Internationalization of entrepreneurial firms: Leveraging real options reasoning through affordable loss logics

Hunt, Richard A.; Song, Yue; Townsend, David M.; Stallkamp, Maximilian

doi:10.1016/j.jbusres.2021.04.055

Cited by 10 publications

(16 citation statements)

References 105 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Of the 196 sovereign entities spread across the globe, 184 have formal agencies devoted to promulgating small firm exports (OECD, 2020). And yet, despite extensive formal institutional support for internationalisation, foreign trade is still a risk-laden endeavour for entrepreneurial firms (Shrader et al, 2000) and small-scale exporters often conduct business even when there is little or no legal recourse in the event of contractual disagreements with counter-parties (Hunt et al, 2021). As things currently stand, the overwhelming majority of trade credit supports offered by governments require liquid-asset collateralisation, bank-issued letters of credit and sophisticated derivative instruments to hedge foreign currency fluctuations (Bastos and Pindado, 2013; Bosse and Arnold, 2010; McGuinness and Hogan, 2016) – none of which are conducive to assisting very small, resource-constrained firms with limited sophistication regarding finance.…”

Section: Discussionmentioning

confidence: 99%

“…Therefore, lumber represents a traditional, relationship-driven industry in which the liability of outsidership – as well as trade credits – play a prominent role. Second, transaction-related data is plentiful and accessible in the lumber industry, which provides us a rare opportunity to examine entrepreneurial strategy at the transaction level (Hunt et al, 2021). Third, lumber is a global industry, with producers and consumers in more than 180 countries, consisting of literally hundreds of thousands of firms, including numerous export-minded ventures.…”

Section: Data Methods and Analytical Modelmentioning

confidence: 99%

“…Second, for endogeneity concerns related to variables that are potentially missing from our model, we conducted the Hausman specification test (Davidson and MacKinnon, 1992) using instrumental variables (IV) as correlated with the focal predictor, but not the error term (Angrist et al, 1993). Following Hunt et al (2021), a set of three instruments were used: (i) the difference in the home market and international market population growth rates among children aged five to fifteen, which is a forward-looking indicator of both labour availability and the future demand for commodities; (ii) the firm founding rate differences between each firm’s home market and aspirant international market (GEM, 2018), which provide a proxy for formal and informal institutional encouragement for small businesses (Veciana and Urbano, 2008); and (iii) the survey responses of owner-operators in the study concerning succession planning for their respective businesses, which proxies the forward-looking nature of transactional decision-making (Hunt et al, 2021). The three instruments were found to be jointly significant predictors of internationalisation, ( F 4, 14,348 = 18.47, p ≤ 0.01), referrals ( F 4,14,348 = 12.90, p ≤ 0.01) and operational performance ( F 4, 14,348 = 9.24, p ≤ 0.05), thereby establishing satisfactory IV strength.…”

Section: Data Methods and Analytical Modelmentioning

confidence: 99%

“…In light of this, and given the high failure rate for new ventures, a cautious trade-credit strategy might seem advisable; for example, one requiring customer payment prior to shipment being made. However, growth aspirations and customer expectations often lead exporters to extend long-term trade credit, even for sales to new customers in foreign markets that are fraught with risks (Fisman and Love, 2003; Hunt et al, 2021; Suarez-Ortega, 2003). Thus, entrepreneurial ventures are confronted with a difficult choice: safety and potential stagnation versus growth and potential peril.…”

Section: Theory and Hypothesesmentioning

confidence: 99%

See 3 more Smart Citations

Getting a Foot in the Door: Trade Credit Strategies and the Pursuit of Entrepreneurial Internationalisation

Hunt

Hayward

Song

et al. 2022

International Small Business Journal: Researching Entrepreneurs

Self Cite

View full text Add to dashboard Cite

Trade credit strategies – comprised of the approaches used by internationalising firms to set the payment terms and schedules for their customers – are one of the few levers available to new small firms to overcome the liability of outsidership. They are vital to entrepreneurial firms seeking to achieve international market growth in the context of scarce resources and limited knowledge of foreign markets and partners. Though under-explored and under-theorised to-date, trade credits may unlock material insights for predictive models of entrepreneurial growth. As such, our study develops and tests the notion that trade credits constitute an important mechanism for entrepreneurial firms to initiate goodwill and generate valuable referrals. However, our findings also suggest that while riskier trade credit strategies help first-time exporters combat exclusion from networks key to a firm’s ability to internationalise, the attendant risks often have a detrimental impact on long-term profitability and survival, thus creating a decision-making conundrum for growth-aspirants. Drawing upon a sample of 88,000 export transactions by 1040 small lumber firms from 52 countries, we advance theory and practice by showing how trade credit strategies shape both growth and performance.

show abstract

Section: Discussionmentioning

confidence: 99%

Section: Data Methods and Analytical Modelmentioning

confidence: 99%

Section: Data Methods and Analytical Modelmentioning

confidence: 99%

Section: Theory and Hypothesesmentioning

confidence: 99%

See 2 more Smart Citations

Getting a Foot in the Door: Trade Credit Strategies and the Pursuit of Entrepreneurial Internationalisation

Hunt

Hayward

Song

et al. 2022

International Small Business Journal: Researching Entrepreneurs

Self Cite

View full text Add to dashboard Cite

show abstract

“…Real option theory is applied to many practical decision situations in many industries, such as construction (Ribeiro et al, 2020), energy (Gupta & Mosiño, 2020), finance (Méndez-Suárez & Crespo-Tejero, 2021), healthcare (Gunter McGrath and Nerkar, 2004) or tourism (Piñeiro-Chousa et al, 2021), and many more. Also, risky endeavors, such as internationalization, can be subject to real option argumentation (Belderbos et al, 2020;Hunt et al, 2021;Ioulianou et al, 2021).…”

Section: Background and Past Reviewsmentioning

confidence: 99%

Tackling uncertain future scenarios with real options: A review and research framework

Gorupec

Brehmer

Tiberius

et al. 2022

The Irish Journal of Management

View full text Add to dashboard Cite

Real options are widely applied in strategic and operational decision-making, allowing for managerial flexibility in uncertain contexts. Increased scholarly interest has led to an extensive but fragmented research landscape. We aim to measure and systematize the research field quantitatively. To achieve this goal, we conduct bibliometric performance analyses and bibliographic coupling analyses with an in-depth content review. The results of the performance analyses show an increasing interest in real options since the beginning of the 2000s and identify the most influential journals and authors. The science mappings reveal six and seven research clusters over the last two decades. Based on an in-depth analysis of their themes, we develop a research framework comprising antecedents, application areas, internal and external contingencies, and uncertainty resolution through real option valuation or reasoning. We identify several gaps in that framework, which we propose to tackle in future research.

show abstract

Chance, probability, and uncertainty at the edge of human reasoning: What is Knightian uncertainty?

Townsend,

Hunt,

Rady

2024

Strategic Entrepreneurship

View full text Add to dashboard Cite

Research SummaryFor more than a century, Frank Knight's Risk, Uncertainty, and Profit has significantly influenced entrepreneurship theory development by exploring the nature of uncertainty and the epistemic limits of entrepreneurial action. Knight's work highlights how economic actors cannot fully predict the consequences of their actions. Despite its broad influence, debates persist regarding the nature of Knightian uncertainty. This study addresses these debates through a comprehensive analysis of RUP and Knight's other published and unpublished writings to offer new insights into the nature and meaning of Knightian uncertainty, revealing Knight's holistic theory that integrates “real indeterminism,” “partial knowledge,” and “subjective beliefs.” This analysis provides much needed construct clarity to advance contemporary theories of entrepreneurial action and the role of uncertainty in business venturing processes.Managerial SummaryThis article revisits Frank Knight's foundational work, Risk, Uncertainty, and Profit, a cornerstone in entrepreneurship research for over a century. We highlight Knight's holistic approach to uncertainty, which integrates the concepts of real indeterminism (the inherent unpredictability of future events), partial knowledge (the incomplete understanding of the present and future), and subjective beliefs (individual perceptions and interpretations). The study offers new perspectives on how Knightian uncertainty influences entrepreneurial decision‐making and action, highlighting how this unique type of uncertainty plays a critical role in the business venturing process. These insights provide valuable contributions to contemporary theories of entrepreneurship, emphasizing the complexity and multifaceted nature of navigating uncertainty in business.

show abstract

Internationalization of entrepreneurial firms: Leveraging real options reasoning through affordable loss logics

Cited by 10 publications

References 105 publications

Getting a Foot in the Door: Trade Credit Strategies and the Pursuit of Entrepreneurial Internationalisation

Getting a Foot in the Door: Trade Credit Strategies and the Pursuit of Entrepreneurial Internationalisation

Tackling uncertain future scenarios with real options: A review and research framework

Chance, probability, and uncertainty at the edge of human reasoning: What is Knightian uncertainty?

Contact Info

Product

Resources

About