The Impact of Internalization on Organizational Culture
Increased growth in international trade, foreign direct investment and increase in cross-border technology flow has remained instrumental in influencing the level of internalization experienced among companies (Onetti et al., 2012). Internalization provides companies with the opportunity for geographic growth, which remains instrumental for additional business growth as it provides potential opportunities relating to the growth of a larger market, increase spread of risk, production efficiencies and exposure to new production methods, which remain vital in influencing overall business growth and development (Chandra et al., 2012). Increased growth of emerging markets provides a viable opportunity for business to engage in internalization.
Increasing research has been adopted that seeks to identify the impact of internalization of firm performance through increased operational efficiencies attributed to reduced labor and resource costs that influence the revenue generation and consequent profits derived from the process (Dimitratos et al., 2011). Studies about internalization maintain that increased global expansion provides the business with potential challenges attributed to expansion such as increased complexity and uncertainty (Landau et al., 2016). Competitive advantage is crucial in the internalization process for any organization that is developing new global locations (Ladau et al., 2016). When implemented, internalization is associated critically with institutional structure and business growth within an organization, even within an organization expanding internationally (Ladau et al., 2016). However, internalization influences the development of a blend between diverse cultures, customers, competitors and regulation, which may remain instrumental in influencing the level of business growth (Zheng et al., 2010).
As such, it also increases certain liabilities related to the company culture, and entering a foreign market. According to Chen, Hu, & Zhang (2010), the liability of foreignness effects multinational companies when they enter a new company, and try to internalize rather than joining with foreign allies, and so lack a formal understanding of the laws, social rules, and cultural customs that impact business within the new nation. Similarly, the liability of outsidership states that they struggle to become actively engaged in the network, and to find investors within the country (Johanson & Vahlne, 2009). As such, there is a gap in measuring the impact of these mediating factors, or the two types of liability, on commercial risk, as it relates to performance outcomes within a business strategic approach (Johanson & Vahlne, 2009).
Research Questions
The key research questions that seek to guide the study include:
What is the impact of internalization on commercial risk when globalizing, if commercial risk is defined as the risk of an inability to grow, profit, and secure international investment in a given market (Johanson & Vahlne, 2009)?
What is the financial impact of specific liability features, like liability of foreignness and liability of outsidership act as mediators to commercial risk?
What is the impact of commercial risk on the international growth model for a company?
Independent Variables: Internalization,
Dependent variables: commercial risk
Mediators, liability of foreignness (Chen, Hu, & Zhang, 2010), and liability of outsidership (Johanson & Vahlne, 2009).
Null Hypothesis: There is no impact of internalization on commercial risk when globalizing, if commercial risk is defined as the risk of an inability to grow, profit, and secure international investment in a given market.
Alternative Hypothesis: There is an active impact of internalization on commercial risk when globalizing.
These questions are important to the literature, because they begin to establish a quantitative measure to the relationships which have been established only qualitatively to current. There is a strong body of evidence to suggest that there is a relationship between internalization and risk, however, as we begin to establish what that relationship is, it can be more effectively managed in future projects.
Methodology
The study, which is quantitatively concerned with internalization and outcomes for a brand when expanding internationally. This will be accomplished through data collected via a quasi-experiment based on data from secondary sources, and according to experiment and control groups established through natural behavior.
First sample companies will be sorted according to whether or not they internalize. In other words, the control group will be made up of businesses that partner with local entities to avoid foreignness and outsidership, and the experiment group will be those that elect to remain internalized during the process of international expansion.
As previously identified, commercial risk will be defined as “inability to grow, profit, and secure international investment in a given market,” as such, data will be collected via Bloomberg regarding each company selected as part of the sample’s, profitability, year over year revenue growth, and total international investment funds. Outcomes will then be compared, via comparative statistics, to determine the measurable impact that the impact of foreignness and outsidership have on the primary factors of commercial risk.
References
Chandra, Y., Styles, C., & Wilkinson, I. F. (2012). An opportunity-based view of rapid
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Dimitratos, P., Petrou, A., Plakoyiannaki, E., & Johnson, J. E. (2011). Strategic decision-making
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Landau, C., Karna, A., Richter, A., & Uhlenbruck, K. (2016). Institutional leverage capability:
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Lawrence, T. B. (1999). Institutional strategy. Journal of management, 25(2), 161-187.
Onetti, A., Zucchella, A., Jones, M. V., & McDougall-Covin, P. P. (2012). Internationalization,
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Zheng, W., Yang, B., & McLean, G. N. (2010). Linking organizational culture, structure,
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