu-ation of late-stage IEOs is characterized by the useof finer heuristics- (‘‘Which option is better for us?’’)and economics-based rules (‘‘Which option is the bestfor us?’’), and the more discerning outside-opinion-based rules; or more generally the prudent, calculativeand optimizing approach. Various contingencies


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influence the use of the rules but they primarilydepend on firm resources and time availability,type of stakeholders, and the involvement ofprofessionals in firm decision-making and theirpreference to use complex rules.

The early-stage of internationalization can bedescribed as the opportunity actualization process(following the Critical Realist view), involving aset of decisions and beliefs to acknowledge inter-national markets as un-actualized opportunities andthe requisite entrepreneurial action to actualizethem into possible opportunities. Mistakes andsetbacks are common in early-stage international-ization but these offer substantial learning oppor-tunities for entrepreneurs to improve and revise thedecision-making rules over time. They teach theentrepreneurs how to separate the promising IEOsfrom unlikely IEOs and highly promising from theless promising IEOs, which I label as the opportunityrevision process. Having revised their evaluationrules for selecting and developing internationalopportunities over time, entrepreneurs can moreobjectively assess IEOs, and maximize and furtherdevelop a portfolio of major IEOs, which I call, theopportunity development maximization process. Itshows that when the international markets havebecome less mysterious to the entrepreneurs, theywere able to evaluate IEOs more objectively andoptimize their options or choices (following theEmpiricist view) while co-developing large scaleopportunities with foreign partners (following theConstructivist view). Entrepreneurs’ early-stage IEOevaluation is dominated by the need for survivaland learning, while the late-stage is influenced bythe desire to optimize economic value and efficien-cies. The entrepreneurs’ accumulated experienceand resources allow them to objectively assess IEOsand therefore they are able to better select promis-ing IEOs, which can lead to higher firm perfor-mance over time. Finally, a feedback mechanismfrom the IEO development maximization processto the revision process may be affected by variouscontingencies, including firm-level (e.g., resources,stakeholders, decision-makers’ preference for sim-ple or complex rules) as well as environmental-level(e.g., economic crisis/boom, technological change)factors.

To further develop the Time-based Process model,I relate the findings to extant models of interna-tionalization and the recent IB effectuation research.The Network model (Johanson & Mattsson,1986, 1988) argues that formal and informal rela-tionships with other organizations help firms

penetrate, extend and integrate their network posi-tions leading to internationalization. However, theNetwork model remains relatively static and over-looks the behavioral, emotional and time-basedaspects of how individuals or firms form relation-ships (Liesch et al., 2011). The Time-based Processmodel of IEO evaluation overcomes these concernsby explaining what decision-making rules areinvolved in network-driven internationalization.The core logic of the Network model and theaccidental-unplanned-informal internationaliza-tion model (Crick & Spence, 2005) resembles whatI term as the ‘opportunity actualization process’ ofIEOs (following the Critical Realist view) throughthe use of ‘simple rules.’ That is, the initial exposureto external stimuli (e.g., unsolicited internationalsales order, interactions with foreign entrepreneurialactors) in the largely unknown foreign markets(Ramoglou & Tsang, 2016), requires simple rules totransform the stimuli into an initial internationalmarket experience. This facilitates entrepreneuriallearning for subsequent IEOs actualization. Theopportunity evaluation aspect of the Network modelis equivalent to the ‘outside-opinion based’ or ‘whatdo others say?’ rules (i.e., evaluated by others,relationships as positive cues, and leveraging others’resources rules shown in Figure 1 and Table 2).However, this study contributes 10 new types ofsimple rules beyond the Network and accidental/unplanned model that I categorize into heuristics-,emotion-, and action-based rules (see Table 2).

The heuristics- (‘‘What shortcut can I use?’’),emotion- (‘‘What do I feel?’’), and action-based(‘‘What can I do?’’) rules as shown in the Time-based Process model reveal the multifaceted natureof decision-making in early internationalization.They contribute finer and new individual-level expla-nations of IB decision-making, which the Networkand Accidental/Unplanned models do not explain(i.e., where heuristics and emotion are used widelyby entrepreneurs and that entrepreneurial actioncan supersede opportunity evaluation). The Time-based Process model also provides new explanationsfor why firms internationalize early (within 6 yearsafter inception), which the Network and Acciden-tal/Unplanned models do not explain fully for threereasons. First, when it comes to early-stage IEOs, thedecision-making process of early internationalizingentrepreneurs revolves around transforming noth-ing into something (a binary decision), or actualiz-ing unactualized opportunities into possibleopportunities (a critical realist view). Because theentrepreneurs do not see ‘‘What’s out there’’ (an


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Empiricist view) in international markets in acurrent venture, they cannot know which IEO isbetter than other IEOs or which IEOs better fit theirbusiness. Thus they resort to the ‘simple, fast andfrugal’ approach to quickly make sense of theinternational markets by initially relying on simplerules (heuristics, emotion, action, and outside-opinion) and later evaluate if the IEOs are worthexploring and further developing. Therefore,through simple rules, entrepreneurs engage in a‘quick and dirty intervention’ process to actualizeunactualized IEOs into possible IEOs. Second, theuse of simple rules is related to certain conditions ofthe firm, including entrepreneurs’ decision-makingprocess under a time constraint, a resource-con-strained environment, and the dominance of singledecision-makers (i.e., the founder or CEO). Theseprovide new understanding and contributions thatenrich the Network and Accidental/Unplannedmodel. Third, the simple rules seem not only toinfluence the foreign-market location and entry-mode decisions, in which low-risk, low-commit-ment entry modes are widely used, but they alsoexplain the decision-making processes behind earlyinternationalization. The use of the simple rules,which reduces the amount of information, analysis,and resource needed, shortens the time fromopportunity evaluation to action (e.g., initiation ofan internationalization process), and this explainswhy the firms internationalized soon after incep-tion, and the consequences – the susceptibility tomaking various mistakes in foreign markets.

The Process model (Johanson & Vahlne,1977, 1990) has been criticized for being determin-istic and lacking an explanatory power pertainingto why and how the internationalization processbegins (Axinn & Matthyssens, 2002). This Time-based Process model of IEO evaluation reveals thatthe core logic of the Process model resembles the‘revised rules’ of IEOs or the ‘opportunity revision’process necessary to separate the possible/promis-ing from unlikely IEOs. This Time-based Processmodel offers a new explanation that enriches theProcess Model. It does so by arguing that, first, theProcess model is a manifestation of opportunityactualization activities (the Critical Realist view)where entrepreneurs separate the endless possibil-ities in international markets (the real world) andthe unexploited opportunities (the actual world)and delve into actual experience in the interna-tional markets (the empirical world). The process inseparating and unravelling these different layers ofreality often involves mistakes and setbacks due to

many unknowns (e.g., ideas, people, culture, insti-tutions) to entrepreneurs. However, the mistakesand setbacks are sources of new information thathelp entrepreneurs revise their decision-makingrules. Second, the revised rules that comprise seventypes of rules categorized as externally-driven(‘‘What do they help me learn?’’), situation-driven(‘‘Is it beyond my control?’’), and internally driven(‘‘I wish I had known that in advance’’) (see Figure 1and Table 2) – offer nuanced, new explanationsabout the process in the Process model. The Processmodel adopts a firm-centric view (equivalent to theinternally-driven rules) about market learning. Thisstudy enriches it by showing that many of themistakes, setbacks and sources of learning about IBcome from externally-driven and situation-drivenproblems. Third, entrepreneurs often change theirdecision-making rules (e.g., from naıve to critical ofthe ethical behavior, commitment and perfor-mance of foreign partners; see Table 2) in evaluat-ing IEOs to avoid future mistakes and setbacks andimprove the probability of finding promising/suc-cessful (vs dubious/unsuccessful) IEOs. The simpleand revised decision-making rules means that pro-gression in international markets is not easilypredictable – linear or progressively building greatercommitment to foreign markets as the ProcessModel explains – but can be non-linear and flexiblewith regards to the location of internationalizationand entry-modes use.

The Time-based Process model reveals that thecore logic of the Economics and Entrepreneurialmodels of internationalization resembles the ‘op-portunity development maximization’ process, fol-lowing the Empiricist and Constructivist views ofIEOs. These models do not, however, explain whythe opportunity evaluation process for internation-alization relies on structured, formal complex rules.This Time-based Process model enriches theseinternationalization models by providing severalpossible answers. First, having revised their evalu-ation rules for assessing IEOs over time, entrepre-neurs can more objectively assess and co-createIEOs, and maximize and further develop a portfolioof major successful IEOs. This study found little, ifany, strategic planning (i.e., ‘strategy absence,’ seeInkpen & Choudhury, 1995) in early-stage interna-tionalization but strategies emerged (Mintzberg &McHugh, 1985) in the late-stage.

From a linguistics point of view, the entrepre-neurs rarely used the word ‘strategy’ when dis-cussing their early-stage IEOs but often used‘strategy’ during late-stage IEO interviews. Second,


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by examining opportunity evaluation from early- tolate-stage IEOs, this study shows a clear transitiontowards the use of finer heuristics-based rules(‘‘Which option is better for us?’’) and economics-based rules (‘‘Which option is the best for us?’’) inthe late-stage internationalization (Figure 1 andTable 2), or from opportunity actualization toopportunity optimization efforts. This processreveals the emergence of choices or alternatives forentrepreneurs that did not exist or were not avail-able to the entrepreneurs in the early-stage IEOs,based on the ones that are considered better or bestfor the firm. This highlights the rise of ‘prudent,calculative and optimization’ thinking at the late-stage IEOs evaluation. The transition in the oppor-tunity evaluation process is not well explained inthe Economics and Entrepreneurship models ofinternationalization and this study explains it.Third, the patterns identified in the entrepreneurs’evaluation of late-stage IEOs demonstrate the deci-sion-making approach commonly used by leaders ofmultinational (or mature) enterprises who prefer touse ‘complex rules’ because these firms have suffi-cient organizational resources and more time toevaluate, and they have the additional input ofprofessional CEOs and managers and new stake-holders (e.g., investors) who tend to use complexrules in firm decision-making processes. Thesefactors are generally accepted assumptions in theEconomics model because it assumes that thedecision-makers are endowed with internationaliza-tion slack (i.e., firm resources, time to make sys-tematic evaluation of IEOs), which enables thecomplex rules use, something that small andmedium firms do not or rarely have.

By studying IEO evaluation process longitudi-nally, this study unravels the assumptions thatunderpin the use of complex rules in the interna-tionalization of mature and large firms. Since thisTime-based Process model adopts an entrepreneur-ial lens, it offers new explanations and contribu-tions that enrich the Entrepreneurial model byhighlighting the transition of the three general rules(simple, revised and complex) of IEOs evaluationacross time, bringing in an ontological view of IEOs(constructivist, empiricist, and critical realist views)in the discourse about the Entrepreneurship model,and the contingencies that may influence the use ofsimple vs complex rules such as time, resources, andthe highly skilled professional managers.

The Time-based Process model of IEO evaluationalso addresses the limitations of the recent effectu-ation research in IB, which tends to impose the

effectuation concept on internationalization and afocus on the static, atemporal aspect of theentrepreneur’s decision-making. For instance, Kali-nic et al. (2014) argued that entrepreneurs preferthe causal over the effectual approach if the infor-mation is available and the company has theresources, and they asserted that entrepreneursswitch between causal and effectual logic whenproblems appear too complex. Chetty et al. (2015)propose that ‘‘it is meaningless to consider causa-tion and effectuation as opposites of a continuumbut to consider them as substitutes’’ and that ‘‘theselogics are not linear but are nuanced as theyintertwine during decision-making and actualimplementation’’ (Chetty et al., 2015: 1453). Harmsand Schiele (2012: 95) found that ‘‘experiencedentrepreneurs tend to apply effectuation ratherthan causation.’’ Ellis and Pecotich (2001: 126)found that the ‘‘salient influences of export initia-tion are more often social than economic.’’ Lambet al. (2011) argue that owner-managers of smallfirms confront opportunities to assess markets,prospects, and agents and to maintain relation-ships. This study enriches the emerging research onIB decision-making by demonstrating the impor-tance of time in understanding the decision-mak-ing processes in internationalization. It shows howentrepreneurs who evaluate early- to late-stage IEOstransition from the ‘simple’ to ‘revised’ to ‘com-plex’ rules and are influenced by a set of contin-gency factors that enable the transition includingresource and time availability, type of stakeholders(e.g., investors), and the influence of professionalCEOs and managers in firm decision-making. Itshows that a time-sensitive, rule-based perspectivein opportunity evaluation may offer a new expla-nation on why and how entrepreneurs make inter-nationalization decisions. Effectuation is oftencharacterized as a decision-making model wheredecision-makers ask ‘‘Who am I?’’, ‘‘What do Iknow?’’ and ‘‘Whom do I know?’’ (Sarasvathy,2001). This study enriches the effectuation theoryby demonstrating the three general rules of IEOsevaluation – simple, revised and complex – andtheir sub-rules (i.e., ‘‘What shortcut can I use?,’’‘‘What do I feel?,’’ ‘‘What can I do?,’’ ‘‘What doothers say?,’’ ‘‘What do others help me learn?,’’ ‘‘Is itbeyond my control?,’’ ‘‘I wish I had known that inadvance,’’ ‘‘Which option is better for us?’’ and‘‘Which option is the best for us?’’) and thus offers aricher understanding that extends and enriches thediscourse beyond the effectuation vs causationdebate.


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Lastly, this study demonstrates the workings ofthe three philosophical underpinnings of opportu-nity – critical realism, empiricism, constructivism(Ramoglou & Tsang, 2016; Ramoglou, 2013) indifferent stages of the internationalization process(Figure 1). It solves the puzzle on the ontology ofopportunity. It shows that the critical realist view iswell-suited to explain the evaluation of initial-stageinternationalization in which initial market stim-uli, which are part objective and part subjective,require an actualization process and simple rules toturn unmet foreign market demand into viableopportunities. Empiricism and constructivism canexplain the late-stage of internationalizationbecause as time passes, entrepreneurs gain moreknowledge and they can more ‘objectively’ evaluateIEOs using the complex rules and co-develop themwith multiple stakeholders.

Limitation and Implications for Theory, Methodand Further ResearchDespite its contributions on decision-makers’ cog-nitive processes in IB, this study contains twolimitations. First, since this is theory-buildingresearch, the findings may not be generalizable tothe broader IB contexts. This opens a new opportu-nity to test the IEO evaluation rules identified usinglarge samples across different country settings andexamining their influence on intervening variables(e.g., opportunity-selection success) and outcomevariables (e.g., firm performance, speed of interna-tionalization, de-internationalization). Future stud-ies can also examine the effects of certain IEOevaluation rules (e.g., simple vs complex) in differ-ent contexts (e.g., time 1 vs 2; product X vs Y) tounderstand their effects on performance and otherrelated constructs (e.g., choice of location and entrymode) using surveys and experiments.

Second, although the Gioia methodology enablesresearchers to systematically code and aggregatetextual data, it could also constrain a researcher’sability to ‘see the forest for the trees.’ For example,in the first round of data analysis, this studygenerated nearly 1,000 first-level codes (before theywere streamlined into 30 first-level codes), and it isthus challenging and time-consuming to makesense of the findings. The question is when to stopcoding and how to be parsimonious in data codingwithout losing sight of new, rich themes thatemerge. To address these problems, I invited peerreviewers to read and challenge the codes andfindings as well as conduct conventional qualitativedata analysis (e.g., using pens, highlighter, folders

and boxes) after completing the analysis a la Gioia.These helped maintain a balance in seeing andunderstanding the data and reporting the findings.

This study offers a universal rule-based perspec-tive of international opportunity evaluation thatdescribes why and how decision-makers makeinternationalization decisions, along with thebroader IB decisions (e.g., hiring, financing, gover-nance, and operations) and the influence of timeon this decision-making process. This shifts ourresearch process in internationalization from thepredominantly firm-centric (Benito et al., 2009;Dunning, 1988) and network-centric (Coviello,2006, 2015) to a rules-centric process. The threegeneral rules of IEO evaluation developed in thisstudy – simple, revised, and complex – enhance ourunderstanding of the nature of decision-makingrules used in internationalization over time. Theserules also help to explain the various contingenciesthat influence their use.

This study forges a new research stream thatfocuses on the dynamic aspect of rules in interna-tionalization decision-making. In particular, we ask:What factors enhance the rule revision process? Is itdriven by institutional-, firm-, or individual-levelfactors or a combination thereof? Does culture (e.g.,ambidextrous thinking, long-term orientation, andmale-dominated processes, values and perspectives)play a role? Future research can use protocolanalysis to analyze the verbalized thoughts ofentrepreneurs or design experiments to tease outfactors that drive the rules-revision process acrossvarious problem contexts such as domestic vsinternational markets, international market at time1 and time n. An excellent example of this type ofresearch is the study of managers’ who ‘think outloud’ as they make internationalization decisions toreveal how their perception of distance affects thelocation, timing and entry mode in international-ization (Williams & Gregoire, 2015).

Moreover, the three rules of IEO evaluationdeveloped here offer new avenues to test hypothe-ses that can explain the opportunity evaluation andperformance relationships among ‘born global’firms (Cavusgil & Knight, 2015), to conduct con-joint analysis of consumers’ evaluation of opportu-nities to become international entrepreneurs, andto test entrepreneurs’ decision-making models forinternationalizing (or copying) sharing-economyplatforms across market borders (e.g., Uber, Grab-Car and Didi Kuaidi for cars).

Next, this study of IEO evaluation raises majorquestions that can extend research on decision-


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making models such as effectuation (Sarasvathy,2001; Sarasvathy et al., 2014). For example, IBeffectuation research (Kalinic et al., 2014; Chettyet al., 2015) does not incorporate the influence oftime on entrepreneurs’ reasoning. This study foundthat entrepreneurs’ ability to revise their decision-making rules was critical to their long-term success.Moreover, little is known about why and how deci-sion-makers transition from the effectuation to cau-sation approaches or vice versa. Research along thisline will offer a dynamic view of effectuation in IB.

This study also offers important contributions toentrepreneurship research. Current research onrule-based reasoning has been largely conceptual –very little empirical research explores why and howrule-based reasoning is used and how time influ-ences the reasoning process (Williams & Wood,2015). The present study contributes to the rule-based reasoning research by revealing that it ismultidimensional (see Figure 1 and Table 2). Sec-ond, rule-based thinking involves an interactionbetween time and the use of simple vs complexrules; and finally ‘revised rules’ could enrich therule-based perspective research and open up a newresearch stream in entrepreneurship. Moreover,this is one of the first empirical studies that appliesthe ‘entrepreneurial journey’ (McMullen & Dimov,2013) method. It shows how the study of opportu-nity evaluation as it unfolds over a period of timecan enrich our understanding of entrepreneurialaction across borders.

Implications for PracticeThis research suggests that managers contemplatingan early international market entry may use simplerules, and add to and revise them over time, andafter the firms have more resources, time, andstakeholders, then entrepreneurs and managerscan play more dominant roles in firm decision-making using complex rules. Importantly, entrepre-neurs and managers can fruitfully use the differenttypes of IEO evaluation rules identified in thisstudy. Instead of being fixated with the ‘textbook’approach that calls for due diligence, marketresearch and prudent business planning, IB man-agers of small and medium firms can rely on thedecision-making rules such as ‘‘What shortcut can Iuse?’’, ‘‘What do I feel?’’, ‘‘What I can do?’’, ‘‘Whatdo others say?’’, ‘‘What do others help me learn?’’,‘‘Is it beyond my control?’’, ‘‘I wish I had known thatin advance’’ rules in early-stage IEOs and graduallytransition to ‘‘Which option is better for me?’’ In thelate-stage IEOs when opportunities can be more

objectively assessed with increases in knowledgeand internationalization slack, they can then ask‘‘Which option is the best for us?’’ In this regard, itwould benefit managers to understand the philo-sophical foundation of reality: critical realism,empiricism and constructivism. By understandingthe ontological foundation of opportunities, man-agers can see the world has different layers of realitythat form ‘opportunities’ and how they can engagein an intervention process to transform endlesspossibilities into possible (successful) vs unlikely(unsuccessful) opportunities. It may be difficult tofully rely on complex rules in the evaluation ofearly-stage IEOs as they could restrict and/or delaythe initiation of internationalization. The evalua-tion of early-stage IEOs is akin to the beginning of aproduct innovation project (Coviello & Joseph,2012), which fits well with the logic of simple rules.Entrepreneurs use simple or complex rules in IEOsevaluation based on contingency factors such asresource and time availability, type and number ofstakeholders involved in decision-making, and theinfluence of professional CEOs and managers indecision-making.

What rules can I follow?, When should I use them?,and Can I revise them over time and if so, how? arecritical questions facing entrepreneurs. Entrepre-neurs operating small to medium sized firms canmake a small investment in the early-stage of inter-nationalization and gradually actualize IEOs anddevelop knowledge to discern possible from unlikelyopportunities and major from minor opportunities.By making an early international market entry andgradually actualizing IEOs, entrepreneurs can choosemore optimal opportunities and learn about foreignmarkets faster and more effectively than waiting forthe best/ideal opportunities to come. Likewise, thesame approach can be used by managers of multina-tional and well-established firms to quickly penetratenew markets. Early setbacks are often inevitable inthe early-stage of internationalization and thereforeentrepreneurs need to keep revising their decision-making rules and strategies over time based on ananalysis of outcomes so as to make sound judgmentsand succeed.

CONCLUSIONThis study offers a new understanding of how andwhy entrepreneurs evaluate IEOs over the course ofan internationalization process. It unpacks the IEOevaluation process and derives three general rulesof IEO evaluation – simple, revised, and complex –


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and demonstrates how they interact with time.These rules call for a shift towards a decision-making, rule-centric approach in IB research andhighlight the importance of explicitly examiningthe influence of time in decision-making. Researchon opportunity evaluation is a fertile field and willcontinue to offer opportunities to advance IBtheories and practice.

ACKNOWLEDGMENTS

I thank Area Editor Daniel Bello, Editor-in-Chief AlainVerbeke and the three anonymous reviewers for theirstimulating comments. I also thank Nicole Coviello,Chris Styles, and Ian Wilkinson for their valuable sugges-tions. I thank Lord Jesus Christ for his endless love andwisdom in helping me develop the article.

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ABOUT THE AUTHORYanto Chandra ( , PhD, University of NewSouth Wales) is an Assistant Professor at theDepartment of Public Policy at the City University ofHong Kong. His research interests include the policyand management of social enterprises, non-profitorganizations, social welfare, and ‘‘opportunity’’ as alens to study behavioral sciences. His research hasbeen published in PlosONE, APJM, JWB, amongothers.

Supplementary information accompanies this article on the Journal of International Business Studies website(www.palgrave.com/journals).

Accepted by Daniel Bello, Area Editor, on 6 February 2017. This article has been with the author for four revisions.

This work is licensed under a CreativeCommons Attribution-NonCommer-

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