Institutional Distance

10 October 2016

The case of mobile operators Nicolai Pogrebnyakov a,? , Carleen F. Maitland b a b Department of International Business and Management, Copenhagen Business School, Frederiksberg 2000, Denmark College of Information Sciences and Technology, The Pennsylvania State University, University Park, PA 16802, United States. This paper applies the institutional lens to the internationalization process model. It updates the concept of psychic distance in the model with a recently developed, theoretically grounded construct of institutional distance. Institutions are considered simultaneously at the national and industry levels. It also aims to understand whether the internationalization process of service firms is different from the behavior predicted by the model, which was developed for the manufacturing context.

We empirically test the model using proportional hazard analysis with 130 instances of entry and presence of mobile operators in Europe and South America over 13 years. In? uences of regulative, normative and cognitive institutional aspects were disaggregated and shown to have differing effect on internationalization. This suggests that institutional distance is a viable alternative to other distance measures used in the internationalization process research. The results also indicate that the internationalization behavior of this type of service

The institutional perspective allows better understanding of how cultural beliefs, norms as well as formal rules in? uence the operation of organizations (Gooderham et al. , 1999). The mutual in? uences of institutions and organizations on one another have been systematically investigated (DiMaggio and Powell, 1983). Furthermore, the separation of institutions into different levels, including world, societal, organizational and individual, have led to a recognition of the differing in? uences of institutions at each of these levels on organizations and other types of actors (Scott, 1995).

This paper has three objectives. First, it integrates the recently developed construct of institutional distance with insights from the internationalization process model. That construct has origins in institutional theory, which has been applied to many aspects of organizational behavior. Whether institutional distance affects behavior of internationalizing ? rms is as yet unclear. Second, it contributes to statistical studies of internationalization research. Qualitative methodology in this domain allows to gain insight of motives or decision-making processes involved in internationalization.

By contrast, quantitative examinations allows understanding of the β€œbig picture” and observe larger-scale patterns of internationalization. However, statistical studies have been somewhat underrepresented in favor of qualitative studies (Barkema et al. , 1996), and this paper is an attempt to bridge that gap. Finally, it aims to enhance our understanding of internationalization of service ? rms. Its theoretical foundation is the internationalization process model, which was developed for the manufacturing sector and applied to services with mixed results. In particular, it asks whether ? ms in the mobile telecommunications industry, with its end product that has global appeal and little cross-country variation, are subject to learning experience when entering foreign markets as predicted by the model. This objective is timely and important because it addresses calls for thorough research of internationalization of service ? rms, of which there have been few studies (Cicic et al. , 1999). To address these objectives, we construct a Cox proportional hazards regression model using data on 130 instances of foreign entry and presence of mobile operators in 36 countries of Europe and South America over 13 years.

The study is set in the context of the mobile telecommunications industry. Mobile services have diffused across the globe faster than any previous technology (World Bank, 2008). Mobile telephony was used by over 60% of the world’s population in 2008, up from a quarter ? ve years before, and is projected to grow strongly despite the recent economic turmoil (International Telecommunications Union, 2009). However, while the use of mobile services is generally widespread, signi? cant differences in demand and supply exist. On the demand side, countries vary in their levels of adoption (e. . , 50% in Moldova compared with 94% in France in 2008) and patterns of use (e. g. , text messaging was until recently more widely used in Europe than in the United States). On the supply side, mobile operators are often national ? rms with investments from or in competition with foreign ? rms from a variety of countries. For example, in the U. S. , Verizon Wireless, a domestic ? rm, is in fact a joint venture with the British ? rm Vodafone and competes against the German ? rm T-Mobile. The paper is structured as follows.

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