Experiential learning about host country non-market environment

Abstract

In their international expansion, firms with ethnocentric mindsets tend to be trapped in the myopia that believes they can effectively exploit their home-base non-market capabilities in host countries without incurring additional institutional costs. This myopia may impose severe learning barriers when firms enter host countries with lower level of government corruption than home country because they are less likely to learn from their prior failure experience due to the belief that performance in less corrupt host countries would be solely determined by their market capabilities. Drawing on behavioural approach to multinational corporation (MNC) organisational learning, this paper proposes that investments in market capabilities in the home country tend to result in higher rates to enter host countries with lower level of perceived government corruption. In addition, I propose that prior failure experience may not necessarily enhance the survival rates of subsequent entries in host countries with lower level of perceived government corruption than home country.