Abstract
International business (IB) scholars’ over-reliance on a select few theories leaves our understanding of firm internationalization incomplete. The behavioral theory of the firm (BTF) can offer new insights and can be used to model a broad range of firm actions. We focus on the three basic BTF components: problemistic search, learning by doing, and vicarious learning. These components help us understand why firm behaviors are more dynamic and heterogeneous than other theories allow. BTF, with its emphasis on how firms assess performance according to aspiration levels, selectively learn and update routines, and selectively incorporate the learning of others, is better suited to examine the diversity and change increasingly observed in internationalization decisions. We explain why scholars should move beyond “dynamizing” static theories and show BTF’s applicability to behaviors involving change such as multi-mode market entries and market re-entries. BTF also helps examine the decision to internationalize in the first place, nascent firm internationalization, location choices, international market adaptation, and headquarter–subsidiary relationships. We encourage IB scholars to use theories that can handle the complexity increasingly associated with modern firm growth, and propose BTF as a promising starting point.
Highlights
For the past five decades, the scholarly focus in the field of international business has been on how multinational enterprises (MNE) generate rent by effectively utilizing their resources and capabilities in attractive international markets
We focus on the three basic behavioral theory of the firm (BTF) components: problemistic search, learning by doing, and vicarious learning
We focus our discussion on two main questions: How does behavioral theory fit with what we already know about internationalization decisions? How can behavioral theory answer questions about firm internationalization that have not been answered effectively using extant theory?
Summary
For the past five decades, the scholarly focus in the field of international business has been on how multinational enterprises (MNE) generate rent by effectively utilizing their resources and capabilities in attractive international markets. Nascent firms likely possess other advantages, such as more flexible routines (Kumar, Singh, Purkayastha, Popli, & Gaur, 2020) that allow them to learn and repeat appropriate behaviors, whilst at the same time being able to unlearn and disregard less appropriate behaviors This is relevant in the context of constantly changing environmental demands, in that nascent firms will seek to grow internationally faster and catch up with global competitors and are faced with a multitude of environmental demands and opportunities to learn in each market entered (Li & Fleury, 2020).
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