Investigation of Entrepreneurs’ Decision-making Logic While Entering Foreign Markets Based on Effectuation and Causation

Document Type : Research Paper

Authors

1 Department of Entrepreneurship, Faculty of Management and Accounting, Allameh Tabataba'i University, Tehran, Iran.

2 MSc., Department of Entrepreneurship, Faculty of Management and Accounting, Allameh Tabataba'i University, , Iran.

Abstract

Objective  Since effectuation is expanding and the scope of this theory has been extended to various decisionmaking areas including entering into foreign markets, the present research seeks to investigate entrepreneurs' decision making logic while entering foreign markets in order to extend the theoretical framework in this area. It also aims to determine what decision-makers logics they apply at different entry points. The findings of this study can help companies which are seeking to enter export markets understand the decision-making process and mental structure of expert entrepreneurs operating in these markets. Therefore, the purpose of this study is to investigate the logic of entrepreneurs' decision-making while entering foreign markets based on effectuation and causation approaches. 
 
Methodology  This study uses a qualitative approach based on a multi-case study. The data were collected using semi-structured interviews with the founders and entrepreneurs of nine reputable home appliance companies that have entered foreign markets over the past 25 years. Causal mapping was used for data analysis and to evaluate the validity of the research, coders' consensus was used. 
 
Findings The companies under investigation showed the tendency to implement the effectuation approach in the early stages of entering the global market. Such companies, using available resources and means, begin to export irregularly and practice entering into foreign markets. They attempt to gain market insights through networks. They would apply affordable loss and communicate with stakeholders in order to control future and use contingencies as leverage to gain new opportunities. Findings show that foreign-market entry in early stages is effectual and in later stages, as export activities develop in target markets, it tends more towards causation.  
 
 
Conclusion Uncertainty in foreign market entry, limited resources and means, led entrepreneurs to take decisions which are different from those counterparts in large firms. The dominant logic in entrepreneurial decision-making at early stages of internationalization is effectual with un-organized and sporadic exportation. To reduce uncertainty, they prefer to export through agents. As foreign market grow, they tend more to be causative in decision-making process. On latter stages, entrepreneurs tend to open service centers and even run assembly line in foreign markets. 

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References

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Journal of Business Management
Volume 11, Issue 4
2019
Pages 992-1013

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