Modelling international entry mode choice and speed: locational and cognitive insights in Pakistani small businesses

This thesis intends to explore the process of foreign investment and entry mode choices of small firms from Pakistan. Pakistan being an epicure of global terrorism and ethnictension is an economy that is driven by small sector. The small sector is facing extreme difficulties to expand their international operations. This needs a comprehensive research to see beyond basic infrastructural impediments to small firms in Pakistan. What are the major behavioural and analytical impedimentsto their international expansion? Cognitive biases are the behavioural impediments and so far there is no research in Pakistan in general and in advanced countries in particular, to see how cognitive heuristics and biases affectthe foreign investment decision process?

Entry mode is said to be the building block of internationalisation, and due to their small size, resource limitations and lack of international knowledge, small firms often try to obtain first-mover advantages through strategic alliances or joint venture operations abroad. Post entry speed is the international development of small firm, once the process of entry mode choice is completed. Entrepreneurial managers perceive cooperative modes and other equity investments as high-risk oriented strategies due to the legal and moral hazards associated with co-operative modes of entry. This creates a dilemma as to how to maintain a sustainable post-entry international speed?

The absence of a unique set of enduring dispositional preferences is striking. There is no research that explores the role of entrepreneurial cognition/biases in small firm entry mode choices process. This applies particularly when small firms expand their international operations from emerging to developed economies. Based on the integration of cognitive capabilities and the Dunning eclectic framework, this study develops a rigorous model by introducing the new resource value generation taxonomies, and explores the impact of cognitive biasness in small firm entry mode choice process and cognitive dynamism in post-entry speed. A sub-modal for the enquiry of cognitive biases in foreign investment decision process is also introduced. This sub model by qualitative enquiry found the significant role or heuristics and biases in foreign investment decision process.

The data was collected from a stratified sample of three major provinces of Pakistan through postal and drop-off survey/personal visits. Ten in-depth personal and telephonic interviewswere conducted to triangulate the entry mode choice process with speed model. Triangulation of positivist and interpretivist approach confirms the validity and reliability of the research findings. The dependent variable is dichotomous for post-entry speed.

Logistic regression for post-entry speed is used to analyse the quantitative data set.
Foreign investment and/or entry mode choice process are the simultaneous terms used in the entire thesis. The findings support the central role of biases in foreign investment decision process and ownership, location and cognitive advantages in the post-entry speed. The new value generation entry mode choice taxonomies (high and low value generation modes) and cognitive biases during the three stages of foreign investment decision process introduced in this research, contributes significantly to present literature. Complexities associates with IB research highlight the need for further empirical, cross-cultural and longitudinal studies.

One of the most important challenges that the managers in small firm in developing economies face is to find new ways to enhance the probability of their exports‘ success through a suitable entry mode choice process (foreign investment decision process). This research through careful deliberation presents useful implications that will enhance the international activity of small firms from developing economies in general and advanced economies in particular. The findings are generalizable because the cognitive biases emerge as behavioural and analytical impediments in any event, process and/or in any system of relationships. The dispositional tendencies of managers identified in this thesis are the source of mitigating the negative effects of the biases. Thus this study is unique in its nature that contributes to both economic and behavioural theories.