The international expansion of firms

Hazard Accommodation and Uncertainty Acclimatisation in Internationalisation and International Entrepreneurship


In this article we review how hazard and uncertainness are treated in the internationalization and international entrepreneurship literatures, pulling on emerging research in both Fieldss, and conclude that there is demand for a more nuanced intervention of hazard and of uncertainness in their interaction with the international enlargement of houses. We introduce the constructs of hazard adjustment and uncertainness acclimatization as a better contemplation of how hazard and uncertainness might change over clip. We present a coevolution theoretical account as a agency of demoing how the interaction and kineticss of hazard and of uncertainness during internationalization might be theoretically developed.

Key Wordss: hazard, uncertainness, coevolution, internationalization, international entrepreneurship


Hazard and uncertainness, chiefly as a complex, have occupied an of import topographic point in accounts of house internationalization and in speculating sing international entrepreneurship since the outgrowth of both Fieldss. Early advocates of the internationalization procedure theoretical account, Johanson and Vahlne ( 2006:165 ) late have observed “ that the internationalization procedure theoretical account often is interpreted as a theoretical account of hazard decrease in the internationalization of the house ” . In their original internationalization theoretical account, a basic constituent was the house “ endeavoring to maintain risk-taking at a low degree ” ( Johanson & A ; Vahlne, 1977: 27 ) . Alongside this digesting acknowledgment of hazard there was a concern, in early attempts to explicate internationalization, to take the intervention of uncertainness beyond that of “ a unvarying factor ” , to reflect the world that it “ is complex and heterogenous ” ( Wiedersheim-Paul, 1972: 5 ) .

Similarly, hazard and uncertainness figure conspicuously in speculating in the newer field of international entrepreneurship. As noted by Johanson and Vahlne ( 2003: 98 ) , there are “ dramatic similarities between the internationalisation and entrepreneurial procedures… At least in the more utmost instances they take topographic point under echt uncertainness. Given some ‘strategic purpose ‘ a batch of the action aims at diminishing that perceived uncertainness ” . However, an early difference in these two Fieldss emerged in the intervention of hazard, peculiarly with the displacement of focal point in international entrepreneurship off from hazard averse behavior to an accent on hazard tolerance of the enterpriser. From the beginning, international entrepreneurship surveies have concentrated on international new ventures ( INVs ) , or the alleged born globals, which seemed to dispute impressions of the restraining consequence of hazard and uncertainness at the start of international operations, as stressed in the internationalization procedure literature ( Madsen & A ; Servais, 1997 ; Oviatt & A ; McDougall, 1994 ) . Autio ( 2005:12 ) has observed that “ a cardinal part of Oviatt and McDougall… was their direct challenge to this risk-averse, constrained position described by the PTI ( Process Theory of Internationalisation ) . International new ventures… are possible, they stated, because enterprisers are able and willing to do strategic picks, every bit good as to accept the hazards associated with an aggressive international enlargement ” .

We begin by showing an overview of the constructs of hazard and of uncertainness, including both single and steadfast positions. We so review the manner in which both hazard and uncertainness have been treated in the two watercourses of literature, and see emerging thoughts in, and about, both Fieldss that offer range for a better apprehension of the diverse interaction effects that produce sometimes unexpected and apparently contrary results for hazard and uncertainness and international engagement. Finally, we adopt coevolution theory as a manner of researching the kineticss of alteration and in covering with the interaction and alteration effects of other factors that mediate the influence of hazard and uncertainness over clip.

Hazard and Uncertainty: An Overview

In much of the research on internationalization and international entrepreneurship, hazard and uncertainness are treated as an amalgam – a composite explanatory factor and frequently under the confusing label of one term merely. This has resulted in small if any powdered apprehension of how these two elements impact on the internationalization determination. A similar observation has been made by Alvarez and Barney ( 2005:778 ) with respect to the literature in strategic direction and entrepreneurship, saying that “ hazard and uncertainness are treated as if they were synonyms ” . In portion, this appears to reflect the apprehension of many enterprisers and international concern directors, although Alessandri, Ford, Lander and Taylor ( 2004:755 ) assert that directors do see hazard and uncertainness as “ distinguishable concepts… with different impacts, separately and jointly on the decision-making procedure ” . Importantly, nevertheless, directors and enterprisers are seldom called upon by research workers to place whether it is risk or uncertainness they are covering with, and to specify the significances they ascribe when they use these footings – as they respond to questionnaires and supply narrative expoundings.

The international entrepreneurship literature has tended to concentrate more on enterprisers as persons and their perceptual experiences of hazard, albeit in the procedure of driving their corporate creative activities. In contrast, within the internationalization literature, there tends to be more accent on the house position, the administration, following the economics-based behavioral theory of the house ( Cyert & A ; March, 1963 ) , although with some focal point on single perceptual experiences in diverse surveies, particularly in some of the exporting research ( Freeman, Edwards & A ; Schroder, 2006 ) . In general, there tends to be small elucidation on this point, with no specification of the move from the person to the organizational degree with regard to both hazard and to uncertainness. Miller ( 2007:70 ) has noted that “ hazard research based on… the behavioural theory of the house… posits organization-level concepts to explicate hazard taking. Few hazard research workers… convey together the person and organisational degrees of analysis in their theorizing and empirical research ” . However, as Downey and Slocum ( 1975:576 ) pointed out in early direction surveies on uncertainness, “ organisational uncertainness is non good represented by a simple summing up of persons ‘ perceptual experiences of uncertainness ” .

From a traditional economic sciences attack, hazard and uncertainness tend to be differentiated, although the term uncertainness is non ever systematically applied: uncertainness sometimes mentioning to determination state of affairss where there is an unknowable hereafter and sometimes to situations where this hereafter is cognizable but non calculable. Hazard refers to determinations where the effects of actions are capable to cognize chance distributions, following Knight ‘s ( 1921 ) differentiation. Williamsonian ( 1985 ) uncertainness – nucleus to dealing cost economic sciences and normally invoked in state of affairss of ambiguity and sketchiness – emphasises the delimited reason of worlds to assemble and interrogate all possible eventualities to a determination. However, there are uncertainnesss impacting determinations that defy cognizing in that the eventualities are merely non cognizable. Information on all possible results is merely non available, and non all possible results might be cognizable. In these state of affairss, Williamson ‘s ( 1985 ) deterministic uncertainness misrepresents this alleged non-ergodic universe ( Dunn, 2000 ; Slater & A ; Spencer, 2000 ) , a universe where illation from the general context to a specific state of affairs is debatable as “ the yesteryear does non supply a usher to the class of future events, ( and where ) agents are genuinely unsure as there presently does non be information that will assist them detect the hereafter. Decisions have to be made and pick is echt ” ( Dunn 2000:427 ) . This is the universe of true Knightian ( 1921 ) uncertainness.

Earlier, Penrose ( 1972:56 ) had attempted to switch believing on hazard, reasoning: “ … the fact that the hereafter can ne’er be known with truth agencies that the planning of concern houses is based on outlooks about the hereafter which are held with changing grades of assurance… ‘Uncertainty ‘ refers to the enterpriser ‘s assurance in his estimations or outlooks ; ‘risk ‘ , on the other manus, refers to the possible results of action, specifically to the loss that might be incurred if a given action is taken ” . Thus, attending was drawn to the decision-maker ‘s focal point on the hazard of a determination ‘s possible loss vis- & A ; agrave ; -vis its possible addition ( see besides March, 2006 ) . As Shackle ( 1970:114 ) stressed, “ a loss can stultify or destruct a house, or lead to [ the owner/manager ] losing his commanding place ” . This is peculiarly of import for internationalising houses, and even more so for many entrepreneurial little houses, where the owner/managers are frequently extremely exposed financially with much to lose at a personal degree ( Liesch, Steen, Middleton & A ; Weerawardena, 2007 ) . Similarly, March and Shapira ( 1987:1411 ) have noted that “ in recent treatises on hazard appraisal and hazard direction… hazard has become progressively a term mentioning non to the capriciousness of results but to their costs ” . The focal point on hazard of a loss provides a more concrete nexus to the hazard averse behaviors stressed in the internationalization literature. Early research drew to a great extent on thoughts developed in the behavioral theory of the house emphasizing the importance of hazard turning away as a driver of house behavior ( Cyert & A ; March, 1963 ) .

Hazard, Uncertainty, the Internationalisation Process and International Entrepreneurship

In much of the internationalization literature, high hazard and uncertainness are treated as restraining factors on forward impulse ( Johanson & A ; Vahlne 1977: Welch & A ; Luostarinen, 1988 ) . In general, the statement stressed has been that high perceived hazard, and uncertainness, constrains the attack by directors and decision-makers to internationalization. Both affect the behavior of directors and houses and their readiness to perpetrate – depending on the grade to which they are being disturbed by hazard and by uncertainness and hence take turning away or minimization action. As Buckley and Carter ( 2004:372 ) point out, “ … uncertainness inhibits the ability of houses to make value by restricting the range and effectivity of the activities they undertake ” . Research in international entrepreneurship has been overpoweringly on international new ventures ( INVs ) and born globals ( Keupp & A ; Gassmann, 2009 ) . In a recent Australian survey, born globals were found to stand for about 25 % of new exporters ( Austrade, 2002 ) . In contrast, exporting research in general has shown that many possible exporters regard exporting activity as troublesome and demanding, and non surprisingly, tend to readily happen the jobs they were concerned about, reenforcing the sense of hazard and of uncertainness, and restraining international engagement.

Scholars in international entrepreneurship have come to see the attack of enterprisers to international activity as in portion defined by the manner that hazard is taken on board. Risk-seeking was viewed as one of the specifying features of international entrepreneurship in McDougall and Oviatt ‘s ( 2000 ) earlier, influential definition. Harmonizing to this position, high hazard may be recognised by international decision-makers, but they are prepared to take action however. Others stress hazard antipathy as a restraint that born planetary enterprisers are readily able to invent ways of get the better ofing ( Freeman, Edwards & A ; Schroder, 2006 ) . In a recent scrutiny of the hazard concept in general research refering to entrepreneurs, Janney and Dess ( 2006:386 ) emphasis the dangers of sing hazard seeking or tolerance merely in footings of nonsubjective entrepreneurial action. They argue that “ an action may look hazardous to an established house ; nevertheless, in an entrepreneurial context, it might really turn out less so. An enterpriser who accepts such hazards will look to be accepting greater degrees of hazard relative to their more established opposite numbers, even though the enterpriser does non comprehend this greater hazard ” . Thus, evident hazard seeking behavior, peculiarly in the early phases of internationalization, may be illusory when considered at the degree of single decision-maker perceptual experience.

In world, it may be that while houses engage in overtly dissimilar actions ( no foreign market research vs. extended research and foreign market visits ) in accomplishing international entry, the credence of hazard by the relevant decision-makers is rather similar, although clearly their perceptual building of the state of affairss confronting them is rather different. Shane and Venkataraman ( 2000:223 ) argue that “ people who exploit chances tend to border information more positively and so react to these positive perceptual experiences ” , and this observation can be applied to how hazard is perceived and uncertainness assessed. As Janney and Dess ( 2006 ) note, this is non an statement that embarking into the unknown is non hazardous in some nonsubjective sense. Rather, it is doing the slightly obvious point that different decision-makers see such state of affairss in different ways, including their perceptual experiences of hazard and their appraisals of uncertainness.

Surveies show that actions by houses, in an nonsubjective sense, may supply a deformed image of hazard as perceived by decision-makers and their consequent responses. Simon, Houghton and Aquino ( 2005:113 ) point out that past research has shown “ enterprisers do non hold a high hazard leaning… ( to ) wittingly take hazards ” , with their ain research proposing “ enterprisers may non comprehend the peril of get downing ventures ” . They argue that this province of personal businesss is because “ cognitive prejudices lead persons to comprehend less hazard ” . The prejudices considered were overconfidence, the semblance of control, and the readiness to pull decisions from limited information. Certitude or unreasonable optimism appears to be a common trait among get downing enterprisers. In a big survey of enterprisers who had late become concern proprietors, Cooper, Woo and Dunkelberg ( 1988 ) found non merely a high degree of optimism overall but that ill prepared enterprisers were merely every bit optimistic as those who were good prepared.

However, in a survey by Busenitz and Barney ( 1997 ) , there was a strong difference found in the attack of directors in big administrations and enterprisers: enterprisers were more susceptible to cognitive prejudices ( eg over-confidence ) . Presumably this would intend that directors in big administrations would expose more risk-averse behavior. In add-on, the hazard to a director ‘s calling of a bad determination may stress any built-in hazard attached to a peculiar international venture. Individual directors, nevertheless, do non run in isolation. The immediate group context and broader house webs are of import mention points in seeking to get by with the sense of personal hazard about of import determinations, and could move to chair the extent of hazard that an single director feels. Nevertheless, research indicates that personal differences in the perceptual experience of hazard held by directors do impact their determinations, reflecting the impact of personal feelings, experience and context ( March & A ; Shapira, 1987 ) .

Emerging, Challenging Positions on Risk and Uncertainty

Individual and Network EffectssThere is some commonalty in the internationalization and international entrepreneurship literatures on the importance of the personal experience and personal interactions of enterprisers and/or decision-makers in explicating internationalization. For both the person and the house, past successes and failures, jobs encountered, bad experiences and the similar impact how any new activity is viewed. History affairs in the formation of perceptual experiences about hazard and in appraisals of uncertainness, soaking into wonts and ways of sing the universe, supplying the frame of mention for how new state of affairss are assessed and actions adopted ( Garud & A ; Rappa, 1994 ) . Similarly, both literatures place considerable sway on the function of single and steadfast webs in enabling houses to internationalize, and impacting how hazard and uncertainness are perceived and managed as portion of this procedure ( Johanson & A ; Vahlne 1990 ; Oviatt & A ; McDougall, 2005 ) . Research shows besides that decision-makers are influenced by the thought of those regarded as knowing in their web. It is good known that trusted, personalised, viva-voce beginnings are the most powerful in footings of influence on decision-makers, and this has a strong consequence on perceptual experiences of hazard and of uncertainness ( Austrade, 2002 ) .

Ambler and Styles ( 2000:501 ) point out “ the evident paradox is that under conditions of greater uncertainness associated with an international market ( vs. the domestic market ) , peculiarly upon first entry… directors rely ( more ) on socially generated subjective cognition ” , underscoring the importance of exporters ‘ webs as a beginning of uncertainness cut downing cognition. The writers stress the contrast to the deep apprehension that exporters tend to possess about their domestic market, in a sense taking to a magnification of the feeling of a deficiency of cognition at the international degree and, hence, stressing the uncertainness they experience. In the Chinese context, it has been argued that alleged guanxi is a manner of get bying with hazard, that guanxi ( connexions or relationships ) is of import as a preliminary to cover devising, take downing perceived hazard and extinguishing some uncertainnesss, enabling such trades to continue. As such, in Chinese state of affairss, guanxi is efficaciously a necessary, albeit non sufficient, status for making concern ( Ambler & A ; Styles, 2000 ) .

Networks and relationships ( peculiarly swearing 1s ) in a general sense tend to be viewed and used as an of import counterpoison to perturbing hazard and uncertainness, a type of comfort zone, a ‘place ‘ to travel to assist work out jobs ; to clear up future waies ; to derive cognition ; to entree new webs in other states, and to bring forth confidence about the behavior of affiliated parties. They are an of import sphere, hence, of managerial action as internationalization unfolds for a house, of on-going activity and resource committedness, both impacting and affected by international results, interacting with hazard and uncertainness, straight and indirectly ( Welch & A ; Welch, 1996 ) . Both single and steadfast webs may be operative. They overlap, influence and interact with each other, through a assortment of societal procedures ( Marschan, Welch & A ; Welch, 1996 ) , therefore interceding the relationship between the decision-maker ‘s perceptual experience of hazard and appraisal of uncertainness, and internationalization determinations. Network interaction can turn a apparently high hazard and uncertainness state of affairs, such as foreign market entry, into a comparatively comfy measure.

Presentation EffectssResearch on webs in different spheres points to the importance of others, persons and administrations, and of presentation effects fluxing through the assorted signifiers of interaction. Demonstration effects influence non merely market-related facets, such as how to cover with foreign clients and distributers and ways to run, but besides attitudes toward making concern in a foreign location, including perceived hazard and appraisals of uncertainness. At a broader degree, imitation or ‘fashion ‘ effects in foreign direct investing activity have long been noted ( Knickerbocker, 1973 ) . Chan, Makino and Isobe ( 2006:642-3 ) point out that houses can derive sensed legitimacy for their actions by following the behavior of others: “ In the instance of foreign market entry, houses that are less familiar with a foreign market tend to mention to and copy the actions of other houses that operate in the same market, because of the legitimacy of extremely seeable entry determinations ” . Organisational research workers besides have been concerned with the nexus between hazard and organizational action, observing that in the face of hazard, a safe response is isomorphous behaviors, following the actions and responses of other cardinal histrions: to make otherwise threatens the legitimacy of action taken. However, departures from this way ( non-isomorphic, going from the norm ) may go more legitimate in the face of high hazard, high menace state of affairss ( George, Chattopadhyay, Sitkin & A ; Barden, 2006 ) .

We argue that the external web context should be considered non merely in footings of understanding any response to hazard and to uncertainness, of import as this is, but besides as a context within which attitudes to put on the line and to uncertainness in a peculiar state of affairs are influenced or taught in the first topographic point, therefore underscoring the embeddedness of a house at assorted degrees. Embeddedness in this context refers to more than the web connexions of a house. It includes a broader array of persons and administrations such as rivals or other referential houses, and authorities organic structures, and their past actions. History provides an of import scene for the rating of lessons which can be drawn. Well-publicised, successful international raids of peculiar houses from a given state frequently become a theoretical account for follower houses, bring forthing perceptual experiences of lower hazard and decreased uncertainness. Likewise, motion into a foreign market alongside other houses from a similar local environment provides a cover of legitimacy that can better some hazards and uncertainnesss, peculiarly in comparing to a state of affairs of traveling it entirely. For illustration, the corporate context has been shown to hold a important and supportive impact on the export behavior of Italian SMEs ( Bonaccorsi, 1992 ) .

Ignorance and its DissipationAn alternate account of low hazard perceptual experience in the face of apparently high hazard state of affairss is the ‘ignorance is bliss phenomenon ‘ whereby the decision-maker is comfy about a measure into the new and unknown because of ignorance ensuing from unknowingness of the possible jobs and demands of a new international venture. For illustration, this ignorance can ensue from a deficiency of acknowledgment of the extent and consequence of cultural differences. Ignorance provides perceptual protection from the usually restraining rough worlds of international market entry. In fact, it has been argued that much organizational activity is undertaken in conditions of ignorance ( Roberts & A ; Armitage, 2008 ) . A recent study of exporters in Australia found the instead surprising consequence that 32 % of respondents indicated they did non confront any barriers in undertaking international operations ( Harcourt, 2006 ) .

However, ignorance may non last into the longer term. Increased information flow, practical activities in the chase of international enlargement, and inauspicious results could ensue in a inquiring of the ab initio sanguine position of the demands of international operations, taking to increased hazard and uncertainness, non less. & A ; Agrave ; priori, there is no ground to anticipate that international experience, emerging information and results of cross-cultural selling enterprises will needfully take down perceived hazard and take uncertainnesss. The international selling literature is full with illustrations of international selling jobs that are likely to raise hazard perceptual experience instead than lower it. The result of international experience could good be viewed as disturbing, and it is non surprising that some grounds shows a high drop-out rate amongst early exporters ( Welch & A ; Wiedersheim-Paul, 1980 ) . An exporter might be involved in a scope of activities that are capable of presenting new positions, for illustration, go toing exporting seminars, carry oning foreign market research, and speaking to other exporters. All of these have the potency of exposing demands ne’er contemplated. There may be feelings of insufficiency comparative to other international houses that are encountered. Government trade publicity support bureaus may be accessed, and they are likely to name for clear programs, budgets and the similar – the antecedently simple becomes more complicated, confidence can run out off. Ignorance is no longer bliss. The terminal consequence of this rousing procedure may be that decision-makers become more cautious in the face of a significantly heightened position of the hazards to be borne and the uncertainnesss to pull off. The born planetary accelerated internationalization found in many surveies could be merely an passing phase.

As international operations develop, decision-makers non merely face the job of deficiency of information, but besides misdirecting or wrong information about foreign markets. There may be considerable uncomfortableness if it becomes apparent that undependable information is being received. Concerns could be exacerbated by the reception of conflicting information about the foreign market state of affairs. As good, experience or hunt procedures may bring out unpleasant or distressing information about unanticipated jobs and menaces, doing a re-evaluation of the house ‘s place on some of its foreign market committednesss. In an early intervention of the issue, Nystr & A ; ouml ; m ( 1974:131 ) warned that “ the function of information can non – as in traditional analyses – be restricted to cut downing uncertainness ; alternatively added information may well increase uncertainness in a subjective sense ” . Further, house representatives in foreign markets who are seeking to develop relevant webs sometimes spend clip edifice contacts that in the terminal are non appropriate or utile, supplying unhelpful or deceptive information and farther contacts that are similarly unhelpful, worsening the sense of being an foreigner, with flow on concerns about the deficiency of cognition and apprehension of the market in inquiry.

Confusing ExperienceScholars in the country of organizational acquisition point out that while experience, and the information and cognition it generates, be given to take to improved public presentation, lowered uncertainness and elevated assurance degrees, a contrary result is possible. In consequence, experience can at times be confounding, ensuing in a perceptual experience of increased hazard and greater uncertainness. Levinthal and March ( 1993:96-7 ) argue that “ larning from experience involves illations from information. It involves memory. It involves pooling personal experience with cognition gained from the experiences of others. The troubles of larning efficaciously in the face of confounding experience ( italics added ) are legendary. Even extremely capable persons and administrations are confused by the troubles of utilizing little samples of equivocal experience to construe complex universes ” . It is executable that persons who started with a comparatively clear thought of the demands of international market entry, possibly holding undergone relevant preparation and other cognition development processes, happen that as their go oning international experience unfolds they encounter confusion instead than verification and lucidity. Levitt and March ( 1988 ) use the construct of superstitious larning to mention to the misinterpretations that arise as results from organizational action unfold, as the nexus between actions and outcomes become deformed for decision-makers.

These considerations may hold of import effects. Based on a instance survey probe of the entry of a Swedish house into the Russian market, Johanson and Johanson ( 2006:202 ) found that “ finds ” were of import for the “ gait and way of the entry procedure ” , and they were led to theorize that in disruptive environments, unforeseen finds, with both positive and negative effects, and associated effects on the manner hazard and uncertainness are viewed, could be a finding factor in internationalization behavior. While experience has been found to be “ … conducive to early internationalisation… non all acquisition is functional or good ” ( Zahra, 2005:24 ) .

The house ‘s overall international gross revenues and profitableness public presentation, every bit good as that for peculiar foreign markets, are an of import portion of the scene within which new, pertinent information is0 assessed. Strongly positive or negative gross revenues results can easy overpower information rating, peculiarly when failure looms. As such, there is no simple connexion between information received, perceived hazard and appraisals of the uncertainnesss and determinations sing international operations and, finally, the class of a house ‘s internationalization. Given the function of persons in the formation of a house ‘s hazard position and its apprehensions of the nature of the uncertainnesss that relate to different international activities, it is inevitable that places can alter quickly, and radically, as persons move about, and in and out of a house, altering the balance of a house ‘s experience, cognition and attitudes using to international operations.

Coping ResponsesThe ability of houses to internationalize in the face of hazard and uncertainness appears to be partially explained by the assorted get bying mechanisms they are able to use. Examples shown in research are the early concentration on more conformable foreign locations – conformable in footings of factors such as civilization ( and psychic distance ) , geographical distance, managerial background, cognition and experience, and accessible webs. There have been many surveies demoing the importance of psychic distance for the house ‘s internationalization determination: there is a inclination to see operations in a more familiar foreign location, in footings of civilization, linguistic communication and political systems, every bit good as facets such as historical, societal and featuring links, as being less hazardous, less unsure ( Arrow, 1969 ; Brewer, 2007 ; Dow, 2000, Johanson & A ; Wiedersheim-Paul, 1975 ) . The sense of the unknown is diminished by foreign location pick. Similarly, there is a inclination for some houses to remain with a given manner of foreign operations for every bit long as is executable – in some instances for considerable periods of clip. Turning acquaintance and competency in manner usage facilitates a decrease in associated sensed hazard and uncertainness ( Welch & A ; Welch, 2004 ) .

Research has shown a farther foreign operation manner nexus: the overall hazard of an international move can be mitigated for houses by using low committedness manners, such as exporting via agents or licencing instead than utilizing foreign direct investing, and infixing exchanging options in manner agreements that allow comparatively problem free issue or alteration to another signifier of operations. For illustration, the option-to-buy clause is sometimes used in licencing contracts ( Hill, Hwang & A ; Kim, 1990 ; Petersen, Welch & A ; Welch, 2000 ) . In a survey of exporting by Italian little houses, Bonaccorsi ( 1992:630 ) found that an of import agencies by which “ little houses cut down the hazard involved in export activity is through guaranting they can go out with small cost from a peculiar market when demand goes down ” . The shift, or issue, options, contractually based or otherwise, can be seen as options to the kind of elaborate scrutiny of possible foreign spouses that some internationalising houses undertake. By acquiring to cognize the possible spouse in progress, by speaking to clients, providers and the similar that trade with the foreign house, an internationalising house attempts to cut down the sensed hazards and uncertainnesss of covering with a future foreign spouse. Other houses will seek comfort alternatively through the strength and extent of coverage of contractual agreements with the foreign spouse: by legal agencies seeking to make greater certainty of ‘appropriate ‘ spouse behaviors under the menace of legal countenance.

Other attacks to the decrease of perceived hazard and the betterment of some uncertainnesss include: extended market research ; market distributing scheme ; enlisting authorities support ; market experimentation techniques ; and the payment of inducements, gifts and payoffs, in a general sense seeking to “ … arrange a negotiated environment ” ( Cyert/March 1963:119 ) . In an overall sense, though, there is a cost bound to the type and extent of hazard and uncertainness decrease actions that a house can set about which finally depend on its entree to fiscal, managerial and web resources. Penrose ( 1972 ) noted cost as a linking nexus between hazard and uncertainness and the ability of a house to set about enlargement, and it can be argued that this applies even more strongly to international enlargement in position of the broad scope of extra information aggregation, transmittal and reading costs typically involved in international operations ( Arrow, 1969 ; Carlson, 1975 ) .

Hazard Accommodation, Uncertainty Acclimatisation and Opportunity SeekingOur reappraisal has shown that even with entrepreneurial assurance early in the house ‘s lifecycle, and turning international experience, increased cognition and expanded webs ; perceptual experiences of hazard and uncertainness can lift, with the possible to restrain subsequent international committednesss and engagement, bring forthing apparently perverse internationalization forms. The born planetary enterpriser could be transformed into a cautious planetary participant, even prosecuting in partial de-internationalisation ( Benito & A ; Welch, 1997 ) . However, research in the field of entrepreneurship indicates that many enterprisers are prepared to dismiss emerging information that runs counter to their anterior beliefs, so it is hard to cognize when and in what organize a new international way might emerge, even if hazard and uncertainness are perceived to hold increased ( Garud & A ; Rappa, 1994 ; Parker, 2006 ) . While negative results from a house ‘s international experience require attending at some phase, the nature of that response can be extremely variable. Long-standing direction research has noted the inclination for extremely committed directors to keep committedness to a given scheme, and even intensifying committedness, in the face of negative consequences ( Staw, 1976 ) . Committed persons might even see deficiency of action to rectify the state of affairs as transporting greater hazard, therefore apportioning increased resources and attempt to ‘ensure ‘ ultimate success of the chosen international way.

A scope of synergistic procedures may be at work in chairing the effects of alterations in sensed hazard and appraisals of uncertainness on internationalization, and frailty versa, so that a consistent way of effects can non be assumed. Differences among persons as to how hazard is viewed and how uncertainness is understood guarantee broad differences in reaction to common state of affairss confronting internationalising houses. As directors with varied backgrounds, attitudes, cognition and skill sets move in and out of, and within, houses they can convey about important alterations in the manner international activities are regarded, so it is non surprising to happen many instances of direction alteration precipitating international market entry, acceleration of international development, or de-internationalisation ( Benito & A ; Welch, 1997 ) . Nevertheless, some consistences in hazard perceptual experiences and apprehensions of uncertainness, and the responses by houses and persons in the face of peculiar external fortunes can be expected. For illustration, volatile foreign environments, with rapid alteration and disruptive, intrusive authorities action, tend to be seen as rising hazard and presenting more uncertainnesss in a negative manner, detering engagement.

Entrepreneurs and directors seem to rehearse what we refer to as hazard adjustment and uncertainness acclimatization in their many signifiers. For illustration, in a survey of women-owned concerns that engage in exportation, the participants described themselves as ‘risk averse ‘ yet they did non see exporting as ‘inherently hazardous ‘ , in consequence comparing hazard antipathy with hazard direction ( Welch, Welch & A ; Hewerdine, 2008 ) . Risk adjustment, as an overarching term, includes hazard direction, hazard spreading and other get bying mechanisms, stand foring ways in which houses and single enterprisers trade with their concerns about perceived hazard, nevertheless significant, enabling them to perpetrate to internationalization and to come on international engagement. Uncertainty acclimatization refers to the versions and responses, psychological and stuff ( e.g. foreign market visits and other signifiers of direct foreign market experience ) , that single enterprisers and houses make to the germinating sensed uncertainnesss of foreign operations, enabling them to run within the restraining effects of uncertainty and apprehensiveness that ensue from the sense of the unknown. Uncertainty acclimatization, exercised as managerial opinion, is grounds of true Knightian ( 1921 ) endeavor. Internationalisation research indicates that, over clip, larning frequently is a powerful subscriber to the uncertainness acclimatization procedure, while the ability to cover with hazard facilitates uncertainness get bying. Although we argue that hazard and uncertainness are separate constructs, they are non unconnected in their effects.

While chance seeking has come to be stressed as a shaping characteristic and driver of international enlargement ( Oviatt & A ; McDougall, 2005 ) , the signifier that it takes is affected by the hazard adjustment and uncertainness acclimatization responses of enterprisers. In a survey of high executing smaller and moderate-sized Australian houses that had internationalised early after origin it was found that their attack to international development was anything but cavalier and risk-seeking ( Liesch, Steen, Middleton & A ; Weerawardena, 2007 ) . The directors of these houses were found to be carefully positioning their endeavors in universe markets cognizing good that one ill-judged move could be fatal, with small in modesty to prolong the endeavor. The directors viewed the international concern environment as one characterised by many uncertainnesss, some of which presented hazards that could be mitigated. The uncertainnesss mostly remained.

A Coevolutionary Model

The manner hazard and uncertainness influence and react to internationalisation brings about an of import combined alteration constituent influencing responses over clip. However, this is non merely a one-way street ; we have shown that turning international experience may stress, non merely cut down, hazard and uncertainness. Indeed, it could be expected that over clip, a house ‘s perceptual experience of hazard and uncertainness with respect to assorted international operations would demo considerable variableness – peculiarly at the state degree. As good, hazard and uncertainness should be seen as coevolving with other internationalization factors – such as resources accessible to the house, including germinating webs, context ( domestic and international ; see Meyer & A ; Gelbuda, 2006 on passage economic systems ) and managerial inadvertence ( or managerial bureau – see Madhok & A ; Liu, 2007 ) , inculcating facets such as ignorance, confusion and biases into decision-making. These assorted factors affect each other, and impact on the gait, way and content of internationalization, including assorted get bying responses, as shown in Figure 1.

A coevolution theory of steadfast behavior late has been adapted to the international house ( Madhok & A ; Liu, 2006 ; Pajunen & A ; Maunula, 2008 ) . A similar position has been proposed by Jones and Coviello ( 2005 ) as a manner of widening the focal point in the international entrepreneurship literature beyond its preoccupation with the international new venture ( Keupp & A ; Gassmann, 2009 ) . The coevolution of hazard and uncertainness and other factors reflects the procedures of managerially guided choice and version. For illustration, jobs in one state context may do a re- rating toward higher hazard and greater uncertainness, taking to a down-grading of activities and eventual backdown.

However, the interlingual rendition of context-effects into action by houses is non straightforward, as Weick ( 1979:125 ) some clip ago noted: “ decision-makers in organisations intervene between the environment and its effects inside the organisation, which means that choice standards become lodged more in the decision-makers than in the environment ” . Because of the intervening function of single perceptual experiences, Downey and Slocum ( 1975:576 ) hold even suggested that “ environmental uncertainness can be considered as a contradiction in footings and therefore misleading ” . Thus, managerial inadvertence must be included as one of the factors driving how hazard and uncertainness are perceived and acted upon. Because of the assorted, and indeterminate, interaction effects, we can non claim any consistent way between hazard, uncertainness and internationalization. However, we believe the constructs of hazard adjustment and uncertainness acclimatization better gaining control the kineticss of hazard and uncertainness operation and development, which finally influence, and are influenced by, internationalization.

Having taken a stance that hazard adjustment and uncertainness acclimatization coevolve in the internationalization procedure, we apply Lewin and Volberda ‘s ( 1999 ) five belongingss of coevolution to measure the legitimacy of this place. Multilevelness/embeddedness, multidirectional causalities, nonlinearity, positive feedback and path/history dependance are identified by Lewin and Volbeda ( 1999 ) as belongingss that distinguish coevolutionary from non-coevolutionary contexts. First, in the internationalization procedure, the resources of the house ( its cognition, accomplishments and webs ) , the macro-context of the house ‘s domestic and international activities, and managerial inadvertence will interact with and influence hazard perceptual experiences and uncertainness appraisals to make up one’s mind on degrees of committedness and the nature of international activities undertaken, as a manner frontward in internationalization is charted. The single director, the house, and the house within the market, coevolve as entities through this multilevel order. Microevolution emerges within the house, guided by the director, with the director larning from the house ‘s competitory environment, and accommodating, as the house abuts other houses within a nested ( Garud & A ; Van de Ven, 1992 ) macroevolution of kineticss within the domestic and international market places ( McKelvey, 1997 ) . In the internationalization procedure, there is grounds of multilevelness and embeddedness as portion of a coevolutionary procedure.

Second, internationalization does non merely go on for a house. Procedures are orchestrated by directors in response to invariably altering domestic and international contexts, with differing degrees of hazard associated with the battalion of activities necessary to take a house from local markets into international 1s. The uncertainnesss confronted are many, and they are confronted diversely by different houses, and by different directors within the one house. Impressions of dependant and independent variables in these systems can be debatable, and causality, peculiarly direct causality, can be more or less meaningful ( Lewin & A ; Volberda, 1999 ) depending on how partial, or complete, one considers the analytical frame of mention. The internationalization procedure is a procedure of many activities, each a procedure of itself, all with multidirectional causalities, the 2nd belongings of coevolutionary procedures identified by Lewin and Volberda ( 1999 ) .

Aligned with this endogeneity in such complex systems, and with multiple entities at different degrees of the administration interacting in diverse ways, outlooks of direct, additive relationships between associated variables must be tempered, even put aside. As Anderson ( 1999 ) and others have observed, analytical elegance and declaration of dependences within these systems, has demanded that nonlinearities in these interactions be assumed off. Managerial adjustment of hazard and acclimatization to the uncertainnesss of the internationalization procedure frequently produce undetermined waies to internationalisation characterised by nonlinearities in the relationships among interacting variables, Lewin and Volberda ‘s ( 1999 ) 3rd belongings.

While these indefinitenesss and idiosyncracies pervade the internationalization procedure, made even more unpredictable by interactions across multiple degrees of administration ( directors, the house, and the house in the market ) , directors and houses needfully need to react and accommodate to environmental influences – there is causality. That is, 4th, there is intentionality, positive feedback is observed, and larning occurs. Directors set up and develop international experience through increasing committedness to international markets, engagement in those markets, and through relationship development within webs ( Johanson & A ; Vahlne, 1977 ; 1990 ; 2006 ) . They orchestrate their houses through the internationalization procedure with an oculus to the hereafter, while being aware of the past. As such, and eventually, way dependences are observed ; the histories of the directors and of the house affair, the 5th belongings called for in coevolutionary contexts ( Lewin & A ; Volberda, 1999 ) .

As represented in Figure 1, in this coevolutionary internationalization procedure, with the coincident finding of directors ‘ adjustment of hazards and of their acclimatization to the uncertainnesss of internationalization, managerial inadvertence mediates in these findings – different directors might good make things otherwise, given similar resources sets and exposure to the same domestic and international contexts. This is non Williamson ‘s ( 1985 ) deterministically unsure universe, although constituents of it might be, and while it might non be entirely the non-ergodic universe that Dunn ( 2000 ) and Slater and Spencer ( 2000 ) conjectured, facets will non be ergodic. The internationalization procedure of the house is orchestrated by directors in a universe that is a whirl of deterministic ( Williamson, 1985 ) and true Knightian ( 1921 ) uncertainness, one where there are both separate and joint effects of hazards and of uncertainnesss ( Alessandri, Ford, Lander & A ; Taylor, 2004 ) , and one where these effects change over clip as the internationalization procedure unfolds, as do the hazards and the uncertainnesss.

This is a universe where confounding experiences, ignorance and other apparently irrational behaviors intercede in what has by and large been taken to be a well-determined and orderly procedure where directors merely ‘manage hazard and uncertainness ‘ , and even more inaccurately, seek out hazards as proactive risk-seekers. We return to Wiedersheim-Paul ‘s ( 1972:5 ) concerns that uncertainness be treated in internationalization research as something more than “ a unvarying factor ” ; that it “ is complex and heterogenous ” . We argue that directors acclimatise to the uncertainnesss they both know of and those that are unknowable, and that they accommodate the hazards associated with the uncertainnesss they know of, and that this acclimatization to unsteadily and adjustment of hazard is non unvarying across directors.

Reasoning Remarks

About four decennaries ago, in early research on internationalization, it was noted that while uncertainness was of import in an international context, it had, up to that clip, been treated in a superficial mode ( Wiedersheim-Paul, 1972 ) . At the least, it is clear that there is non a consistent relationship between hazard, uncertainness and internationalization. A more nuanced position on the nature of, and motion in, hazard perceptual experiences in response to on-going international operations is likely to supply greater lucidity in understanding the significance of entrepreneurship in general, but more peculiarly in the comparatively new field of international entrepreneurship where a dynamic position is missing. Of no lesser importance is a more nuanced apprehension of how enterprisers and directors approach uncertainness, and whether they differentiate between types of uncertainness in a manner that affects behavior. How they acclimatise to uncertainness seems cardinal.

In general, we argue for a more pluralistic intervention of hazard and of uncertainness, along with their distinction, in order to progress our apprehension of the manner they affect the class of internationalization. This may necessitate non merely detailed instance survey research on houses and persons but possibly an in-process methodological analysis that enables research workers to expose the nuances of significance, interaction and alteration effects that these two most hard constructs in the internationalization procedure spawn. As suggested in this article, coevolution theory may supply an appropriate foundation for understanding the kineticss of hazard, and of uncertainness, and the interactions that go along with their development, jointly and individually, in the house ‘s internationalization procedure.


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