International expansion of retailers: the role of technical expertise, alliances and allocation of resources in economic crises

Abstract

Economic downturns are often viewed as threats to prosperity and the challenges they can pose for international retailers are well documented. However, the potential opportunities of economic downturns are less well understood. In this paper, we ask whether or how these environments might actually afford occasions for strategic market adjustment, in the form of international expansion to new markets. Specifically, drawing on resource-based theory and game theory, we consider how a firm's financial performance during international expansion in a downturn may be predicted by its engagement in three modes of knowledge transfer. We consider knowledge transfer enabled by: 1) long-term investment in technical expertise; 2) formation of alliances in the local target market; 3) focused allocation of firm resources. Based on cases from the 1997 Asian Financial Crisis, the 2007 US recession and the 2009 European Sovereign Debt Crisis, we developed propositions to guide future research on international expansion during economic downturns.