The Recognition of First Time International Entrepreneurial Opportunities: Evidence from Firms in Knowledge-Based Industries

Abstract

Purpose: This paper aims to complement existing theories of internationalization by studying an important aspect which has been neglected in previous studies: the process of international entrepreneurial opportunity recognition. International market entry is conceptualized as an entrepreneurial, innovative act; and opportunity recognition consists of both discovery as well as deliberate and systematic search. Methodology: The methodology employed involves eight case studies of small and medium-sized enterprises (SMEs) operating in knowledge-based industries in Australia. The unit of analysis is the “opportunity-firm” nexus. Findings: Firms with little or no prior international knowledge tend to make use of opportunity discovery rather than deliberate/systematic search. In contrast, firms with extensive prior international experience and knowledge were found to deliberately search and discover their first international opportunity. International opportunity discovery did not occur simply through serendipitous encounters with new information from networks or referrals but involved interpreting possible matches between pre-existing means (resources, skills, new technologies) and new ends (international markets) in a problem solving process. It favours those with the requisite prior knowledge and entrepreneurial orientation. Practical Implications: The study offers guidelines on what business practitioners and export promotion agencies can and cannot do to influence opportunity recognition process. Particular attention was paid to strategies to avoid costly deliberate search among resource-stricken SMEs. Originality/Value: This study introduces Knightian uncertainty and Kirznerian discovery as the conceptual cornerstones of internationalization that can help account for the lack of incrementalism and optimizing logic in internationalization among smaller firms.