How new ventures can gain competitive advantage in the international scene

Author: Iloka Benneth Chiemelie 

Published: 08/12/2013

1.0 Explain how the article builds on the seminal work of Oviatt and McDougall in their paper, Toward a Theory of International New Ventures, published in 1994

The highlight which serves as the foundation of the article is based on the understanding that the publication of “Towards a theory of international new ventures” (Oviatt and McDougall, 1994) in the past decade has been the centre of attraction in terms of the attention towards the increase in role played by young firms in the modern world marketplace.

The argument presented by Oviatt and McDougall (1994) is that international new ventures have been in existence for numerous years but the researches on such have been limited as researchers seem to overlook them. The authors continued to present a discussion of how these features influences the competitiveness of international new ventures in the global marketplace. Their argument continued with the notion that current theories are not designed to understand how the INVs are formed, and as such the authors challenged as well as revised a number of exiting and powerful conceptions on the internationalization process with special reference to the stage theory (Johanson and Vahlne, 1977).

This is the background from which Zahra (2005) developed a new article ‘A theory of international new ventures: A decade of research’ with the objective to present a review of the body of researches on the field, distilling and clarifying the contributions that were made by the original paper by Oviatt and McDougall (1994).

2.0 Describe and analyse the factors identified in the Zahra article as giving competitive advantage to new firms in the globalised economy

Zahra (2005) centred the discussion of factors that influences competitive advantage for new firms in globalized economy on the benefits of “learning concepts” and the suggestions made by Dimitratos and Plakoyiannaki (2003) on the embodiment of international entrepreneurship culture. These factors include:

2.1 Market orientation – it implies that the firm should have interest and be committed to the activities in international market as it related to their presence in these markets and business operations.

2.2 Learning orientation – this implies that the firm should gather, interpret and disseminate intelligence as it relates to the foreign market they operate in and be well alerted on opportunities that might usher into the market.

2.3 Innovation propensity – the reference laid down in this case is that the firm should be willing and able to invest in pursue of new ideas.

2.4 Risk attitude – the emphasis laid in this case is that the firm must be willing to undertaken and address significant level of risky resources and commitment in order to obtain new opportunities in the foreign market.

2.5 Networking orientation – the firm should be able to operate in the form of alliances, cooperative ventures and other formal as well as informal networking approaches in order to obtain necessary resources for international business.

2.6 Motivation orientation – this implies that the firm should keep employees motivated by adopting incentives and rewards and also offer promotional opportunities for the workforce as such will help them to be able to explore and exploit opportunities in the foreign market.

3.0 Do you agree that these are the key factors underlying success in the international business environment?

Yes! Definitely

3.1 Give reasons for your answer

The reasons are:

3.1.1 Market orientation – understanding the market will help them understand their competitors and customers, and as such improve their competitive advantage through the adoption of right strategies.

3.1.2 Learning orientation – this is still similar with the market orientation, it will help them to learn from past failures and avoid it in the future or improve based on past and proven successes factors.

3.1.3 Innovation propensity – innovation makes firms competitive as it adds more features to the products/services, which will mean an increase in customers’ satisfaction. 

3.1.4 Risk attitude – some business opportunities can be risky and as such deter other competitors. In that case, if the company is able to attain success in these areas they will improve their competitiveness.

3.1.5 Networking orientation – partnering with other companies (especially those from the foreign county where the company is operating) will help advance their understanding of the market and as such help improve their business success. 

3.1.6 Motivation orientation – without the workforce the company is destined to fail, but motivated workforce will mean improved productivity and profitability and as such improve competitive advantage.

REFERENCES

Oviatt, B.M. & McDougall, P.P. (1994) ‘Toward a theory of international new ventures’, Journal of International Business Studies, 25 (1), pp. 45–64.

Zahra, S.A. (2005) ‘A theory of international new ventures: A decade of research’, Journal of International Business Studies, 36 (1), January, pp. 20–28.

Dimitratos, P. and Plakoyiannaki, E. (2003) 'Theoretical foundations of an international entrepreneurial culture', Journal of International Entrepreneurshi1p( 2): 187-215.

Johanson, J. and Vahlne, J.-E. (1977) 'The internationalization process of the firm: a model of knowledge development and increasing foreign market commitments', Journal of International Business Studies 8(1): 23-32.