A behavioral economics approach to internationalization of born global firms : an exploratory investigation

The main aim of this research is to develop a conceptual model that describes the way managers make decisions about internationalizing. It also tries to explain under what conditions managers will be risk-seekers and under what conditions they will be risk-averse, and as a result which groups of strategies and tools they will choose to use when internationalizing. This investigation focuses on the field of behavioural economics in opposition to leading paradigms in the IB field that concentrate on the neoclassical economic theory. This research uses an interdisciplinary approach that combines the behavioural economics approach and theories drawn from the field of entrepreneurship, IB, market relations, industrial organization, RBV and institutional theory, in order to develop a comprehensive theoretical framework that can explain from the senior manager? s perspective when and why s/he chooses certain variables and not others. The findings link the manager's perception of his position vis-�-vis his industry reference point (IRP are defined as any variable that highlights a particular objective, seems capable of establishing a reference point, and as a result, creates a framework for organizational/individual decision making) and his decision making in the area of risk management, learning, and product adaption and development. The findings indicate that managers below their IRP display innovation when developing new marketing/ distribution channels, and share their knowledge with partners. Nevertheless, they demonstrate low awareness of risk management. In contrast, managers above their IRP focus on the organization's existing technology and marketing and distribution channels and avoid adjusting their products to the market needs and sharing knowledge with distributors. On the other hand, they adopt an active risk management strategy.Additionally we link between the manager's perceptions of his position vis-�-vis his IRP and his choice of entry mode strategy. The findings indicate that a number of differences exist between managers below their IRP and managers above their IRP. Managers below their IRP use positioning strategies but use TCA or institutional strategies very little. In contrast, managers above their IRP use TCA or institutional strategies but will hardly use positioning strategies at all. The two types of managers use network strategy and RBV, but each group uses different factors within the theories. The research makes a number of important contributions to study of the IB sphere, particularly to the fields of research relating to the internationalization of BG companies, which is a relatively new field of knowledge. Today there is no comprehensive theoretical framework explaining the way BG companies internationalize and the reasons they choose one strategy or tool over another when entering foreign markets. The present research attempts to establish a conceptual model that describes the way managers make internationalization decisions. It does so by importing a new discipline from the field of behavioural economics into the IB field, which is deeply wedded to the tradition of neo-classical economics and integrates it with existing strategies in the field to create a conceptual model that mediates between traditional IB research and the BG research stream.