The role of managerial cognitive reasoning on the internationalization decision-making of small ventures

Abstract

This doctoral thesis synthesizes decision making theory, internationalization theory and managerial cognitive approaches to provide further explanation of heterogeneous internationalization patterns of small ventures (SV´s). This research has used a structural equation model in the first stage and a grounding theory approach in the second stage to assess the relationship between the components of managerial cognitive reasoning (CR, hereafter) (Experiential and Rational) as explanatory variables of the internationalization intentions and process of the decision making –perception, options, evaluation, choice–. First part of this model has been tested in a representative sample of 134 “future entrepreneurs” namely University students under extreme conditions while the second part of the model has been tested on international SVs in the context of the managerial cognitive reasoning influence on internationalization decision-making process (IDMP, hereafter). The consideration of individual-level cognitive aspects and role of cognition from the field on neuroeconomics as an element of the internationalization decision-making process is an original aspect of this research. Chapter one summarises the research problem, the interest of research topics and the research objectives. It is included the justification that encourages research and interest in the intersection of cognitive reasoning, decision-making theory and internationalization process theory, from the empirical point of view for academic and practitioners’ implications. Considering the research problem, chapter two comprises the relevant findings from the literature regarding the CR supplement to the IDMP as a framework for this research. It is included a literature review of the research topics, following a model of a systematic review of relevant literature. The literature review has been divided into three subsections: (a) A review of the typology of internationalization process, with attention to managerial decision-making importance; (b) A review of the main components of a cognitive system theory in terms of decision making; (c) Finally, the application of the Dual-Process theory to SV´s IDMP, followed by conclusions for the research aim. Chapter three concrete the scope of the CR on the first stage of IDMP specifically internationalization intentions. There, the model and hypotheses to be tested are introduced. The proposed indicators for each element of Cognitive Systems (System X - Experiential; System C - Rational) and for measuring internationalization intentions among” future entrepreneurs” are also detailed. Following the importance of IDMP under the interactive effect of the two-cognitive reasoning, namely experiential and rational while making decisions regarding speed, scope, and breath of internationalization. The empirical test of the model is included in Chapter four, to further investigate the importance of CR among” future entrepreneurs” international intentions. In the second subsection of this chapter is outlined a qualitative approach to further investigate the importance of cognitive reasoning among the small venture managers regarding the internationalization process through the Dual-Process theory. The methodological procedure leads to the next chapter, for building the final specification of the structural equation system and grounding approach to the finally proposed internationalization decision-making framework. In Chapter Five is detailed step-by-step statistical tests performed, including a discussion of results obtained in the process internationalization regarding the cognitive predominance among SV´s managers. It also includes the results for the contrast of the six hypotheses tested. The main challenges faced in the heterogeneous internationalization topic were the intersections between both modes of cognitive reasoning, as well as the need for bringing out the linkages between the components of the neuroeconomics to internationalization decision making framework. From the micro level of how the behavior of the individual could explain the heterogeneous SV´s internationalization behavior. Derived from the results, one could argue that the CR plays a significant role in SV´s IDMP are embedded in the inborn managerial structure, the importance of environment, perceived social norms and levels of behavioral contours. In the SV´s, the interrelationships between components of the CR seem to have a notable role in explaining its IDMP. Concerning the theory of CR and IDMP, the existence of some remarkable relations between their components to explain the heterogeneous behavior of SV´s are highlighted. In view of accepted and not accepted hypotheses, it seems that the starting point is the CR predominance among managers to create initial internationalization intention which later leads toward the how’s and whys to perform internationalization. There is not enough evidence to support the hypothesis that CR is directly related to the internationalization intention, if not through perceived behavioral control (PBC) (primarily), perceived social norms (PSN) and attitude toward the behavior (ATB) (lesser extent) adopted from Ajzen (1991) Theory of Planned Behavior. Furthermore, there is evidence that CR plays a notable role in the internationalization opportunity perception, creation of battery of options, evaluation of selected option and making the final choice. In Chapter Six implications from conducted studies are detailed and elevated to overall implications for theory as well the practitioners. Namely, the process of internationalization decision-making parallels the psychological process: managers are to recognize what the strategic problem is to generate a battery of options and choose the one that yields higher satisfactory levels of expected results. The importance of cognitive reasoning as an enhancement for internationalization decision-making under circumstances of elevated uncertainty and low supportive environment provides evidence of cognitive importance for positioning managerial cognitive reasoning as an antecedent of internationalization decision-making framework. Furthermore, since internationalization is a key aspect for SV´s survival, and there are observed lack of intentionality to internationalize under high uncertainty and risk perception, decision-makers are supposed to develop the capability of learning and adopting expertise during the process of internationalization through the trial and error approach in order to pursue internationalization. Chapter Seven provides the final conclusion obtained through the empirical studies as well the notable limitations and promising research avenues. It is noted that the decision-maker cognitive reasoning intervenes in case that perception of markets validity is different between the host and domestic markets. The individual’s interpretation of environmental differences in terms of ability to maintain the international behavior chosen under control based on the knowledge available ex-ante. The overall level of perceived control plays a role in internationalization process and fostered by decision-maker cognitive predominance guides the internationalization acceleration.