Internationalization Decision Making and Performance: Cognitive Heuristics and Biases

Description of the Project

This research project focuses on the role of entrepreneurial and managerial cognitions in internationalization decision making. Specifically, we look at how decision making heuristics and biases - the mental shortcuts and biases emanating from those shortcuts - influence entrepreneurial decisions in internationalization, e.g., opportunity recognition, market selection, entry mode choice, early and rapid internationalization, etc.

The main research questions we seek to answer include, but are not limited to:

  • How do owner-managers' primary affective heuristics (resulting from prior experience) and biases (resulting from heuristics) influence initial internationalization decisions, and later on transform into adaptive heuristics and biases in the post-entry stages?
  • How do managerial cognitive heuristics and biases influence strategic orientations, internationalization decision making (e.g. international opportunity recognition & exploitation, market selection and entry mode decisions), as well as international performance?
  • How does corona epidemic influence the impact of heuristics and biases in internationalization decision making?

In highly complex decision tasks, such as internationalization, decision-makers face cognitive limitations (Miller, 1956), and they are unable to process all available information, which prevents them to make fully rational choices (Simon, 1997). In such situations, they resort to decision making shortcuts and therefore are also prone to cognitive biases, such as overconfidence, and over-optimism, emanating from those heuristics. Managerial cognition's role in evaluating foreign environments and determining internationalization decisions remains underexplored and inadequately understood. Through our research investigation, we bring insights, for example, into why international entrepreneurs (or managers working in internationally operating firms), who internationalized early and rapidly in the beginning, slow down the pace and speed of internationalization later after initial entry, from a cognitive perspective, using the theory of heuristics and biases. Additionally, we also investigate how heuristics and biases influence other facets of internationalization decisions, such as opportunity recognition, exploitation, market selection and entry mode choice, as well as international performance. Finally, we also want to look into how future uncertainties arising from corona pandemic will influence the use of heuristics and biases in internationalization decision making.

The project research team is in an excellent position to seek answers to these questions, because the team members have substantial experience and knowledge in the relevant domains of research, having recently presented the research findings in the prominent conferences and paper development workshops, which will ultimately get published in some impactful journals in near future. Faroque et al. (2017) and Faroque et al. (2019) papers brought the team ‘Best Paper Awards' in two international business conferences, which also reflect the novelty of the topic and impact of the research. Team members' past publication history also indicates their capacity to conduct impactful research in these areas of inquiry.

The Research Team

LUT University

Olli Kuivalainen (Principal Investigator; D.Sc. Econ. & Bus. Adm.) is a Professor of International Marketing and Entrepreneurship at LUT University School of Business and Management. His expertise covers broad areas of international business, marketing, entrepreneurship and technology management and their interfaces. His research interests are in the areas of international entrepreneurship, and strategic management, marketing and internationalization of knowledge-intensive firms, the focus especially being on firms operating in the domains of software business and media, and information and communication technologies. His academic work has been published in journals such as Journal of International Business Studies, Journal of World Business, International Business Review, Journal of International Marketing, Technovation, International Marketing Review, International Journal of Production Economics and Journal of International Entrepreneurship.

Anisur Faroque (Project manager, PhD. International Business & Entrepreneurship) is a researcher and teacher at LUT School of Business and Management. His areas of expertise are related especially to the internationalization of SMEs, export assistance, entrepreneurial opportunity recognition, network exploration and exploitation, as well as the role of entrepreneurial/managerial cognitive heuristics and biases in internationalization decision making. He has published research articles in both conferences and international academic scientific journals, such as Journal of Business & Industrial Marketing, International Journal of Entrepreneurship & Small Business, International Journal of Emerging Markets, Asia Pacific Journal of Marketing and Logistics, and International Review of Entrepreneurship.

Chukwuka Obiora Igboanua (Junior Research Assistant, B.Sc. Economics) is a graduate student and research assistant at LUT University School of Business and Management. His interest and expertise are in the fields of economics, entrepreneurship, international business, and marketing.

Aalto University

Sanna-Katriina Asikainen (Sanna Sundqvist) (D.Sc. Econ. & Bus. Adm.) is an Associate Professor in Marketing at Aalto University, School of Business. Her research and teaching covers topics related to Strategic Management, International Marketing, and International Entrepreneurship, and she has published in scholarly journals, like Journal of the Academy of Marketing Science, Journal of Business Research, International Marketing Review, Journal of World Business, Industrial Marketing Management, and European Journal of Marketing.

Publications and Reports

Faroque A.R., Kuivalainen O., Sundqvist S. (2019). Initial and post-entry internationalization: The role of cognitive heuristics and biases. https://www.univaasa.fi/en/sites/ibconference/

Faroque A.R., Ahi Ali, Kuivalainen. O., Sundqvist S. (2019) Shackled to the status quo: when do managers adopt or deviate from the prior entry mode? 45th European International Business Academy (EIBA). https://eiba2019.eiba.org/

Faroque A.R., Casulli L., Kuivalainen O., Sundqvist S. (2019). The Power and Perils of Cognition: Differential Role of Heuristics and Biases in Initial and Post-Entry Internationalization. https://eiba2019.eiba.org/

Faroque A.R., Gani O., Ahmed J.U., Kuivalainen O. (2019). Go it alone or work together: the individual and joint influence of founders' prior experience and managers' market knowledge in international opportunity identification. https://www.univaasa.fi/en/sites/ibconference/

Faroque A.R., Sultana H., Kuivalainen O., Sundqvist S. (2019). Network exploration and exploitation capability, foreign market knowledge and international performance: The role of strategic orientations. https://www.impgroup.org/paper_view.php?viewPaper=11167

Faroque A.R., Morrish S., Olli K., Sundqvist S. (2017) Capability Triad in IE: The role of dual network and opportunity recognition capability.

Ahi A., Baronchelli G., Kuivalainen O., Piantoni M. (2017) International Market Entry: How Do Small and Medium-Sized Enterprises Make Decisions? Journal of International Marketing, 25(1), 1-21.

Events

After organizing a decision-making workshop in Helsinki  in the autumn 2019, we are planning to organize our next event in Helsinki region in the autumn 2020, where we will discuss about the findings of the results of our study, and would be happy to respond to your questions and explore the other possible avenues to improve the decision making of internationally operating Finnish firms.

If you have questions, please contact either Olli Kuivalainen (olli.kuivalainen(at)lut.fi) or Anisur Faroque (anisur.faroque(at)lut.fi), thanks.

Contact Us

Sami Saarenketo
Dean
tel. +358 50 308 6181
sami.saarenketo@lut.fi
Research Portal profile
Twitter: @Saarenke

Anni-Kaisa Kähkönen
Vice Dean, Academic Affairs
tel. +358 40 746 8132
anni-kaisa.kahkonen@lut.fi
Research Portal profile
Twitter:@annikaisakahk

Juha Väätänen
Vice Dean, External Relations
tel. +358 40 526 1518
juha.vaatanen@lut.fi
Research Portal profile
Twitter: @JuhaVaatanen