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rticle Review

This article is partially a response to Casson's (1985) call to include the role of the entrepreneur in explaining the dynamics of the MNE. The article by Oviatt and McDougall threw the spotlight on international entrepreneurs, on international new ventures, and on their importance in the globalizing world economy. A new, growing phenomenon witnessed since the late 1980s is the establishment of born global firms (Knight, 2000), that raise capital, establish operations and R&D and sell products in different countries. Research literature traditionally ignored age of organization when it internationalizes and viewed it as an unimportant demographic characteristic (Malekzedah and Nahavandi, 1985), or a side issue (Cooper and Kleinschmidt, 1985). Researches based on case studies of international entrepreneurship (since 1989) indicated the importance of international new ventures and suggested that global forces may be promoting their development. The speed of internationalization is evident from Ernst and Youngs survey of 303 firms in the North American electronic industry that showed that 53% were domestic in 1987, 17% in 1992 and expected to diminish to 9% by 1997. The purpose of this paper is to define international new ventures and present a framework explaining how INVs fit within the theory of MNE in order to unify, stimulate and guide research in this area. They defined an INV as a business organization that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries. Three major problems in the application of MNE theory to INVs are as follows: First, MNEs are believed by many people to evolve only after a period of domestic maturation and home market saturation (Caves, 1982; Porter, 1990). This staged development of firm internationalization is described as an incremental, risk-averse, and reluctant adjustment to changes in a firm or its environment (Johanson and Vahlne, 1977, 1990). Contradictory to stages theory, Welch and Loustarinen (1988) discussed reports of English firms, Australian start-ups, and Swedish firms that skipped stages and were involved with unexpected speed in FDI. Turnbull (1987) presented strong conceptual and empirical criticism of the stages theory. Second, large size is often thought to be a requirement for multinationality as firms reap economies of scale in R&D, production, marketing, and can efficiently manage communication & transportation and exchange of information among many countries (Stopford and Wells, 1972). Third, changing international environment like speed, quality, and efficiency of international communication and transportation have reduced the transaction costs of multinational interchange (Porter, 1990). International financing opportunities are increasingly available (Patricof, 1989; Valeriano, 1991) and human capital is more internationally mobile (Johnston, 1991; Reich, 1991). The necessary elements for sustainable INVs are: 1. Internalization of some transactions 2. Alternative governance structures (hybrid structures such as licensing & franchising, or network structure) 3. Foreign location advantage: Firms find advantage in transferring some moveable resources across a national border to be combined with an immobile, or less mobile, resource or opportunity (Dunning, 1988). 4. Unique resources: Sustainable competitive advantage for a firm requires that its resources be unique (Barney, 1991). For knowledge based INVs, patents, copyrights, or trade secrets; imperfect imitability (Barney, 1991; Schoemaker, 1990); and licensing ensure the proprietary nature of knowledge.

The four types of international new ventures are as follows: 1. Export/import start-ups focus is on serving a few nations with which the entrepreneur is familiar. 2. Multinational Traders serve an array of countries and are constantly scanning for trading opportunities where their networks exist or can quickly be set up. 3. Geographically focused start-ups serve specialized needs of a particular region of the world through use of foreign resources. 4. Global start ups derive significant competitive advantage from extensive coordination among multiple organizational activities, with geographically unlimited locations. They are the most difficult to develop but once established they to have the most sustainable competitive advantages due to a combination of historically unique, causally ambiguous, and socially complex inimitability with close network alliances in multiple countries.

Ontology and epistemology


Ontology (world view of how things exist) and epistemology (way of knowing) are a means to critically evaluate the nature of knowledge. The epistemology of this article is subjective. Scientific facts are objective as are mathematical proofs; whereas opinions and interpretations are subjective. Qualitative methodology recognizes that the subjectivity of the researcher is intimately involved in scientific research. Subjectivity guides everything from the choice of topic that one studies, to formulating hypotheses, to selecting methodologies, and interpreting data. Qualitative research is interpretive (Denzin & Lincoln, 1994; Mason, 1996; Creswell, 1998; Marshall & Rossman, 1999; Angen, 2000). This is the ontology of this article (the opposite view being functionalism). The interpretive paradigm is the foundation of qualitative research. Today, the interpretative school is more prevalent in research building. The article is deterministic in nature and is not value neutral. There is no crisis of representation as the authors take a specific position in their statements. The nature of knowledge presented and produced is political, cultural and contextualized. There are elements of change and conflict in the discussion and it cannot be generalized in the form of global knowledge but takes form of local knowledge. It is not strong in theory building because reality is fluid, unpredictable, discontinuous, dynamic and fragmented.

Methodology
The article in question is qualitative as it seeks to "discover the new and to develop empirically grounded theories" (Flick, 1998). Qualitative research is by definition exploratory. This article "explains, defines, clarifies, elucidates, illuminates," constructs, and discovers (Morse, 2004; Gobo, 2005). Qualitative research is interested, in particular, in the way in which the world is "understood, experimented, or produced" (Mason, 1996) by people's lives, behavior, and interactions (Strauss & Corbin, 1990). This article seeks to do the same as INVs still require plenty of research focus and need a well structured framework to serve as a basis for explanatory theories. This article uses inductive reasoning (methodology). Inductive reasoning works the other way, moving from specific observations to broader generalizations and theories. The conclusion is likely based on premises.

Critical Analysis
The work by Oviatt and McDougall has opened up numerous avenues for future research, both theoretical and empirical. The greatest value of this articles contribution lies within the creative tension the authors generated in the field of international business studies by mounting a direct challenge to the established

Process Theory of Internationalization, and by highlighting the increasing prevalence of international new ventures. It has also inspired the creation of a new journal dedicated to international entrepreneurship. An important aspect of the Oviatt and McDougall contribution is that they open a way towards building a more comprehensive theory of new firm internationalization - one that addresses the initiation, implementation and outcomes of internationalization processes in new and entrepreneurial firms. The main purpose of the Johanson and Vahlnes Process Theory (1977, 1990) was to explain why the internationalization process tended to unfold in an incremental and gradual fashion in Swedish firms in the mid-1970s (Johanson and Wiedersheim-Paul, 1975; Johanson and Vahlne, 1977). To explain the incremental pattern, they developed the stage-change model of internationalization, where stage variables interacted with change variables so as to produce an incremental, self-reinforcing, and path-dependent pattern of international expansion. One important aspect of the McDougall and McDougall challenge focused on the nature of path dependences instilled by internationalization moves. Do firms tend to get locked into country-specific growth trajectories, as maintained by Johanson and Vahlne, or does early entry into international markets lock the firm into an international or global growth trajectory, as maintained by McDougall (1994)? The hypothesis by Oviatt and McDougall (1997), that INVs should be more prevalent in sectors characterized by high degrees of international integration, remains to be verified empirically, owing to lack of archival data on firm internationalization in different industry sectors. A more detailed examination of the transferability, nature, and types of internationalization experiences and competence appears necessary in the context of internationalizing new ventures. Given that McDougall and Oviatt placed so much emphasis on the enabling effect of individual-level (pre-firm) internationalization experience for early and rapid internationalization, a more detailed examination of this issue appears necessary. The purpose of the PTI model being to explain the gradual, constrained pattern of internationalization, it reads very much as a theory of constraints and drew heavily both on the behavioural theory of the firm (Cyert and March, 1964), and on the theory of the growth of the firm (Penrose, 1959)., whereas the INV theory lays great emphasis on enabling effects. Oviatt and McDougall (1994) directly challenged the risk-averse, constrained posture described by the PTI. By turning the spotlight on the role of the entrepreneur, Oviatt and McDougall (1994) opened an entirely new direction for international business research, that of international entrepreneurship. The position taken by Oviatt and McDougall in terms of international resource commitments is that the knowledge intensity of the firm's resource endowment constitutes an important facilitating condition for INVs. More work is required to sort out the effect of sector knowledge intensity and international integration from the effects of knowledge characteristics. According to this paper, the firm needs to internationalize in order to make value creation possible, not in order to disseminate its outputs. The idea that the competitive advantage of international new ventures may be based on the establishment and exploitation of cross-border positions represents a radical new insight that considerably extends the scope of internationalization studies. The INV perspective does not incorporate firm-level outcomes of internationalization processes in their frameworks, beyond explicitly assuming that internationalization is necessary for international new venture growth in some situations at least.

References
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