inv presentation 31march2011

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Benjamin M. Oviatt & Patricia Phillips McDougall

Journal of International Business Studies (1994) 25, 45-64

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Awarded 1st prize in the1993 Competition for theBest Paper on

Entrepreneurship &Innovation (NYU’sCenter forEntrepreneurial Studies

2004 Decade AwardWinning Article

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Benjamin M. Oviatt

• Professor of Managerial

Sciences

• Director of the HJ Russell, Sr.

International Center for

Entrepreneurship in the

Robinson College of Business at

Georgia State

• focuses on the

internationalization

of new ventures

Patricia P. McDougall

• currently Interim AssociateDean of Academics

• William L Haeberle Professor of Entrepreneurship at IndianaUniversity’s Kelley School of Business

• focuses on the

InternationalizationOf new ventures &new venturestrategies

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To define & describe the phenomenon & to

present a framework explaining how

international new ventures fit within the theory

of the MNE Hope that a well-delineated, theoretical

framework will unify, stimulate, and guide

research in the area

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the success of international new

ventures seems to depend on

having an international vision of the firmfrom inception

an innovative product or service marketed

through a strong network

tightly managed organization focused on

international sales growth

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as a business organization that, from

inception, seeks to derive significant

competitive advantage from the use of resources and the sale of outputs in

multiple countries

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The stage theory of MNE evolution

after a period of domestic maturation and

home market saturation

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Scale and the MNE

Requirement for multinationality: scale …

▪

ability to efficiently manage internationalcommunication & transportation & exchange of 

production & market information

▪ Some makes feasible a large scale R&D effort

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The Changing of International Environment Large Size economic, technological and social conditions …

Markets link more efficiently

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Necessary & Sufficient elements for

sustainable international new ventures

With many markets internationalizing,fewer new ventures can escape

confrontations with foreign competition

more entrepreneurs are adopting a

multinational viewpoint

Thus, incongruent new framework

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Internalization of some transactions

most basic and is clearly part of traditional MNE theory

Organizations form where economic transactions are

inefficiently governed by market prices defining element of all organizations

transaction costs of

constructing and executinga contract & monitoring the

performance of the

contracting parties

hierarchical

authority willbe the

governance

mechanism

chosen

transaction is said tohave been internalized

within an organization

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Alternative governance structures

Poverty of resources & power defining

characteristic of the new venture▪ lack sufficient resources

▪ tend to internalize, or own, a smaller % of the resources

essential to their survival than do mature organizations

Hybrid partners

Network structure

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distinguishes new ventures &

established organizations:

minimal use of internalization & >

use of alternative transactiongovernance structures

poverty of resources & power new

ventures use such structures whenthe risk of asset appropriation by

hybrid partners is high.

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Foreign location advantage

The location advantage

▪

firms are international because they findadvantage in transferring some moveable

resources

Disadvantages

Barriers, laws, language & practices

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Unique resources

3 elements - necessary conditions

not sufficient conditions for sustainable competitiveadvantage

For Sustainable competitive advantage…

▪ knowledge-based INV - public good

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Kept proprietary by direct means

Imperfect imitability

Licensing The fact that new ventures frequently

use network governance structures The relationships inherent in a network can have

high personal and economic value because networkmembers share fees than…

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Framework

explains the existence of international new

ventures, and appears useful in describingtheir distinct types

describes sustainable international new

ventures as controlling assets

identifies ways of protecting rents derivedfrom such knowledge empirical research

is needed

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