Explaining the Firm's De-Internationalization Process by Using Resource-Based View

Explaining the Firm's De-Internationalization Process by Using Resource-Based View

Zeynep Sadikoglu (Bogazici University, Turkey)
DOI: 10.4018/978-1-4666-6635-1.ch024
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Abstract

The main purpose of this chapter is to analyze why some firms fail in their international operation either right after their exposure or after a certain period of time. Resource-Based View (RBV), which deals with firms' competitive advantage and their superior performance, is used to predict the underlying reasons of firms' failure of internationalization process. In international marketing, RBV basically states that the firm internationally expands its territory when it decides to exploit its resources and capabilities in other markets. This chapter extends RBV literature by applying it to de-internationalization process of the firm. It also provides a framework that shows the actions that need to be taken when firms are faced with a failure in their international operation.
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Introduction

Resource-based view (RBV) deals with the very fundamentals of the existence of organizations by analyzing the question of how companies can obtain and sustain their competitive advantage (Srivastava et al., 2001). In other words, RBV helps us explain and predict the foundation of firms’ competitive advantages and their superior performances. The very basic idea of RBV puts forth that the specific resources and capabilities of a firm are its main sources regarding their competitive advantage (Barney et al., 2001 and 2011), both of which lead to a superior kind of performance. (Fahy & Smithee, 1999). RBV analyzes the firms through the resource point of view, rather than that of the product (Wernerfelt, 1984). In addition, it takes an “inside-out” approach where the main focus lies on the firm’s dynamic (Dicksen, 1996) rather than its external market.

Although the term RBV was first coined by Bridger Wernerfelt in 1984 (Fahy & Smithee, 1999), the study of untraditional resources (labor, capital and land) goes back to Penrose’s (1959) work concerning the theory of the growth of the firm (Wernerfelt, 1984). Dating back to early works of industrial economists (Fahy & Smithee, 1999), RBV has reached its maturity stage as a theory (Barney et al., 2011). It is widely used in the domain of strategy. In their study, Kozlenova et al. (2014) set froth that the use of RBV in marketing literature has increased more than five times in the past decade. They have also analyzed each RBV article in the marketing field and come up with three major domains, which are marketing strategy, marketing innovation as well as international marketing (Kozlenova et al., 2014).

RBV in international marketing basically states that a firm expands its territory internationally when it decides to exploit its resources and capabilities in other markets. MNE’s choose to use their own distinctive resources through entering into new markets rather than resorting to leasing or licensing (Luo, 2001). Bloodgood et al. (1996) state that distinctive resources are the main factors playing a role in the internationalization of firms, in which firms with these resources have a greater chance of internationalization. However, existing international literature mainly focuses on the exploitation aspect of these resources and capabilities while failing to pay attention to the exploration aspect (Kozlenkova et al., 2014). Firms must acknowledge the dynamic nature of the market and the importance of the need to adapt and improve their existing resources (Kogut & Singh, 1988; Luo, 2001 and Prange & Verdier, 2011).

Key Terms in this Chapter

Resources: Refers to (in)tangible assets that are utilized by firm to generate and execute their strategies ( Barney & Arikan, 2001 ).

Competitive advantage: Refers to an advantage market position gained by the firm over its competitors, which would yield to superior performance (Hunt and Morgan, 1995 AU49: The in-text citation "Hunt and Morgan, 1995" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ).

Capability: Refers as firm-specific resources that increase the productivity of other resources ( Makadok, 2001 ).

Dynamic capability: Emphasizes the importance satisfying the changing market demand by continuous improvement and protection of existing capabilities and exploring new ones (Teece et al., 1997 AU50: The in-text citation "Teece et al., 1997" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ).

Resource-Based View (RBV): Basically states that firm’s specific resources and capabilities lead to gain competitive advantage in the market ( Barney et al., 2001 and 2011 ).

Internationalization: Refers to the process where firm increases its level of involvement in its operation to other markets ( Welch and Luostarinen, 1988 ).

De-Internationalization: Refers to the process where firm (in)voluntarily reduces its operation or activities in (a) particular market(s) ( Benito and Welch, 1997 , p.9).

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