Noticing and Capturing Growth Opportunities in International Markets: A Real Options Perspective

Abstract

Building on real options reasoning (ROR), we argue that an entry mode choice available to a firm is a shadow option—available investment opportunity. We also argue that noticing and later exercising shadow options provide potential growth opportunities for a firm entering international markets. However, we argue that this is dependent on the firm’s attention structure as well as its entrepreneurial orientation. Different attention structures of a firm lead the firm to notice shadow options in different markets, while entrepreneurial orientation of the firm, as an internal capability, allows the firm to exercise the recognized options—usually in an uncertain environment. This ultimately provides economic growth for the firm and improves its performance. Against this background, we develop testable propositions. Providing two contrasting examples from business practice, we then elucidate our argument further by showing how firms could act differently in noticing and exercising growth opportunities as entry modes. We show that a similar entry mode chosen by these companies may, and equally may not, be based on ROR. Finally, we discuss how our chapter enhances firm’s growth in global markets under uncertainty as well as how it advances growth frontiers in international business.