When I have to versus when I am able to: Behavioral and resource explanations for firms’ international expansion via exporting

Abstract

This study investigates how the motivations of firms to expand internationally via exporting in rather different contexts can be explained through either the more traditional “ability to export” as held in the resource-based view of the firm or with a behavioral theory perspective. In a riskier context with numerous roadblocks to international trade and investment, this study found support for the behavioral perspective, showing that under- and over-performing firms in that challenging context tended to export more as a result of problemistic search and slack search, while the firms performing around their aspiration levels tended to export less. And this effect proved stronger for smaller firms and non-state enterprises. In contrast, when the conditions for international expansion turned less risky, due to reduced trade barriers, clearer rules and adjudication, the better-performing, larger, and state-owned firms with more resources tended to engage in more exporting activities than others, supporting the resource-based explanations for taking fairly bold strategic action. Based on data from China’s pharmaceutical firms in a time of major institutional change during the pre- and post-WTO periods, this study revealed that firms’ incentives and propensity for undertaking exports change, with changes in the context and the relevant risks. This underscores the importance of selecting and applying theories judiciously when examining firms' international expansion behaviors, particularly given significant contextual change.