Exploratory Search and International Performance: When Do Local Alliances Matter?

Abstract

Firms are often encouraged to collaborate to draw on local partners’ expertise and insider status during internationalization. Appropriateness of alliances during international expansion depends on the type of exploratory search a firm pursues. During internationalization, firms engage with novelty in two distinct, yet often conflated, domains: institutional and product. Firms’ novelty-seeking in these two domains engages homegrown knowledge structures in contrasting capacities, which alters the conduciveness of local partnerships as a mechanism of internationalization. While reliance on local partnerships enhances the performance outcomes of institutional exploration, performance-enhancing product exploration requires internalized governance arrangements. Based on the export operations of firms from three emerging economies, the empirical results support the theorized relationships.