Speed of Internationalization of New Business Units: The Impact of Direct and Indirect Learning

Abstract

To date, surprisingly little research has been devoted to speed, which is arguably one of the most important time-based dimensions of a firm’s internationalization process. We address this gap, focusing on the learning processes during internationalization of established MNEs’ new business units, in particular their accumulation of business knowledge and internationalization knowledge and the temporal order of their knowledge acquisition. We argue that new business units benefit from the corporate environment of the parent MNE into which they are born as this may enable them to acquire business knowledge and internationalization knowledge not only by means of direct learning but also by means of indirect learning. Thus, we hypothesize that (1) internationalization speed increases with new business units’ relatedness to their parent MNEs’ portfolio of businesses, (2) new business units will increasingly rely on indirect learning to obtain business knowledge as relatedness increases, and (3) that the positive effect of direct learning of internationalization knowledge decreases the more new business units have been relying on indirect learning to obtain business and internationalization knowledge during the ramp-up process. We examine the internationalization of 788 new business units of 90 established German MNEs and find support for our arguments.