Entering and Participating in the Turbulent Russian Market

Abstract

This paper discusses how foreign firms enter and operate in a turbulent Russian market. Following the internationalisation process model, this paper is based on the assumption that current business activities are a driving force of internationalisation. Since planning in highly turbulent and uncertain markets is difficult, the IP model with its emphasis on gradual learning provides a good starting point. When foreign markets are assumed to be rather static, experiential knowledge can be easily utilised in subsequent actions. However, the Russian market is highly turbulent, which questions the value of experiential knowledge and seems to challenge the validity of the IP-model. In an attempt to address this problem, the paper suggests to deconstruct the concept of current business activities, so that it becomes more powerful in explaining the behaviour of firms in the markets characterised by high turbulence. Drawing on the Austrian Economics, this paper suggests that current business activities in a foreign market can conveniently be seen as consisting of two fundamental processes-search and discovery. The search process occurs when a firm already has knowledge about what it is looking for, but has to search for it. The discovery process initiates as searching for something known, but the turbulence turns it into a discovery of something else. Since the market conditions change rapidly and the knowledge is imperfectly distributed, discovery is an essential part of the firm's business activities in the Russian market. In the end, the paper discusses the implications of search and discovery processes for firms both entering and participating in the Russian market. Finally, it advances relationship as a mechanism to handle the market turbulence.