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Closing knowledge gaps in foreign markets

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Abstract

Knowledge and learning are ascribed pivotal roles in firms' internationalization processes: perceived market uncertainties, namely knowledge gaps related to business environments in foreign markets, may curb firms' inclinations to commit resources to these markets. This study explores whether knowledge gaps tend to increase or decrease with time when operating in the foreign market, and it discusses which learning components narrow – or widen – the perceived knowledge gap. A theoretical model is developed based on the internationalization process view and the more recent organizational learning perspective, including such concepts as overconfidence and absorptive capacity. The theoretical model is tested on a set of primary data covering Danish and Swedish firms and their foreign market operations. The results suggest a more subtle relationship between experience and perceived knowledge gaps than the “mechanical” relationship portrayed by the internationalization process view – a relationship in which absorptive capacity and, in particular, overconfidence play important roles.

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Notes

  1. Zollo and Gottschalg (2004) term this problematic situation the “confidence–competence paradox”. The opposite situation – that competence develops faster than confidence – equals possession of tacit knowledge, that is., a situation where people know more than they think they do (Polanyi, 1966).

  2. We also conducted the Harman's one-factor test in a model including only the dependent variable and the five independent variables. It arrived at the same conclusion as the six variables revealed three distinct factors that explain not more than 70% of the total variance.

  3. We are grateful to one of the reviewers for drawing our attention to this explanation.

  4. We are grateful to one of the reviewers for drawing our attention to this explanation.

  5. We are grateful to one of the reviewers for drawing our attention to this countervailing effect.

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Acknowledgements

We thank Professor Yadong Luo and two anonymous reviewers for their insightful comments. This project was funded by a research grant provided by Tranes Fond and the Center for Strategic Management and Globalization at CBS.

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Authors and Affiliations

  1. Center for Strategic Management and Globalization, Copenhagen Business School, Frederiksberg, Denmark

    Bent Petersen & Torben Pedersen

  2. Kelley School of Business, Indiana University, Indianapolis, USA

    Marjorie A Lyles

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  1. Bent Petersen
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  2. Torben Pedersen
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  3. Marjorie A Lyles
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Accepted by Yadong Luo, Departmental Editor, 16 November 2007. This paper has been with the authors for three revisions.

APPENDIX

APPENDIX

See Table A1.

Table a1 Measurement of constructs
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Petersen, B., Pedersen, T. & Lyles, M. Closing knowledge gaps in foreign markets. J Int Bus Stud 39, 1097–1113 (2008). https://doi.org/10.1057/palgrave.jibs.8400409

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