Effectuation and foreign market entry of entrepreneurial firms

The purpose of this study is to examine the decision-making process for entrepreneurial firms when entering foreign markets and how and why they entered those markets.

A nascent theory in entrepreneurship called effectuation is combined with internationalization process theory as the conceptual framework to study decision-making under uncertainty. The central concept in both these theories is relationships and how they can be used to gain knowledge and thus reduce uncertainty and in the case of effectuation to co-create opportunities to enter foreign markets. The research design involves a multiple case study of software firms from Finland and New Zealand.

It was found that entrepreneurs differentiate between foreign market selection and foreign market entry during their internationalization process, potentially using different decision-making processes in them. They tend to interweave effectuation and causation logics as substitutes in their decision-making. Uncertainty during foreign market entry is not always a barrier because it can provide opportunities depending on the logic used. In addition, there is evidence that entrepreneurs who have existing relationships in foreign markets tend to use effectuation to select and enter foreign markets.

This paper transposes effectuation from its original field of entrepreneurship research to the context of internationalizing entrepreneurial firms. Consequently, it contributes toward understanding the decision-making process for selecting and entering foreign markets.