internationalization performance revisited: the impact of

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"Internationalization performance revisited: the impact of age and speed on sales growth" Sylvie Verdier, Christiane Prange, Tugrul Atamer et Philippe MoninManagement international / International Management / Gestión Internacional, vol. 15, n° 1, 2010, p. 19-31.

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Ithas longbeen accepted thatfirms’operationsbeyondtheirdomesticboundariesenablethemtoreapthebenefits

fromforeignmarketengagementsandincreaseprofitability(e.g. Barkema & Vermeulen, 1998). However, empiricalsupport for this assumption has been mixed (Tallman &Li,1996)andtheoverwhelmingliteratureontherelation-shipbetweeninternationalizationandperformancehasnotachievedconsensus(seenotablyGlaum&Oesterle,2007:40 Years of Research on Internationalization and Firm Performance: More questions than Answers1). Thisarticleis based on some preliminary results drawn from the 1stauthor’s unpublished dissertation (Cellard-Verdier, 2008)andaddressestwooftheflawsthathaveplaguedpasttheo-

reticalandempiricalresearchontherelationshipbetweeninternationalizationandperformance.

Afirstmajorshortcomingofextantstudiesresultsfromtheirstaticandcontent-basedviewofinternationalization.Internationalizationhasoftenbeenconceivedas themeredegree of “multinationality”, but this does not in itselfreflectinternationalizationasa movement towards foreign markets.Indeed,therecentliteraturehassuggestedthatitisnotthedegreethatmayhaveanimpactoninternationaliza-tionperformance,butthewayfirmsreachthislevelthroughtime-based considerations (Tallman & Li, 1996;Vermeu-len & Barkema, 2002). Consequently internationalizationshouldbeoperationalizedthroughthepatternsoftheinter-nationalizationprocess(Wagner,2004).Inthisarticle,we

Résumé

La littérature sur les processus d’interna-tionalisationa largement étédominéeparlathéoried’UppsalaetlathéoriedesNewVentures:cesdeuxapprochespermettentd’expliquer la croissance internationalelente des firmes matures et la croissanceinternationale rapide des jeunes entrepri-ses, mais restent muettes sur les autresprocessusd‘internationalisationcombinantâgeetvitessededéveloppementinternatio-nal.Cet article esquisseunematrice2*2etexplorelesdifférencesdeperformancesentre quatre processus d’internationalisa-tion. Sur la base de données empiriquesde l’industriede lagrandedistributionauniveau mondial (1998-2004), une crois-sanceinternationalelentedèsleplusjeuneâge semble préférable à toutes les autresoptions d’internationalisation. Et s’inter-nationaliserjeunefavoriselaperformanceinternationaleplusquen’importequelpro-cessus d’internationalisation à un âgeplusmature,queceprocessussoitlentourapide.

Motsclés:Performancedel’internationa-lisation,Uppsala,ThéoriedesNewVentu-res,Age,Vitesse

AbstRAct

Internationalization process theories havebeen dominated by the Uppsala theoryand the new venture theory: they pro-vide explanations for slow internationalgrowth by mature firms and fast interna-tional growth by young firms, but fail toconsider other combinations of age andspeed. This article sketches a 2*2 matrixandexplorestheperformancedifferentialsoffourinternationalizationpatterns.Build-ing on early empirical evidence from theretailingindustry(1998-2004),thecombi-nationofyoungandslowinternationaliza-tionispreferabletootheroptions,whileayoungageisgenerallymorelikelytoyieldinternationalizationperformance than anycombinationofmatureinternationalizationwithsloworacceleratedspeed.

Keywords: Internationalization Perfor-mance, Uppsala, New Venture Theory,Age,Speed

Resumen

La literatura sobre el proceso de interna-cionalización ha sido ampliamente domi-nadaporlateoríadeUppsalaylateoríadeNewVentures:Ambasteoríascontribuyena explicar el lento crecimiento interna-cionalporpartede lasempresasmadurasy el rápido de las empresas jóvenes. Sinembargo,talesteoríasnotienenencuentaotras posibles combinaciones de edad yvelocidad de internacionalización. Esteartículo examina lasdiferenciasde rendi-mientodecuatroprocesosdeinternaciona-lizaciónsegúnunamatriz2*2.Unprimeranálisis de datos empíricos de la indus-tria de la gran distribución (1998-2004),sugierequelacombinaciónempresajovene internacionalización lenta es preferiblesobre las otras opciones posibles. En tér-minos más generales, la internacionaliza-ción de las empresas jóvenes permite unrendimientointernacionalmayorqueeldelasempresasmásmadurasindependiente-mentedelavelocidaddeinternacionaliza-cióndeestasúltimas.

Palabras claves: Rendimiento internacio-nal, Uppsala, teoría de New Ventures,Edad,Velocidad

Internationalization performance revisited: the impact of age and speed on sales growth*

SyLVIE VErDIEr chrISTIAnE PrAnGE TUGrUL ATAMEr PhILIPPE MOnInZürich Financial Services EMLYON Business School EMLYON Business School EMLYON Business School

* The comments expressed in this publication are the author's ownpersonalopinionsonlyanddonotnecessarily reflect thepositionsoropinionsoftheemployer

1. The effects of the degree of internationalization on performancehave been found of various natures: negative (Geringer, Tallman &Olsen,2000),positive(Goerzen&Beamish,2003,Delios&Beamish,1999;curvilinear(Lu&Beamish,2001;Daniels&Bracker,1989)andevenS-Curve(Lu&Beamish,2004).

20 Management international / International Management / Gestión Internacional, 15 (1)

examinetheinternationalization ageandinternationaliza-tion speedoffirmsintheworldwideretailingindustry.Spe-cifically, we demonstrate that Uppsala-based incrementaland new venture internationalization processes – the twomostinfluentialmodelsintheliterature–onlyreflecttwoextreme ways of internationalization: a fast internationalgrowthpreferredbyyoungfirmsandaslowinternationalgrowth typically undertaken by mature firms. However,restrictingananalysistotheseprototypicalstrategiesfailstoincludetwootheralternatives,whichmayalsoprovesuc-cessful:afast internationalgrowthbymaturefirmsandaslow international growthbyyoungfirms.By combiningthetwotime-relateddimensionsofinternationalization ageandinternationalization speed,wesketcha2*2matrixthatshould be conceived as a first step towards developing afull-fledgedtypology(Doty&Glick,1994).

Asecondshortcomingintheliteratureconcernsthedef-initionofperformanceoutcomes.Facingthegeneralpau-cityofclearperformancevariablesintheliterature,authorshavetakenindicatorssuchasROA,ROS,andROE(Dan-iels&Bracker,1989;Kumar,1984,Lu&Beamish,2001),aswell asmarket-basedmeasures such asBeta and risk-adjustedreturns(Buhner,1987;Collins,1990;Goerzen&Beamish,2003).However,manyoftheseindicatorsarenotdirectlyapplicabletonewventuresintheirearlystagesofinternationalization(Pangarkar,2008)astheiremphasisison entering multiple markets quickly (Oviatt & McDou-gall,1995).Ononeside,manymarketmeasuresmaynotbeapplicabletosmallfirmssincemanyarenotlistedonstockexchanges.On theother side, being early in the stageofinternationalization,newventurefirmsmightplacestrongemphasisonsalesgrowthandananalyticalfocusontheirprofitabilityunderestimatestheirtrueperformance.There-fore,wedefinegrowthhereastherelativeyearlyincreasein foreign sales, an indicator which has been used quiteconsistently across a variety of studies (e.g. Cavusgil &Zou,1994;Chandler&Hanks,1993;Delmar,Davidsson&Gartner,2003).

Empirical evidence based on qualitative insights andselected descriptive statistics from the retailing industry1998-2004 shows that high performing retailers do notnecessarilyfollowoneofthetwointernationalizationpat-terns as predicted by the incremental ‘Uppsala’ and newventureprocesses,butreflectthetwounder-exploredalter-native patterns. Incidentally or deliberately,WAL-MARTand CARREFOUR, the two undisputable leaders in theindustry, illustrate thesetwopatterns.In theremainderofthisarticleweconceptuallydevelopandillustratethis2*2matrix.Asaresult,thecomparisonofthefourpatternsofinternationalizationopensnewavenuesforboththeoreticalandempiricalresearchandalsoprovidesvaluableinsights

formanagersinvolvedintheinternationalizationprocessesoftheirfirms.

Two theories but four internationalization patterns

Whilevariousstreamsofresearchhaveinvestigatedthenature of foreign market entry, incremental international-ization and accelerated early cross-border engagementshave come to form the dominant paradigms in interna-tionalizationprocessresearch(Zahra,2005).Thefirst,theso-called Uppsala, or internationalization stage school,purportsthatfirmsenterintomarketsgradually,oncetheyhave established their home base (Johanson & Vahlne,1977, 1990; Bilkey & Tesar, 1977). In contrast, the so-calledinternationalnewventuretheorysuggeststhatfirmsadopt an accelerated foreign market entry process rightfrominception(Oviatt&McDougall,1994).Boththeoreti-calapproacheshaveprovidedsuccinctexplanationsontheprocessofforeignmarketentry2.Yet,nonehassufficientlyexplainedtheunderlyingdifferencesinthemannerinwhichfirmsestablishandconsolidatetheircompetitiveadvantageandtheirdifferential(andoftenparadoxical)impactonper-formance(Zahra,2005;Sapienza,Autio,George&Zahra,2006).Table1summarizesthemajordifferencesandcom-monalitiesbetweenthetwomostinfluentialmodelsintheliterature.

Incremental internationalization. Incremental inter-nationalizationprocess theorybuildsonknowledgeaccu-mulation and experience. It incorporates several relatedapproaches,whicharesimilar in theirexplanatorypower.The Uppsala internationalization model (Johanson &Vahlne, 1977; Johanson &Wiedersheim-Paul, 1975) andtheinnovation-relatedinternationalizationmodel(Bilkey&Tesar,1977),bothcontendthatfirms become international in a slow and incremental processwitha limitednumberoftargetedgeographicmarkets.Toexplaininternationaliza-tionacrosscountries,authorshypothesize thatfirmshavetocompensatebetweenmarketknowledge,resourcedepen-dency, and uncertainty.The internationalization of a firmisdescribedasbeingnecessarilypath-dependentbasedonpriorknowledgeacquisition.Thus,internationalizationisaprocessbuiltuponthereductionofuncertaintybyknowl-edgeaccumulation.Knowledgeofthefirmincreaseswithtime and experience so that firms choose an incrementalpattern of internationalization, gradually seizing oppor-tunitiesonacountry-by-countrybasis.Allinall,astrongunderlying assumption of the gradualist approach is thatfirmsinitiatetheirfirstinternationalentryoncetheyhaveastrongdomesticmarketbase,i.e.,at an older age.Interna-tionalizingatanolderagesupposesbuildingontherefer-

2. GiventhefocusofthisSpecialIssueofManagement International,we purposefully frame the contest between Uppsala and born-globalapproaches. Of course, we fully acknowledge that several alternativetheories are highly referenced and established as demonstrative forfirms engaged in internationalization, including notably Dunning’s

eclecticparadigm(1977,2001),Ethier’sOLItriad(1986),BuckleyandCasson’s internalization theory (1976,2009), transactioncostapproa-ches(Hennart,1982),strategicbehaviorapproaches(Harrigan1988orKogut,1992),orelsespringboardperspectives(LuoandTung,2007).

Internationalization performance revisited: the impact of age and speed on sales growth 21

entialknowledgebaseofthehomemarketandcompetitiveadvantage inforeignmarkets isgainedbyexploitingcur-renthome-basedadvantages.

The incremental view of internationalization has notbeen without its critics.As the environment has changedsignificantlysincethetraditionalinternationalizationtheo-riesweredeveloped,firmshavequiteoftenbeenrequiredto speed up their foreign market entry processes. Theincreasedlevelofglobalizationinmanyindustriesmayfur-ther lessen theperceived riskofentering foreignmarketsandpartly explains theobserved increase in the speedofinternationalization. Technological innovation aside, thepresenceofan increasingnumberofpeoplewith interna-tional business experience has established new founda-tions for multinational enterprises (Oviatt & McDougall,1994).Crick&Jones(2000)foundthatmanyfirmswereset up by managers with previous experience in interna-tionalmarkets,whohadalreadydealtwith thecomplexi-ties of international operations, appreciated the risks andresourceimplications,andevenmoreimportant,developedanetworkofcustomersandcontactsonwhichtobuildforsettinguptheirownfirms.Notsurprisinglythen,giventhiscriticism,anewtheoreticalapproachhasstartedtodevelopsince the late 1980s.This relates to the establishment ofnewventuresasfirmswithaninternationalorientationrightfrominception(Oviatt&McDougall,1994,1995).

New venture internationalization. Due to environ-mentalchangesandthelimitedexplanatorypotentialoftheincrementalprocess theoryof internationalization, Johan-son & Mattson (1988) have pointed out that some firmsmight follow a different pattern of internationalizationthansuggestedbythestagemodels.Morerecently,severalauthorshaveemphasizedanewphenomenonofsmallandmedium enterprises that are becoming international soonafter being founded (Oviatt & McDougall, 2005, 1994;Autio,Sapienza&Almeida.,2000;Rennie,1993;Knight& Cavusgil, 1996; Madsen & Servais, 1997). This ideagave the impetus for the concepts of “born globals” and

“internationalnewventures”with the latterproviding thename for the theory (McDougall, Shane & Oviatt, 1994,Zahra,2005).Thisnewstreamofresearchstartedfromthedefinitionofinternationalnewventuresas“abusinessorga-nization that, from inception, seeks to derive significantcompetitive advantage from the use of resources and thesaleofoutputinmultiplecountries”(Oviatt&McDougall,1994,p.49)or“bornglobals”,definedasfirmsthathavereached at least 25% of foreign sales within three yearsafterestablishment(Madsen,Rasmussen&Servais,2000).Thetheoryofinternationalnewventuresmostlyrelatestotheseearly and rapid internationalization processes.How-ever, internationalizing at an earlier stage involves morerisk-taking than the well-established internationalizationprocessesofolderfirms(Oviatt&McDougall,1994).Thismaybeduetothefactthatnewventureschoosetopursueinternationalopportunitiesaggressivelyinordertocapturecapabilitiesonaglobal-scale.

Theborn-globalapproachpresentsauniquechallengetoincrementalismandstagetheory(Oviatt&McDougall,1994).Ifinternationalizationwerepossibleonlybyknowl-edgeaccumulationandexperience,thennewventurescouldnotbe international and successful from inception.Olderfirms with the necessary resources and skills that enableinvestmentsinlearningandthuseffectiveadaptationwereclearly in a superior position.Yet those established firmsareoftensubjecttostructuralinertiathatpreventsorlimitstheirabilitytogrowquicklyabroad(Oviatt&McDougall,1995). In this vein, internationalizing at an earlier stagemayhaveadvantagesascomparedtoanestablishedcom-panywhoseabilitytolearnanddevelopitsoperationsmaybelimited(Oviatt&McDougall,1994).

Inorder to solve thedilemmaposedby the inconclu-siveperformanceresultsofbothincrementalandnewven-turetheory(Vermeulen&Barkema,2002;Wagner,2004),researchershavesuggestedthatinternationalizationshouldnotonlybeconsideredfromacontentbutalso throughaprocesslens.Thisincludestheratesandpatternsbywhich

TABLE 1

Incremental vs. new ventures internationalization processes

INCREMENTALINTERNATIONALIZATION NEWVENTUREINTERNATIONALIZATION

Control,uncertaintyavoidance,riskreduction:international-izationisaprocessbuiltuponknowledgeaccumulationandexperience.

Models: Uppsala (Johanson & Vahlne 1977; Johanson &Wiedersheim-Paul1975)andinnovation-relatedinternation-alizationmodel(Bilkey&Tesar,1977;Cavusgil,1980).

Process:pathdependentand incremental stagesof interna-tionalization.Slowandregularprocesswithalimitednum-beroftargetedcountries.Increasingcommitmenttoforeignmarkets.

Discoveryandinnovation:acceleratedinternationalizationinnewandunknownterritoriesisbasedonthedevelopmentofhithertonon-existingcapabilities.

Models:TheNewVenturestheoryor‘BornGlobals(Ren-nie,1993,Oviatt&McDougall,1994,Knight&Cavusgil,1996).

Process: Speed, irregularity, geographic dispersion.Focuseson the roleofentrepreneurs.Risk-takingpostureandinternationalexperienceencouragerapidinternational-izationatayoungage.


firms organize their internationalization processes andincorporatesthenotionoftime(Jones&Coviello,2005).Specifically, internationalization processes can be distin-guished according to the time elapsed until a firm startsinternationalactivities(Reuber&Fischer,1997;McNaugh-ton,2000)andwerefertothisasinternationalization age.Furtherwerelate to the rateatwhich internationalizationoccurs as the speed of internationalization (Coviello &Munro, 1997; Jones 1999). Differences in international-ization ageandspeed of internationalizationsuggestnewways of accounting for different internationalization pro-cessesthatarelikelytoentailperformancedifferentials.Bycombiningthosetwodimensions,weestablisha2*2matrixthatmayenrich theoreticaldevelopmentand invitesus toinvestigatetwoadditionalinternationalizationpatterns(seeTable2).Inthenextsections,wewishtoexaminetheheu-risticpowerofthismatrix,i.e.,answerthequestionwhetheritaddsnewlighttoourunderstandingoffirms’internation-alization patterns. To do so, we apply this matrix to themassgroceryretailing industry,and thenexplore theper-formancedifferentialsacrossinternationalizationpatterns.

Internationalization processes in the mass grocery retailing industry

For several reasons, we chose the mass grocery retailingindustryasarelevantsettingtoexaminetheheuristicpowerof our matrix. First the pursuit of international develop-menthasbeenamajortargetformostplayersintheindus-try(Hallsworth,1992,Williams,1992a,1992b,Treadgold,1988,Alexander&Myers,2000,Dawson,1994).Second,whereas the Uppsala theory befits all industries, thereis no consensus on the applicability context of the inter-nationalnewventure theory.Someauthorsargue that theinternationalnewventurephenomenonisonlyobservablein knowledge-based industries (Burgel & Murray, 2000),whileothersdefenditsexistenceinallindustries(Rennie,1993).Thus,theretailingindustryisinterestingforexam-ining and comparing the relevance of the two dominanttheories of internationalization (Akehurst & Alexander,1996).Lastly,theretailindustryincludesalargevariationofinternationalizationagesfromone-yearoldfirmsto204year-oldfirmsandalsoshowsdifferentialratesofinterna-tionalizationspeed.

Our population includes all internationalized compa-nies in the world in the grocery retailing industry, basedon exhaustive data from Planet Retail, a leading consult-ingfirmspecializedinworldwideretailing.Retailersinthepopulationareactiveinatleastoneofthesixstoreformats:supermarkets,hypermarkets and superstores, conveniencestores,discountstores,neighborhoodstores,andcashandcarry.Weconsultedadditional secondary sources suchascompany websites, the specialized press, sector analyses,biographies, and annual reports to complement our data.Wedefinedinternationalretailersasfirmshavingstoresinatleasttwocountries(Dunning,1989).Formerstudieshave

considered firms as being international when they wereimplanted in at least six countries (Goerzen & Beamish,2003) but we take the view that young internationalizerscannot be that internationalized at an early stage (Oviatt& McDougall, 2005).Among the 96 international retail-ersmakingthepopulation,weselectedthosewhohadbeenpresentforatleastthreeyearsinarowinour7yearperiod.Insum,westudied86internationalretailersfrom1998to2004. Two empirical factors suggest that the 1998-2004time frame is especially relevant for our purpose. First,retailers developed intense international activities duringthatperiod(includingbothentriesinandexitsoutofcoun-tries,andgrowthordeclineatthecountrylevel).Second,retailers experienced a wide range of variations in theirspeed of internationalization (i.e., some firms progressedslowlyandothersrapidly).

Internationalization age. Internationalization agerefers to the time taken to begin international activities(Reuber&Fischer,1997;McNaughton,2000). Internation-alizationagewasmeasuredbythenumberofyearsbetweenafirm’sfoundingdateanditsfirstinternationalsalesabroad(Autioetal.2000).Asregardsinternationalizationage,theretailingindustryisinterestingbecauseretailersarewidelydistributedaccordingtothisvariable(Figure1).Theaver-age internationalizationage in thepopulation is59while30isthemedian.

Somefirmsbegin their internationalization right frominceptionandothersverylateintheirhistory.ForinstancetheGermancompanynamedMETROstarteditsfirstinter-nationaloutletintheNetherlandsin1968,fouryearsafteritsfoundation.ThePortugueseretailerMODELOCONTI-NENTEdid the same inBrazil in1989.On theoppositeend,anotherPortugueseretailer,JERONIMOMARTINS,created as early as 1792, and one of the first retailers intheworld,starteditsinternationalizationverylatein1995in Poland and in 1997 in Brazil. WAL-MART expandedabroadtoMexicoonlyafter30yearsofoperationsintheUS.

Internationalization Speed. Speed is indicative oftheratebywhichafirmundertakesforeigncommitments(Jones&Coviello,2005).Itisatime-basedmeasurerepre-sentinghowfastafirmdevelopsoutletsabroad.Tomeasureinternationalization speed, we adopted Wagner’s meth-odology (2004).We defined internationalization speed asthechange in the ratioof foreignentities to total entities(Lu&Beamish,2004)between1998-2004.Thelargerthechangeovertheseven-yearperiod,thehigheristheexpan-sion speed. Slow internationalizers are firms that chooseagradualprocesswith a low increase in the ratioof for-eignstorestototalstoresduringourperiodofobservation.Fastinternationalizersregisterahighincreaseofthisratio.Amongthe86retailersandwithin theperiodofobserva-tion,themeansofinternationalizationspeedis1%.Figure2showsanexampleofbothpatterns


Four internationalization processes.Table2presentsthematrixofinternationalizationprocesseswithexamplesofprominentretailers

Case 1. CARREFOUR (France), ALDI (Germany),METCASH(Australia)andSEVEN&I(Japan)areyoung

internationalizers that pursue a slow internationalizationprocess.Forinstance,ALDIwascreatedin1960andstarteditsinternationalizationin1967.In2004,itwasimplantedin14countries.However,from1998to2004,theratioofitsforeignstorestototalstoresincreasedonlyby0.84%.This

FIGURE 1

Internationalization Age

FIGURE 2

Internationalization Speed

Num

ber

of r

etai

ler

30

25

20

15

10

5

0

Internationalization age

Less than10 years

old

Between 11and 20

years old

Between 21and 30

years old

Between 31and 40

years old

Between 41and 50

years old

More than 50

years old

Source: Cellard-Verdier (2008), based on the information data of Planet Retail

90%

85%

80%

75%

70%

65%

60%

55%

50%Pro

port

ion

of in

tern

atio

nal s

tore

s

1998 1999 2000 2001 2002 2003 2004

Source: Cellard-Verdier (2008), based on the information data of Planet Retail

fast slow


ratio is lowconsidering thatALDIentered fourcountriesduring this period: Luxembourg (1997), Ireland (1999),Australia(2001),andSpain(2002).

Case 2. SCHWARZ (Germany), COOP NORDEN(Scandinavian: Swedish, Norwegian and Danish), VPMARKET(Lithuania)andMETRO(Germany)areyounginternationalizers that pursue a fast internationalizationprocess.METROwascreatedin1964andoperateditsfirstinternationalestablishmentintheNetherlandsin1968.Itisimplantedin26countriesandduringtheperiodofobserva-tion,itsratioofforeignstorestototalstoresincreasedby1.16%.

Case 3. TESCO (UK), TENGELMANN (Germany),DELHAIZE GROUP (Belgium) and EDEKA (Germany)are mature internationalizers that pursue a slow interna-tionalizationprocess.Inthiscategory,firmsstarttheirfirstinternationalestablishmentlaterandtheirinternationaliza-tionfollowsaslowcurve.TESCOstarteditsinternational-izationattheageof74yearsanditsspeedisabout0,34%duringthisperiod,whileitsnumberofcountriesincreasesfrom7 to13.Thismeans thatTESCOexperiments care-fullyinthesenewcountries.

Case4.Finally,WALMART(UnitedStates),CASINO(France), AHOLD (The Netherlands) and REWE (Ger-many) are mature internationalizers that pursue a fastinternationalization process. CASINO started its inter-nationalization process at 87. However, its international-ization speed isveryhigh.CASINO increases its foreignpresenceatarateof4,33%duringtheperiod.Itincreasesitsnumberofcountriesby18in7years.

Interestingly, the two industry leaders, namely CAR-REFOURandWAL-MART,havefollowedcompletelydif-ferent internationalization processes, and do not support

the two dominant ones. CARREFOUR started its inter-nationalizationatayoungage,andthoughthenumberofcountriesofimplantationincreased,itsforeignstoresratiodecreased during this period. Until 2004, CARREFOURentered38countriesandonlyexitedtwo.Onthecontrary,WAL-MARTstarteditsinternationalizationprocessratherlate at 31 years of age. However, its increase in foreignstoresratioreachedalmost3%withonlyhalfthenumberofCarrefour’scountries.Whilethetwocasesarenotsufficienttobuildtheory,theyclearlystirinterestindifferentvariantsof the internationalization-performancerelationship.Theyalsopresentinitialproofthatthereareviablealternativestothewell-establishedinternationalizationpathssuggestedbyboththeUppsalaandthenewventureschoolsofthought.

Relating internationalization processes and performance

Inthissection,weexaminewhetherourmatrixofinterna-tionalization patterns can yield additional insights on therelationshipbetweeninternationalizationandperformance.Wedefineourmeasureofperformance:international sales growth, then provide a general proposition relating “age-times-speed” to performance. The interpretations of theresults will form part of the major contributions of thisarticle.

International sales growth. Performance relates toexpectations about the achievement of firms’ objectivessuchasprofitabilityandreturnoninvestment(Cavusgil&Zou,1994).However,earlyinternationalizersdonothavethe opportunity to substantiate these conventional perfor-mance outcomes as they have a very limited opportunityto realize their strategy and generate a sustained revenuestream. Conventional measures of performance do not

TABLE 2

A matrix of internationalization patterns with examples from retailers


Slow Fast

Int.Age

Young

Case#1:CARREFOUR;SEVEN&I;METCASH

ALDI (7 years old,0.84% internationalization speed)

Case#2–International New Ventures Theory-SCHWARZ;

COOPNORDEN;VPMARKETMETRO (5 years old,

1.16% internationalization speed)

Mature

Case#3–The Uppsala TheoryEDEKA;TENGELMANN

DELHAIZEGROUPTESCO (74 years old,

0.34% internationalization speed)

Case#4–WALMART;REWE;AHOLD

CASINO (87 years old, 4.33% internationalization speed)


capture the early intent of these firms, whose short-termobjectiveistoquicklyinternationalizeinmultiplemarkets.Therefore,muchof the theoretical literatureonnewven-tureshasfocusedon(international)salesgrowth(OviattandMcDougall,1995,1994;Bloodgood,Sapienza&Almeida,1996; Chandler & Hanks, 1993), and some authors haveevenusedsalesgrowthtodistinguishtheseentrepreneurialfirmsfromnon-entrepreneurialfirms(McDougall,Shane&Oviatt, 1994). Sales growth is also widely used by tradepublications,industryexperts,andventurecapitalists(Sapi-enzaetal.2006).Weuseinternational sales growthhereastheconventionalmeasureofperformance(Cavusgil&Zou,1994)because it seemsbetter suited to international out-comesofbothyoungandmatureinternationalizers.Inter-national salesaredefinedasallsalesrevenuesderivedfromretailers’internationaloperations.Wecomputedthechangeininternationalsalesbycalculatingtherelativegrowthofinternationalsalesperyear,thenaveragedtheratioovertheperiodbycalculatingthemeanofthesevenyears.Thispro-cedureisinlinewithpreviousstudies,whichhaveconsid-eredrelativesalesgrowthas thebest-establishedmeasureofgrowth(Delmar,Davidsson&Gartner,2003).

Age and speed as predictors of international sales growth. Theoretically,incrementalandnewventuresschol-arshaveprovidedcontrastingexplanationsregardingageatfirst international entry and speedof the internationaliza-tion process, yet very few studies have been designed tocaptureandinterprettime-relatedphenomena(Coviello&Jones,2004).Studiesfocusingontherelationshipbetweenageandgrowthhavetheirrootsinpopulationecology(Car-roll&Hannan,2000)butveryfewempiricalstudieshaveaddressedinternationalcontexts(Hannan,Carroll,Dobrev&Han,1998).Ageisknowntonegativelyinfluencegrowthandfirmsthatinternationalizeearlyaremoreaware,morecapableandmorewillingtopursueinternationalopportu-nities (Autio et al., 2000). Moreover, internationalizationrequiresfirmstounlearnpastroutinesandlearnnewones(Barkema,Shenkar,Vermeulen,Bell,1997).Atayoungerage, routinesare lessestablished, such thatfirmsare lessembedded in their past routines; indeed learning impedi-ments throughestablishedroutinesare lower.Barkemaetal.(1997)underlinedthedifficultyforolderfirmstounlearnestablished routines and adopt new ones, due to existingcognitive,political,andrelationalconstraints.Theolderthefirm, the more established are the routines and practices,andthehigheristheleveloforganizationalinertia(Hannan&Freeman,1984).Structuralinertiaargumentsimplythatyoungerfirmsaremorelikelytodynamicallyparticipateinthe internationalizationprocess thanolderfirms(Autioetal.,2000).Finally,theliabilityofsenescenceofolderfirmsindicates that capabilities exhibit an increasing misalign-mentwiththeenvironmentandareresistanttochangeovertime (Hannan, 1998). Therefore, all of these convergentlinesofthoughtsuggestthatgrowthshouldbehigheratayoungerage.

Thatsaid,oursettingisdifferentasweareinterestedintheinteractioneffectbetweeninternationalization ageandinternationalization speed on international sales growth.Inprinciple,thespeedofinternationalizationshouldlimitthetimeframetotransfer,accumulateandgenerateknowl-edge. According to the organizational learning tradition,an increasing speed of internationalization would lead toincreasingdifficultiesofinternationalizationarrangementssinceitreducestimeforadaptation,generationofknowl-edgeanddevelopmentofabsorptivecapacity(Vermeulen&Barkema,2002).Therefore,basedonage-relatedliabilitiesandspeedconstraints,weofferthefollowingproposition:

International sales growth will be relatively higher for young internationalizers at a low speed, relatively lower for late internationalizers at a high speed, and moderate [read: in-between these two extremes] for young internationalizers at high speed and late interna-tionalizers at low speed.

Methodological Overview.Thefindingsthatweshallreport in thenextparagraphsarepartofa largerresearchprogram(Cellard-Verdier,2008).Consequently,wewishtoprovideanoverviewofthecontrolvariablesandstatisticalmethods employed.As mentioned earlier, the populationincludesobservationsfor86firms,eachcomputedintheirrespective country implantations over seven years (1998-2004).

Since several variables might affect the hypothesizedrelationships between age, speed and international salesgrowth, we included six controls: company size, marketscope, country scope, competitive intensity, internationalexperience,andexit.Companysizewasmeasuredby thelogarithm of a firm’s total sales over the period. Marketscope corresponds to a company’s degree of diversifica-tion. Measured by the number of formats of worldwideimplantation,itislikelytobenegativelyrelatedtoperfor-mance (Delios & Beamish, 1999). Country scope repre-sentsthenumberofcountriesofimplantation(Vermeulen&Barkema,2002),andresearchersformerlyshowedthatperformanceincreaseswiththenumberofcountries(Tall-manetLi,1996,GoerzenetBeamish,2003).Wealsocon-sideredthecompetitiveintensitymeasuredbythefirm-levelHerfindahl–Hirschman Index (HHI). International experi-ence measures for how long a firm has been establishedabroad.Thepositiveeffectof internationalexperienceonperformancehaslargelybeeninvestigated(Madhok,1996).However,asinternationalexperienceincreases,itmayleadto a firm’s lock-in, since it supports mature age-relatedliabilities. Lastly, we control for exit. Exit can be eitherdissolution, i.e.closureofanexistingbusinessinacoun-try,closure,ordivestiture,i.e.thesaleofthisbusiness(Li,1995).Researcherspreviouslyshowedthatperformanceisnegativelyrelatedtoexits,sincefirmsexitfromacountryifperformanceislow(Montgomery&Thomas1988).

Alternative sets of hypotheses predicting both inter-national sales growth but also exit were tested through


OrdinaryLeastSquaremultipleregressionmodelsonSAS9.0andfullerresultscanbeexaminedelsewhere(Cellard-Verdier,2008).Below,wewishtoreportonselectedfind-ingsinordertosolveourinitialresearchquestion:istheresuch a thing as one singular internationalization processthatwouldsignificantlysurpassotherswithrespecttointer-nationalsalesgrowth?

Findings and contributions

Givenourconceptualizationofthe2*2matrixofinterna-tionalization processes, and the broad formulation of ourguidingproposition,we startwith avisual representationoftheinteractioneffectsofinternationalageandspeedoninternationalsalesgrowth(Figure3).

The two slopes indicate the following:whatever theirspeedofinternationalization,youngerretailersoutperformmorematureretailers.Thisresultsupportsthenegativerela-tionship between firms’ internationalization age and theirpotentialinternationalsalesgrowththathasbeenreportedelsewhere(Autioetal.,2000).However,isolatingthisdirectrelationshipneglectsthecomplexsetofinternationalizationdrivers.Whileformerresearchhassuggestedthattherela-tionshipbetweeninternationalizationandfirmperformanceis contingenton foreign expansion speed (Wagner, 2004;Barkema&Vermeulen,1998),ourfindingsprovideconfir-matoryevidenceofthismoderatingeffect(Table3).

Younginternationalizersthatpursueaslowinternation-alization process enjoy higher international sales growthratesascompared toyoung internationalizers thatpursuea fast internationalization process. But mature interna-tionalizers that pursue a fast internationalization processreachhigherperformanceresults thanmature internation-alizersthatpursueaslowinternationalizationprocess.Forinstance,CARREFOURandEDEKAbothfollowedaslowinternationalizationprocess,but started theirfirst interna-tional expansion at different ages. CARREFOUR beganits internationalization at a younger age and enjoyed aninternationalgrowthof17.74%duringtheperiod3.Inturn,EDEKAstarteditsinternationalexpansionat84andexpe-riencedaninternationalsalesgrowthrateof1.06%.Amongfast internationalizers,METROandWAL-MARTare twowell-knownfirms.METROinternationalizedearly(5yearsold)andenjoyeda7.99%internationalsalesgrowth.WAL-MARTinternationalizedatamucholderage(30yearsold),yetexperiencedaninternationalsalesgrowthof38.8%.Inshort:when a firm starts its internationalization process, it is better to be slow if young, to be fast if old, but it is better to start young anyway!

Behind that evoking yet simplifying slogan, our con-tributions refer to the existence of alternative performingpaths to internationalization.Bybuildingon thedifferentcombinations of age and speed of internationalization,we not only dealt with the Uppsala and the internationalnew venture theories but also considered the two others

FIGURE 3

The two-ways interaction effects

Inte

rnat

iona

l gro

wth

2

1,5

1

0,5

0

-0,5

-1

-1,5

-2

-2,5

Low Int Age High Int Age

Low Speed Moderator

High Speed Moderator

Two-ways interation Effect: Internationalization age and speed; international growth

3. The figures that we provide below should be considered withcautionandas illustrative:anyexamplecanbe the subjectofhistori-cal events. For instance, during the period (in 1999), CARREFOURmerged with another large but less internationalized French retailer:

PROMODES. Consequently, the reported international sales growthwould have been larger, had we restricted the analysis to the initialperimeterofCARREFOUR.Thatsaid,thosenuancesdonotalterourgeneralargument.


processes.Apart from largeandmature internationalizers(case#3)andsmallandyoungnewinternationalventures(case#2), ourfindings (preliminarydescriptive statisticsand correlations) suggest that two other processes (cases#1and#4)yieldsignificantlybetter internationalizationperformance outcomes. These two additional patternsof internationalization are illustrated by CARREFOURandWAL-MART,thetwoundisputedleaders in thefield.Recently,Bell,McNaughton&Young(2001)have talkedabout so-called “born-again global firms” as those firmsthatbeginarapidinternationalexpansionprocessafteranextensiveperiodofdomesticdevelopment(case#4).Ourfindings further reveal not only born-again global firms likeWAL-MARTbutalsofirms, thatweproposeto label“careful-born global”likeCARREFOUR(case#1),whichmayenjoyhigherinternationalizationoutcomesthanmoreestablishedincrementalistsandborn-globals.

Explaining the performance of CARREFOUR-like “careful-born global”. Fifty years ago, Penrose (1959)argued that a firm’s growth depends on its potential tosense and seize opportunities and to respond to them byreconfiguringitsroutines.Appliedtoaninternationalcon-text, a firm’s growth through the expansion of interna-tional opportunities would be influenced by its ability tointegrate,build,andreconfigureresourcesandroutinestocopewitha changingenvironment.Whenafirm initiatesits first international market entry, it builds routines andrules for change (Guillèn, 2002). Internationalizing earlygeneratesspecializedcapabilitiesforrapidadaptationtotheexternalenvironment(Sapienzaetal.,2006).Aslowspeedofinternationalizationprovidessufficienttimeforthefirmto better address and experiment with internationaliza-tionconstraints.Thesefirms take their time toeffectivelyabsorbthenewcomplexity,designasuitableorganizationalstructure,andreapthebenefitsofinternationalizationwhileconcurrently managing threats and assimilating foreign

knowledge(Wagner,2004).Inaddition,earlyinternation-alizers enjoy some learning advantagesof newness (rela-tivelytomorematureinternationalizers)thatcanenhancegrowth(Autioetal.,2000).Takencollectively,theyoungerthefirmatinternationalization,thestrongeritsinternation-alizationeffortsforlearning(Sapienza,DeClercq&Sand-berg, 2005) and for rapid adaptation. Typically, youngerinternationalfirmsseeforeignmarketsasless‘foreign’andembryonicroutinesreducethetimeandcostsofdynamiccapabilitydevelopment(Autioetal.,2000).International-izationexposesthefirmtonewexogenoussituations(cul-tural, economical, political, competitive conditions) andnewendogenousconstellations(reconfigurationofresourceallocations) andyoungerfirmsoftenhavemore timeandthenecessaryattributestoanswerthem.

Explaining the performance of WAL-MART-like fast and mature internationalizers. Born-again globalfirms(Bell,McNaughton&Young,2001)are thosefirmsthatbeginarapidinternationalexpansionafteranextensiveperiodofdomesticdevelopment.Matureinternationalizershaveaccumulateddomesticresourcesthatstrengthentheirdomestic competitive advantage.WAL-MART’s ‘fast andfurious’internationalizationstrategyduringourwindowofobservationislargelybasedontheleverageofitsfinancialresources andbuyingpowerovermultinational suppliers.InWAL-MART’s case, there is little doubt that standardresource-based-view(RBV)argumentsprovideacompel-lingexplanationforitsinternationalperformance.

Inaddition,organizationallearningtheoryprovidesfur-therinsight(Forsgren,1989;March,1991;Sapienzaetal.,2006).Forinstance,anacceleratedspeedofinternational-izationreducesboth the timefor learningandknowledgetransfer.Itrequirestheabilitytointegratenewenvironmen-talsettings,whichisdependentontheabsorptivecapacityoffirms(CohenandLevinthal,1990).Absorptivecapacity

TABLE 3

A matrix of internationalization patterns with retailers’ performance


Slow Fast

Int.Age

Young

Case#1:SEVEN&I;ALDI;METCASH

CARREFOUR (17.74% international sales growth)

Case#2–International New Ventures theory-SCHWARZ;

COOPNORDEN;VPMARKETMETRO

(7.99% international sales growth)

Mature

Case#3–The Uppsala TheoryTESCO;TENGELMANNDELHAIZE

GROUPEDEKA (1.06% international sales growth)

Case#4–REWE;CASINO;AHOLD

WAL-MART (38.8% international sales growth)


is a dynamic capability pertaining to knowledge creationandutilizationtoenhanceafirm’scompetitiveadvantages.Matureinternationalizersrelyonhome-basedandcumula-tiveknowledgeacquisitionexperience tobuildabsorptivecapacity.Oncesufficient,firmsextendmarketcoverageandthen benefit from higher positional advantage and legiti-macy (Podolny, 1993), which provide them with a solidbackground to facehazards rate.An initial largestockofresourceshelpstoabsorbthenegativeeffectsofacceleratedinternationalgrowth,henceovercomingstructural inertialforces. Essentially, they rely on the two different sets ofabsorptivecapacity.

First they count on their own domestic consolidatedknowledgebase thatconstitutes theirpotential absorptivecapacity, i.e., prior related knowledge to assimilate andusenewforeignknowledgeinput.Second,firms’rapidandpath-breakinginternationalizationprocessenablesthemtoovercometheirageliabilitiesbydevelopingdynamicrou-tinesforchangewhichconstitutestheirrealizedabsorptivecapacity.Maturefirmsfollowingafastinternationalizationtrackmaythenhaveanincreasedabsorptivecapacity(bothpotentialandabsorptive)anddevelopdynamiccapabilitiesthat foster international growth rates (Prange & Verdier,2010).

Why would born-globals and incrementalists under-perform?Ourthirdandfinalcontributionrelatestothetwowell-know internationalization processes that seem to beunder-performing.Inthefollowing,aswedidforthetwoformer processes, we elaborate on the reasons that couldexplainsuchalowperformance.

Born-globals, i.e., young and fast internationalizersoften do not have an incubation phase. Managers’ priorexperienceisoftencitedasinfluencingthespeedofinter-nationalization (Oviatt & McDougall, 2005) but as firmsinternationalize early, this experience has often not beensufficientlyentrenched.Experiencethatcomestoofastcanoverwhelm managers leading to an inability to transformexperienceintomeaningfullearning(Eisenhardt&Martin,2000).Youngandfastinternationalizersmayfacealackofconsolidation capabilities, becausepermanent explorationofforeignmarketsrequiresresourcesandcapabilitiesthatare solely generated in a preceding period of consolida-tion(Rothaermel&Deeds,2004).Therefore,newventuresmightneglectbuildingcapabilitiesforpositionaladvantageand social embeddedness, i.e., consolidation capabilities(JohansonandVahlne,2009;Ellis, 2010). In a fast inter-nationalization process, younger firm’s lack of positionaladvantage(i.e.,status,trust,reputation)andtheabsenceofincipientroutinescanreducethegrowthoutcomes.More-over,firmsthatsetupforeignentitiesfacetimecompres-siondiseconomiesbecausetherearelimitstothecapacityof absorption (Cohen & Levinthal, 1990). Vermeulen &Barkema (2002: 641) stated that overload caused by a very high pace reduces a firm capacity to further absorb expansion. In brief, young internationalizers may some-

timesoverstretchtheirabsorptivecapacity.Eventually,thislineofthoughtisfullyconsistentwithpopulationecologyframeworks and their underlying arguments concerningthe liabilities of newness: newly founded firms are morelikelytofailbecauseofthescarcityoftheirinitialresources(Freeman,Carroll&Hannan,1983).

Incrementalists, i.e., mature internationalizers encour-agetheaccumulationofknowledgeandexperience.Theybuild their internationalization after a period of domes-tication of their competitive advantage. Therefore, theybase their internationalizationonhome-basedknowledge,whichtheytransferabroad.Competitiveadvantageinfor-eign markets is gained by exploiting current home-basedknowledge.Accordinglytheinternationalizationofmatureand slow firms is linked to path-dependent learning andknowledge accumulation through international experi-ence.Subsequently,internationalizationiscontingentonagivenportfolioofknowledgebutalsoonafirm’spotentialto reconfigure and deploy them for foreign market entry.Typically,thefirmintendstopursuedomesticconsolidationofknowledgeandcompetitiveadvantageuntilitreachesasufficient levelofthresholdnecessarytosupportmultina-tional activity (Forsgren, Holm & Johanson, 1995; Tall-man&Fladmore-Lindquist,2002). However,thismayalsolead toa lock-in for further internationalopportunitiesasafirmdevelopsitsknowledgeinapath-dependentprocessin which possible future steps are constrained by its his-tory.Thisisexactlywhythiscumulativeknowledgedevel-opment that limits feasible paths for internationalization(Knudsen&Madsen,2002).Eventually,cumulativecapa-bilitydevelopmentresultsinolderfirmsbeingmorestatic,exhibitingstructuralinertia(Hannanetal.1998).

Limitations and conclusions. Asanyresearch,thisoneisnotwithoutlimitations.Notably,ourinterpretationsarebasedonearlyfindingsandmorequantitative research isneededtoidentifytheperformanceconsequencesresultingfrom the interaction of international age and internation-alizationspeed.Whilethereportedfindingsarefreefromsampleselectionbiases(weconsidertheentirepopulationof retailers worldwide, whatever their country of origin)androbustaftercontrollingforcompanysize,marketscope,country scope, competitive intensity, international experi-ence,andcountryexit(seethe‘MethodologicalOverview’paragraph),severaladditionalvariablescouldbetakenintoaccounttofullyreflectthesubtletiesofinternationalizationpatterns.Threeofthemdeservespecialscrutinyinfurtherwork:therhythmofinternationaldevelopment,conceivedas a measure of the (ir)-regularity of international speed;theculturaldiversityoftheportfolioofcountriesinwhichretailersexpand;andthefirm’scountrychoicesasreflect-ingitscapacitytoselect(moreorless)attractivecountries.Also important in longitudinal and evolutionary empiri-calstudiesarecohortandperiodeffects(Aldrich&Ruef,2006),andthoseeffectsneedtobecontrolledforifwewanttobetterunderstandinternationalizationpatterns.Finally,amorein-depthanalysisofselectedcasesofretailers’inter-


nationalizationstrategieswouldyieldusefulinsightstoourunderstandingofinternationalizationpatterns,andprovideadditional robustness to support our results. This wouldthenresultinextendingthe2*2matrixintoafull-fledgedtypology(Doty&Glick,1994).

There are several suggestions for further research.Amongthemostpertinentavenuesisthelinkagetorecentstudiesonexplorationversus exploitation (March,1991).Interpreting different processes of internationalizationas exploration and exploitation allows for re-examiningvariouscombinations,whichorganizationalscholarshaverecentlyexaminedunderthelabelofambidexterity(Raisch&Birkinshaw,2008).Onlyfewstudieshaveyetappliedan‘ambidexterity’approachtoaninternationalcontext(Han,2005; Barkema & Drogendik, 2007; Luo & Rui, 2009;Prange&Verdier,2010)so there isampleopportunity toextendtheconceptbeyonditsnationalscope.

Inthisarticle,wehaveestablishedthatbothyoungfirmsfollowingaslowinternationalizationandmaturefirmsfol-lowing a rapid internationalization reach higher interna-tionalsalesgrowthratesthanfirmsfollowingprocessesasadvocated by the Uppsala and international new venturetheorists. In a less formal language, and everything elsebeingconstant,wewouldverymuchliketotellexecutivesandtopmanagersinchargeofinternationalexpansionthatitseemsbettertoproceedslowlyiftheirfirmisyoung,togofastiftheirfirmisold,andthatinternationalizingyoungseemsbetteranyway!

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