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POLITECNICO DI MILANO
School of Industrial and Information Engineering
Master of Science in Management Engineering
INTERNATIONALIZATION PROCESS UNDER RISK
AVERSION AND AMBIGUITY
Supervisor: Prof. Stefano ELIA
Co-Supervisor: Dott. Valentina ROTONDI
Authors: Serhan ATAKAN - 835259
Emre BUYUK - 836006
A.Y. 2015-2016
II
ACKNOWLEDGEMENTS
Foremost, we would like to express our sincere gratitude and appreciation to our two
supervisors. This thesis would not have been completed fully without the help and support of
Prof. Stefano Elia and Dott. Valentina Rotondi.
Moreover, we are grateful to our participants who were very kind to spare their time to attend
the interviews. This study would not have been realized without their participation. Their
enthusiasm encouraged us exceedingly to complete our study.
Finally, we are very thankful to our friends and family for their cooperation and
encouragement which helped us in completion of this thesis. Especially, we are very grateful
to those who made the effort and spared their time to raise potential participants for our study.
III
TABLE OF CONTENTS
ABSTRACT ............................................................................................................................... VI
EXECUTIVE SUMMARY .......................................................................................................... 8
1. INTRODUCTION................................................................................................................... 14
2. LITERATURE REVIEW ........................................................................................................... 16
3. METHODOLOGY .................................................................................................................. 29
3.1. Experimental Methods in Management ................................................................................ 29
3.2. Methodology of Our Research ............................................................................................... 30
3.2.1. Participant Selection ...................................................................................................... 31
3.2.2. Introduction of Participants .......................................................................................... 32
3.2.3. Introduction of Companies ............................................................................................ 32
3.2.4. Survey Design ................................................................................................................ 35
3.2.5. Experiment Design......................................................................................................... 36
4. RESULTS.............................................................................................................................. 46
4.1. Results of Survey .................................................................................................................... 47
4.2. Results of Risk Aversion Game ............................................................................................... 55
4.3. Results of Two-Stage Oligopoly Game Under Ambiguity ...................................................... 56
5. DISCUSSION AND REMARKS ................................................................................................ 61
6. CONCLUSION ...................................................................................................................... 62
BIBLIOGRAPHY ........................................................................................................................... 65
APPENDIX .................................................................................................................................. 69
IV
LIST OF FIGURES
Figure 1 - Steps in Experimental Method Design ............................................................................. 29
Figure 2 - Compliance List For Selecting Data Collection Method ................................................ 29
Figure 3 - Steps of Methodology and Results .................................................................................... 30
Figure 4 - Age Interval Distribution of the Participants .................................................................. 47
Figure 5 - Education Level Distribution of the Participants ........................................................... 47
Figure 6 - International Experience of the Participants in Years ................................................... 48
Figure 7 - Trustworthiness Level Distribution of Participants ....................................................... 48
Figure 8 - Company Formations ........................................................................................................ 49
Figure 9 - Internationalization Status of the Firms .......................................................................... 50
Figure 10 - Mode of Entry Choices of the Firms .............................................................................. 50
V
LIST OF TABLES
Table 1 - Advantages and Disadvantages of Different Entry Modes .............................................. 16
Table 2 - Risk Aversion Classifications Based on Lottery Choices (Holt and Laury, 2002)......... 27
Table 3 - Criteria For Participant Selection ..................................................................................... 31
Table 4 - Payoff Matrix of Game L, Bad State of the Demand (Georgantzis et al., 2012) ............ 39
Table 5 - Payoff Matrix of Game R, Good State of the Demand (Georgantzis et al., 2012) ......... 39
Table 6 - Risk Aversion Game Lottery Table, Holt and Laury (2002) ........................................... 43
Table 7 - Expected Payoff Difference Table ...................................................................................... 44
Table 8 - Hypotheses ........................................................................................................................... 46
Table 9 - International Experience of the Participants Based on Location ................................... 49
Table 10 - Company Funding Methods ............................................................................................. 49
Table 11 - International Markets Served .......................................................................................... 51
Table 12 - Specific Information About International Operations of the Companies .................... 51
Table 13 - Company Motivations For Internationalization ............................................................. 52
Table 14 - Barriers for Companies In the Internationalization Process ........................................ 52
Table 15 - Unexpected Benefits Experienced During Internationalization .................................... 53
Table 16 - Unexpected Challenges Experienced During Internationalization ............................... 53
Table 17 - Market Success Criteria of Companies to Internationalize........................................... 54
Table 18 - Competitive Advantages of Companies to Internationalize .......................................... 54
Table 19 - Effects of Home Country Characteristics On Internationalization .............................. 55
Table 20 - Answers of Participants to Risk Aversion Game and Statistical Analysis Results...... 56
Table 21 - Distribution of Participants’ Answers for Each Scenario in the Two-Stage Oligopoly
Game ............................................................................................................................................. 57
Table 22 - Risk Aversion Degrees of Participants and Their Choices for Purchasing Information
....................................................................................................................................................... 59
VI
ABSTRACT
In today’s global world, internationalization has a vital importance for businesses than ever
and its influence is significantly rising every day. Companies worldwide are in search for new
international markets to sell their products and services and to increase their revenues. CEOs
and managers of companies have a crucial role in these internationalization decisions. Their
characteristics, backgrounds and experiences are directly influencing their decisions and these
decisions direct the international operations of companies. This study focuses on the
characteristics of the decision makers of companies and how they influence the
internationalization decisions. Specifically, we examine risk aversion degrees and decision
making processes under ambiguity of a sample of managers who are fully responsible in
decision making in their companies. We revisit previous literature and theoretical work on
internationalization decisions and then develop a survey and an experimental model in order
to understand the underlying factors in the decision-making processes. We conduct two
separate experiments on risk aversion and decision making under ambiguity and by doing so,
first we measure risk aversion degrees of our sample subjects and then observe the
relationship between their risk aversion degrees and their decision-making strategies in
internationalization processes under ambiguity in our second experiment. These experiments
were conducted on 4 managers and the results have shown us that more risk averse subjects
tend to prefer FDIs more when entering a new foreign market. The main reason of such a
result is that risk averse subjects make their entry mode decisions considering the risks in a
new foreign market in terms of demand uncertainty and information asymmetries. Choosing
FDIs, they try to minimize these kinds of risks by maximizing their local knowledge in the
new market. Although, in most of the cases, dominant strategies are preferred in
internationalization processes, there are some other factors such as cooperative behavior
which are directly affecting the internationalization decisions and these demonstrate the
existence of relevant behavioral and strategic factors that are not anticipated by a theoretical
model.
VII
ABSTRACT
Nel mondo globale di oggi, l'internazionalizzazione ha un’importanza vitale per le imprese e
la sua influenza è sempre più importante. Le imprese di tutto il mondo sono alla ricerca di
nuovi mercati internazionali per vendere i loro prodotti e servizi e per aumentare le loro
entrate. Amministratori delegati e manager hanno un ruolo cruciale in queste decisioni di
internazionalizzazione. Le loro caratteristiche, backgrounds e esperienze influenzano
direttamente le loro decisioni e queste decisioni guidano le operazioni sui mercati
internazionali delle imprese. Questo studio si concentra sulle caratteristiche dei decision
maker delle imprese. Più nello specifico studia come queste ultime influenzino le decisioni di
internazionalizzazione ponendo l’enfasi sul grado di avversione al rischio dei manager e sui
processi decisionali in condizione di ambiguità usando come campione manager che sono
pienamente responsabili nel processo decisionale nelle loro aziende. Il lavoro rivisita la
letteratura precedente e la letteratura teorica sulle decisioni di internazionalizzazione e quindi
sviluppa un sondaggio e un modello sperimentale al fine di comprendere i fattori alla base dei
processi decisionali. Abbiamo condotto due esperimenti separati riguardanti l’avversione al
rischio e un processo decisionale in condizione di ambiguità e, così facendo, abbiamo prima
misurato l'avversione al rischio dei nostri soggetti e poi osservato il rapporto tra il loro grado
di avversione al rischio e le loro strategie decisionali nei processi di internazionalizzazione in
condizione di ambiguità. Questi esperimenti sono stati condotti su 4 dirigenti ed i risultati ci
hanno dimostrato che i soggetti più avversi al rischio preferiscono la strategia degli FDI
quando devono entrare in un nuovo mercato estero. Anche se, nella maggior parte dei casi, le
strategie dominanti sono da preferire nei processi di internazionalizzazione, ci sono alcuni
altri fattori come il comportamento cooperativo, che determinano direttamente le decisioni di
internazionalizzazione
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EXECUTIVE SUMMARY
Internationalization has now been actively realized or put in the agenda of many enterprises
from smallest to largest. There might be several reasons inducing managers and CEOs of
firms to take steps towards internationalization. The reactive reasons can be possibility of
increasing sales, diversifying operations, reducing costs of labor production or supply,
compensating for home market decline or saturation and so on. Thus, companies interpret
internationalization outcomes as a solution to a fact or a set of circumstances that is changing
the normal flow of business such as decreasing margins, stagnant market or expanding
customer base. On the other hand, proactive reasons incorporated with competitive advantage
are just as encouraging as the reactive ones. Taking advantage of other markets growth and
development, moving activities in the value chain to more competitive regions to benefit from
cost advantages, exploiting economies scale and scope and gaining knowledge about other
customer profiles and markets can be given as those reasons.
Today’s global world offers myriad of opportunities to do business in an international scale
thus, the trend moves upward especially in the last decade due to efforts and endeavors of
political and economic institutions. European Union expansion along with its free trade
agreements are the results of those efforts. Besides, costs related to trading and transportation
have been decreased sharply with the improvements in distribution and transportation
channels worldwide as well as in agreements between countries. Consequently, firms are far
more enthusiastic about seeking for new opportunities in the international markets to expand
their products and service.
Internationalization trend has also made companies to focus more on the strategies in the path.
The location, timing and mode of entry are three pillars of strategy formulation for
internationalization. These decisions should be made correctly to maintain accurate
internationalization process. The decision-making process, on the other hand, is generally
managed by executive board in which the CEOs are one of the most important actors
participating overwhelmingly since they have the most power, and directly affect all the
decision-making process.
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Due to scope of our study, entry mode choices are reviewed in a more detailed way. It is
difficult to say that there is a single correct mode of entry which is always the best for a firm
in every situation since each mode has its own advantages and disadvantages that should be
considered carefully by the decision-makers. Internationalizing firm must examine its own
specific case with the circumstances of the company and the target foreign market. The
common modes of entry can be lined up from most committed to least committed as follows:
Greenfield investments, acquisitions, joint ventures, licensing, franchising and exporting. To
emphasize the differences of advantages and disadvantages of two ends of this scale,
greenfield investments imply maximum control, extensive knowledge gain and possible high
earnings as advantages yet highest risk and investment costs and slow entry as disadvantages.
Conversely, exporting implies fast entry and low risk as advantages as opposed to
disadvantages such as low control, low local knowledge. As indicated, choice of entry modes
in a way represents the decision-maker’s risk and ambiguity senses incorporated to
uncertainty.
Even though there are many factors affecting the decisions of CEOs, some studies research on
how the characteristics, capabilities and perceptions of managers are shaping the
internationalization strategies of their companies such as previous experience, age, tenure and
so on. For instance, Williams and Gregoire (2015) suggest that executives tend to put reliance
on similarities when deciding where and when to internationalize whereas they focus on
dissimilarities deciding the mode of entry. In other words, psychic closeness can be
determining factor for the location and timing while entry mode choices are made based on
guarding against cost, risk, control and uncertainty. Correspondingly, some of the studies
focus on certain phenomena such as risk aversion and ambiguity by conducting experiments
on selected managers who are in charge of shaping the decision-making process of their
companies and their risk and ambiguity senses are correlated with their entry mode choices
when they face with an internationalization decision. In fact, Georgantzis et al. (2012)
introduced a representative model illustrating the decision-making algorithm in
internationalization strategies with the aim of discussing the impacts of variability and
uncertainty on the internationalization strategies of firms incorporated to risk and ambiguity
senses of those executives who form those strategies.
In our research, we examine the characteristics and especially sense of risk aversion and
ambiguity of managers who are in charge of the decision-making process in all the critical
situations a company faces and we try to associate their different perceptions with their
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corresponding strategies and decisions when they have to decide the entry mode of their firms.
In order to do so, we revisit previous literature and theoretical work on international decisions
and then develop a survey and an experimental model to understand the underlying factors in
the decision-making process.
We designed our survey benefiting from several surveys that were applied for similar study
purposes. The experiment, on the other hand, subsists two distinct games, one revealing the
ambiguity aversion, the other revealing the risk aversion of subjects. The representative model
that is developed by Georgantzis et al. (2012) is implemented to one of the games. However,
the selection of participants and thus, instructions are built differently. The other game also
carried same design principles with the experiment that is done by Holt and Laury (2002) to
evaluate the risk preferences of subjects. Ultimately, all participants were initially given a
survey to fill out then they played two different games where they earned specific amount of
prize money from one of the games that they chose at the end of the experiment session.
Overall interview including survey and the experiment phase took around two hours for each
participant. Each participant was interviewed individually under the same environmental
conditions. Since all participants were from Turkey, we conducted experiments in Turkish to
advance communication.
First we present a model of survey to be completed by participants who are dominant decision
maker in their companies founded in Turkey regarding internationalization process and we
intend to have a detailed information about their personal characteristics, backgrounds and
previous experiences. Moreover, we get to have a broad knowledge about their companies.
We collect some critical information such as the industry, products and services produced,
internationalization progress of the firm, motivations, advantages, challenges and expectations
from the business operations by applying this survey.
Then, a two-step experimental design is developed to be conducted with our selected
participant managers. In the first step, an experiment aiming to measure the risk aversion
degrees of our subjects is prepared. This experiment has its origins from a similar one
presented in Holt and Laury (2002). Basically, the participants are asked to choose a point on
a scale where they will prefer a risky option instead of a safe option for the first time and this
is used to measure their risk aversion degree. Two of our subjects are placed in ‘risk averse’
category while the other two are placed in ‘risk lover’ category considering the results of this
experiment.
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In the second part of this experimental session, an experiment on the same subjects is
conducted in order to interpret their decision-making processes under “ambiguity and
uncertainty” and we try to relate their decisions with their corresponding “risk aversion”
degrees. Another factor which is directly affecting the results is “cooperation theory”.
Therefore, we also want to test how the dynamics of cooperation theory will affect the
decisions of the subjects when they have a dominant strategy in a defined scenario. This
experiment has its roots from the research of Georgantzis et al. (2012) and our aim was to test
the similar hypothesis in a different cultural context. More detailed methodology can be found
in the next chapters.
We selected four executives whose firms are from varying industries. All the participants are
from Turkey specifically, because the study’s aim is to indicate the behavioral effects on
decision-making throughout internationalization process, specifically managed by executives
who have different cultural background compared to extant studies that apply the
experimental method. Our criteria for selecting the participants were basically threefold. We
limited our sample pool to those who manage the firms that are either already
internationalized or have taken serious steps yet not have been operating internationally, and
those who are the main decision-maker in the decision-making process especially for the
internationalization policies, and those who manage specifically firms that are small or
medium sized.
Moreover, we introduce the firms whose executives we interviewed for our study. All the
firms serve in different primary industries from the other. Home country of all firms is Turkey
yet one firm also identifies second home country that is Switzerland. Firms’ annual turnover
varies significantly, however profit margin per industry is considered to make better
evaluations in terms of categorization of firms which all comply our criteria. Three of the
firms are already operating internationally while the remaining firm has taken serious steps
but has not realized its internationalization fully.
As we discuss throughout the report, we expect to show evidence for the hypotheses that are
developed by Georgantzis et al. (2012) with the analysis of the same experiment subjecting
different type of sample. These hypotheses can be found in the end of methodology chapter.
Furthermore, data regarding survey are collected in order to have a deeper understanding of
the personal characteristics, motivations and experiences of our participant managers. Results
of risk aversion game show that two of our participants are categorized as risk averse but the
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others as risk seeker. The more detailed information regarding results of the survey and
experiment can be found in the results chapter.
Throughout our research for our thesis, we aim at understanding the dynamics affecting the
decision-making progress of companies in their internationalization processes. CEOs and the
managers have the most critical positions and effect in this manner. Their characteristics
including especially the risk and ambiguity senses influence the decision-making process for
the internationalization as well as the future of the companies operating all over the world.
We developed our own methodology after presenting an extensive literature review about the
previous studies and experiments conducted in different countries and in different
circumstances and evaluating their key points.
According to our results the following hypotheses are confirmed:
H1: Local firms will play the dominant strategy in the market game regardless of the foreign
firms’ strategies.
H3: For any risk attitude, an increase in G (cost of having information about the demand in
the local market) implies less observed information purchase.
H4: For any probability of the good state of demand foreign firms are more likely to purchase
information the more risk averse they are.
On the other hand, H2, stating that “informed foreign firms will play the dominant strategy in
the market game.” could not be significantly confirmed.
After obtaining the results it can be confirmed that there is a strong correlation between risk
aversion and tendency to avoid ambiguity when having to decide in uncertain circumstances.
More risk averse managers tend to choose FDI (foreign direct investment) more when
entering into a new foreign market in order to reduce the risks coming from information
asymmetries. Local firms know the dynamics and demand of the market much better than the
new foreign firms. Choosing FDI rather than exporting reduces this information asymmetry
by giving the foreign firm the possibility to get information about the market by making the
necessary investment. Therefore, it can be claimed that risk aversion and ambiguity aversion
degrees of decision makers have a vital effect on the future plans, operations and decisions of
international companies.
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It is also crucial to state that the implementation of these experimental studies may not give
the same results in every context. First of all, our sample is relatively smaller than those we
tried to re-model. Second, we certainly believe that the cultural background of participants
also directly affects their way of thinking and thus their decision-making methods. For
example, cooperation can have a significant importance and moral value in a culture while
individualism can be much more important than that in another culture. As it is seen in our
results, this can even change the correctness of some hypotheses.
Finally, further questions can be asked to participants in order to examine the other factors
that may underlie in their decision-making processes. With the aim of following an extensive
framework, these factors that are not investigated by current theoretical models should be
studied in other studies. This can be achieved by collaboration of various disciplines such as
industrial economics, psychology, statistics and business management.
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1. INTRODUCTION
In today’s global world, internationalization has an extreme importance for firms and its
significance is increasing continuously. Easiness of doing business in an international scale
has increased significantly especially in the last decade with the help of the efforts of political
and economic institutions in creating new arrangements such as the expansion of European
Union and its free trade agreements with other countries worldwide. Not only trading costs
but also transportation costs have decreased sharply with the continuous development of
distribution and transportation channels worldwide. All this progress has made firms change
their vision and strategies in their business plans and firms began to seek for new
opportunities in the international markets to sell their products and services.
At this point, the importance of the internationalization strategies has increased naturally. This
means that the companies have started to think about what kind of an entry mode would be
more advantageous for them when they decide to enter a new international market. Without a
doubt, one of the most important actors who are in this decision process is the CEO of the
firms. They have the most power in the executive board of the companies and this directly
affects all the decision-making process in a single firm.
There are many factors affecting the decisions of CEOs during this decision-making process.
In our research, we will examine the characteristics and especially sense of risk aversion and
ambiguity of managers who are in charge of the decision-making process in all the critical
situations a company faces and we will try to associate their different perceptions with their
corresponding strategies and decisions when they have to decide the entry mode of their firms.
If we need to explain the entry modes in a foreign market in a more detailed way, we first
have to mention that there are several common modes of entry in a foreign market and each of
them comes with their advantages and disadvantages together. There is not a single correct
mode of entry which is always the best for a firm in every situation. However, the entering
firm has to examine its own specific case with the circumstances of the company and the
target foreign market. The most common entry modes can be presented as the following:
Greenfield investments are established from zero by a foreign firm which has decided to have
its own entity with everything required in the new foreign market.
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Acquisitions mean acquiring an existing entity which has already been operating in that
foreign market.
Joint ventures are the alliances set up by two companies in a market. In many cases of foreign
direct investments, one of the companies in the joint venture is a local firm knowing the
market characteristics and the other one is the foreign firm entering its target market for the
first time. These firms make an agreement with each other about the sharing of
responsibilities, assets etc. and they decide the percentage of control and shares they will hold
in the joint venture.
Licensing agreements allow foreign firms, to produce a good or service (mostly with an
intellectual property) for a fixed term in a specific market.
Franchising allows a firm to produce its products or services under the name of a well-known
firm with a trademark. Franchisee company pays a certain fee for using the rights of selling
the goods or services of the franchiser company. A firm can enter into a new international
market by giving franchises.
Exporting is one of the easiest and one of the most preferred mode of entry in a new
international market. It is basically the process of selling of goods and services produced in
the home country to other international markets without making any direct investment to the
foreign markets. As mentioned before, all these entry modes have their own advantages and
disadvantages. In order to have a broad view on these positive and negative aspects, we think
it is useful to summarize those in Table 1 illustrated below.
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Entry Mode Advantages Disadvantages
Exporting Fast entry, low risk Low control, low local knowledge
Licensing and
Franchising Fast entry, low risk, low cost
Less control, legal and regulatory
issues to struggle with
Joint Ventures and
Strategic Alliances
Shared costs, reduced risk,
low investment
High costs of investment,
integration problems between the
partner companies
Acquisitions Fast entry, existing
knowledge and operations
Very high cost of investment,
higher risks, higher resource
commitment
Greenfield
Investments
Maximum control, ability to
develop local knowledge,
high earnings if successful
Highest investment costs, highest
risks, slow entry
Table 1 - Advantages and Disadvantages of Different Entry Modes
After having a more detailed understanding about the foreign market entry modes, it is
convenient to continue with the dynamics of decision making process when choosing the
correct mode of entry in a new international market. As indicated before, in this research our
focus will be on the characteristics of the CEOs or the managers who have the full
responsibility in the decision-making processes of their companies. Besides the personal
characteristics such as age, international experience, previous background etc. we will mainly
narrow our scope on the ambiguity and risk aversion of the individuals. Before continuing to
the methodology of this research it will be useful to have an understanding of the previous
literature relevant to our study.
2. LITERATURE REVIEW
There is an extensive research on how the characteristics, capabilities and perceptions of
managers are shaping the internationalization strategies of their companies. Some of the
studies focus on certain phenomena such as risk aversion and ambiguity by conducting
experiments on selected managers who are in charge of shaping the decision-making process
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of their companies and their risk and ambiguity senses are correlated with their entry mode
choices when they face with an internationalization decision. In addition to that, some studies
focus on the personal characteristics and capabilities of managers such as their previous
experience, age, tenure in their current company, international experience etc. Then some
correlations are observed between these characteristics and corresponding level of control that
a manager prefers when deciding the entry mode in a new international market.
Herrmann and Datta (2002) focus on the CEO succession processes in the international firms
since CEO succession is seen as an important, unique, and very visible event, one that has
profound impact on the organization and its strategy (Kesner and Sebora, 1994). Moreover,
the post-succession period is typically characterized by formulation and implementation of
strategies where new CEOs seek to have the greatest impact (Ocasio, 1994; Tushman and
Romanelli, 1985). Major organizational and strategic changes often occur after a succession
(Hambrick, Geletkanycz and Fredrickson, 1993), with CEO successors frequently initiating
strategies that reflect their knowledge base and experiences. All of these factors make the
initial period after the CEO succession very critical for the future of the company strategies.
Characteristics of the newly selected CEO has a critical importance in that manner. Hambrick
and Mason (1984) argue that managers' cognitive orientation influences the perceptual
process behind strategic decision making through selective perception, by limiting their field
of vision and by filtering information. This means that the strategic decision making process
of the companies will highly depend on the cognitive perspectives of their new CEO. The
underlying assumption here in these arguments is that experience, personal background, and
education shape managerial cognition, knowledge, and skills in ways that substantially impact
decision making and behavior (Hitt and Tyler, 1991). Not only the personal characteristics but
also the previous functional background of the managers is thought to affect significantly the
future decisions of a manager in terms of how much control he/she prefers to have in the new
international market. Similarly, Song (1982) found functional backgrounds of CEOs to be
related to the diversification strategies of their firms, with those adopting a strategy of internal
diversification typically being led by CEOs with marketing and production backgrounds. In
contrast, firms that pursued acquisitions were more likely to have CEOs with backgrounds in
accounting, finance, and law. Another interesting finding is that Barker and Mueller (2002)
found firm R&D spending to be greater in firms with CEOs who were younger and had output
backgrounds.
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After presenting this previous related literature, Herrmann and Datta (2002) extends these
arguments in the international arena, by stating that one can similarly argue that the
characteristics of successor CEOs should have an important impact on international strategies
and decisions, including the choice of foreign market entry modes. In their paper, Herrmann
and Datta (2002) narrow their scope to the amount of control a firm has in their foreign
market entry. In other words, they simplify the amount of control by dividing it into two
groups; namely, full control and shared control in the entities. Firms can opt for full control
and ownership by choosing greenfield investments or cross-border acquisitions, whereas
licensing and joint ventures entail sharing of control and ownership (Herrmann and Datta,
2002).
The first research hypothesis of Herrmann and Datta (2002) is about the position tenure of the
successor CEO at a company. The term “position tenure” corresponds to the number of years
a professional has spent in that position at that company. In the initial phase of their tenure,
CEOs can be expected to be somewhat risk averse, avoiding risky strategies that might
jeopardize their position (Hambrick and Fukutomi, 1991). Gradually, a manager will adapt
more to the specific tasks of the position, will increase his knowledge and professional
capability and these will make him less risk averse in the upcoming years. Since it is
reasonable to assume that a professional who is more risk taker will highly seek for more
control in a foreign market entity. Accordingly, the first hypothesis of Herrmann and Datta
(2002) is that position tenure of CEO successors will be positively associated with preference
for full-control entry modes. Moreover, it has been argued that managers with greater
educational levels are more likely to possess the cognitive ability to process complex
information, analyze new situations, and discriminate among available alternatives (Wiersema
and Bantel, 1992). This leads to the second hypothesis of Herrmann and Datta (2002) which
claims that educational level of CEO successors will be positively associated with preference
for full-control entry modes. As mentioned before, an output functional background
(marketing, sales, product R&D, entrepreneurship), as defined by Hambrick and Mason
(1984), has been associated with a preference for new products, new markets, and new
opportunities, while a throughput back-ground (accounting, operations, process R&D) with
the need to maintain control and operational efficiency. Therefore, CEOs who have been in
charge of throughput functions during their previous career tend to have a control and
efficiency orientation which will favor the full-control entry mode options for them, with
greater financial and strategic control. Having this as a supporting argument, the third
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hypothesis is that CEO successors with throughput functional background are more likely to
choose full-control entry modes. Similar to the argument which gives support to the second
hypothesis, there are strong evidences that CEOs who have accumulated knowledge of
foreign cultures and business practices through international experience can be expected to
possess the skills sets that give them greater confidence to operate in foreign business
environments (Black, 1997). Accordingly, the fourth hypothesis is that international
experience of CEO successors will be positively associated with preference for full-control
entry modes. Finally, by considering all the previous hypotheses a fifth one is developed as
the relationships between CEO successor characteristics and entry-mode choice identified in
hypotheses 1-4 will be present in high performing but not in low performing firms. After that
in order to examine the relationships between successor CEO characteristics and choice of
entry mode, logistic regression is used (Hosmer and Lemeshow, 2000; Pindyck and Rubinfeld,
1998). By applying the logistic regression model on the sample of the study, first three
hypotheses were proved statistically. However, no support was found for the hypothesized
relationship between educational level and entry-mode choice. Although the relationship was
in the expected direction, which is positive, it was not statistically significant. This non-
finding can be attributed to the seniority of executives being selected as CEOs (Shenkar and
Zeira, 1992). In addition, in overall, subgroup analyses suggest a stronger fit between entry-
mode choice and CEO demographic characteristics in firms exhibiting superior performance
which also proves the fifth hypothesis.
Herrmann and Datta (2006) explore the relationship between foreign direct investment
methods and CEO experiences in a different way. Based on their sample of 380 foreign
market entry events involving acquisitions, greenfield investments, and joint ventures, they
work to find out how the firm experience, age, international experience and functional
backgrounds of CEOs direct them to choose one of these three kind of foreign direct
investment decisions. If we re-emphasize the main underlying reason when choosing one of
these alternatives, certainly it is the amount of control that the firm will have in this new
international entity. Greenfield investments come with superior control on the entity but with
a serious amount of risk and uncertainty while acquisitions come with a little bit less control
since an existing organization is being acquired. On the other hand, this will mean a less risky
environment and more knowledge about the market dynamics for the acquiring company.
Joint ventures have the least amount of control for an acquiring firm since this means that
only a certain proportion of the decision-making process will be in the hands of one firm.
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Though, this is the least risky way to make a foreign direct investment in a new international
market. Most of the previous studies examining the relationships between executives’
experiences and strategic choices were grounded in the upper echelons theory proposed by
Hambrick and Mason (1984) which posits that executives’ experiences represent valid proxies
for their cognitions, values, skills, and knowledge base and, consequently, represent powerful
explanations for variations in their strategic choices. Smith and White (1987) have also found
systematic relationships between new CEOs’ functional background experiences and firms’
diversification strategies. One of the most important factors affecting the decision of choosing
the correct mode of entry is the amount of control that the entering firm will have. Control
requires the entering firm to assume decision making responsibility in what is likely to be an
uncertain foreign environment. Control also requires greater commitment of resources,
creating switching costs, and reducing a firm’s ability to change its institutional arrangement
should its choice turn out to be sub-optimal (Anderson and Gatignon, 1986). Another factor
affecting this critical decision is the risk. Hill (2003) argues that acquisitions represent the less
risky option because, unlike in greenfield investments, firms entering via acquisitions buy a
set of assets that are producing a known revenue and profit stream. Moreover, in acquisitions,
entering firms not only acquire tangible resources (e.g. factories, logistics systems), they also
get access to intangible assets, including employees with local know-how. That can
significantly reduce the risk of mistakes caused by lack of knowledge of acquisitions are less
likely to result in incumbent retaliation since, unlike greenfield investments, they do not
negatively impact industry profitability by adding to industry capacity (Caves and Mehra,
1986; Hennart and Park, 1993). It is also important to keep in mind that joint ventures can
protect foreign firms from political risk factors, with the help of the local firm in reducing the
possible unwanted outcomes of political risks.
When building the hypotheses of their research, Herrmann and Datta (2006) consider some
previous evidences and findings about the relationship between the FDI (foreign direct
investment) decision making process and four characteristic factors of CEOs which were
mentioned before in this paper. For example, there were some previous studies that associate
managerial youth with greater risk taking behavior. It has been argued that older executives
are typically more risk averse, exhibiting a preference for greater financial and career security
than their younger counterparts (Child, 1974; Hart and Mellons, 1970). Older executives are
often at a point in their lives and careers where financial and career security is of paramount
importance (Hambrick and Mason, 1984) and consequently tend to avoid riskier ventures.
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Extending the argument to entry modes, we can expect older CEOs to exhibit greater
reluctance to use modes that entail higher risks. This favors the use of joint ventures over
greenfield investments and acquisitions, and acquisitions over greenfields (Herrmann and
Datta, 2006) and that is the root of the first hypothesis of the paper. With the help of other
evidences coming from previous researches, other three hypotheses of Herrmann and Datta
(2006) are shaped as following: (1a) CEOs with greater firm experience will favour joint
ventures over greenfield investments and acquisitions as FDI entry mode. (1b) CEOs with
greater firm experience will favour acquisitions over greenfield investments as FDI entry
mode. (2a) CEOs with throughput functional experience will favour acquisitions over joint
ventures as FDI entry mode. (2b) CEOs with throughput functional experience will favour
greenfield investments over joint ventures and acquisitions as FDI entry mode. (3a) CEOs
with greater international experience will favour acquisitions and greenfield investments over
joint ventures as FDI entry mode. (3b) CEOs with greater international experience will favour
greenfield investments over acquisitions as FDI entry mode. Afterwards, these hypotheses
were tested by using multinomial logistic (MNL) regression model on the sample data of their
study which includes 78 firms. In the end, they come up with the conclusion stating that
CEOs with less firm experience preferred acquisitions and greenfield investments to joint
ventures and, older CEOs were more likely to opt for joint ventures over greenfield
investments. In addition, CEOs with throughput functional experience favored acquisitions
over joint ventures and greenfield investments. Finally, CEO international experience was
associated with a greater propensity to choose greenfield investments and acquisitions over
joint ventures and also greenfield investments over acquisitions. These conclusions are
followed by some discussions. For example, Herrmann and Datta (2006) argues that a firm
seeking to aggressively expand into foreign markets using a high ownership and control
strategy (e.g. greenfield investment or an acquisition) might be best served by a CEO whose
experiences support such a choice, indicating that such an individual is likely to be relatively
young with less firm tenure but having significant international experience and a throughput
functional background experience.
Furthermore, Ferris et al. (2013) examine the relation between overconfidence of CEOs and
merger and acquisition activity from an international perspective despite the extant studies
that focus on the effects of the same characteristic on mergers and acquisitions taking place
only in U.S. and Western Europe. In their study about the characteristics of CEOs and how
these shape the FDI decision making process of their firms, Ferris et al. (2013) suggest that
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overconfidence of CEOs affects the corporate acquisitions globally rather than affecting
solely the companies headquartered in U.S. and Western Europe. Thus, behavioral
characteristics of CEOs should be considered in order to understand the decision-making
process of executives during international merger.
Roll (1986) is the first to recognize the impact of overconfidence on decision making process
in which a CEO goes through during a merger activity. Doukas and Petmezas (2007) argue
that overconfidence of CEOs come from self-attribution bias which makes them feel they
have superior abilities in decision making so that they engage in radical transactions.
Moreover, Malmendier and Tate (2008) report that it is more likely that overconfident
executives go after acquisitions when their firms have abundant internal sources. Overall,
many studies on manager overconfidence effects on mergers including these three mentioned
above ignore the international merger and acquisition activity. On the other hand, distribution
of overconfidence among CEOs change by the cultural characteristics of nations such as
language, religion, and legal heritage according to Ferris et al. (2013). These characteristics
influence managerial decision making throughout international merger.
With the aim of measuring the overconfidence of CEOs, Ferris et al. (2013) used the press-
based measure, reviewing the press articles about the firms individually based on several pre-
defined terms. Furthermore, several studies have shown that differences among national
cultures can influence individual behavior significantly. As a result, cultural characteristics
are likely to impact the global distribution of overconfidence as well as how CEOs reflect
their overconfidence in corporate behaviors. Ferris et al. (2013) found that overconfidence
and age are negatively correlated. In other words, older CEOs tend to be more cautious.
Similarly, CEOs who run the firms headquartered in countries where there is common law or
where the national language is English, are more overconfident. They also suggest that
countries whose primary religion is Christianity are likely to have more overconfident CEOs.
More specifically, Ferris et al. (2013) recorded that CEOs of companies located in common
law countries have tendency to be more overconfident with respect to their civil law
counterparts. CEOs of firms are more overconfident in Catholic and Protestant countries than
in the countries whose primary religion is Buddhism. Countries whose main language is
English, Dutch, French or German have more overconfident CEOs. They also found that
Korean or Japanese as the primary languages are inversely correlated to overconfidence.
Apart from these characteristics, low preference of a country for uncertainty avoidance gives
rise to more overconfident CEOs since this type of preference induces the country to be more
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accepting of change and risk seeker. They further found that the more the level of
individualism of a country is, the more overconfident CEOs there are in that country. Finally,
CEOs of firms are more overconfident in the countries that have low level of long-term
orientation. Because this trait of culture makes countries more open to change and innovation.
Ferris et al. (2013) observed that overconfidence can be influential in the number of merger
offers made by a CEO. Also, overconfident executives tend to make more diversifying
mergers that are more uncertain and more likely to bring negative returns. Because
overconfident CEOs may feel that they have superior decision making ability resulting in
overestimation of value creation from a merger. Thus, they might seek acquisitions that differ
from firm’s core business. Overconfident CEOs make higher number of mergers not only in
Christian countries but also in countries with high level of individualism. High level of
individualism or low level of long-term orientation as characteristics of national cultures urge
executives to make more non-diversifying mergers. However, there is no significant effect of
long-term orientation of a country on number of diversifying merger decisions made by CEOs.
Another observation that is made by Ferris et al. (2013) is that overconfident CEOs are more
likely to view their firms undervalued so they prefer to use the cash to finance mergers instead
of equity. Overconfident CEOs are more likely to cash to finance acquisitions in countries
whose dominant religion is Christianity. Moreover, disproportionate use of cash to finance the
mergers tends to take place when power distance, uncertainty avoidance, or long-term
orientation is low.
Dutta et al. (2016) also discuss the effects of the overconfidence attribution of CEOs on their
decision-making process in an FDI strategy. It argues when and how a multinational company
breaks free from its current cross-border acquisition (CBA) decision patterns and related
entry-mode choices and starts to follow a new original pattern in decision making process.
The presented hypotheses in this paper are as the following: (1) The multinational’s prior
CBA experience is positively related to its subsequent CBA decision. However, the
relationship is non-linear, such that at high levels of prior CBA experience, the positive
relationship increases at a decreasing rate and eventually becomes negative. (2) Access to
organizational slack negatively moderates the relationship between the multinational’s prior
experience and subsequent CBA decision. (3) CEO overconfidence positively moderates the
relationship between the multinational’s prior experience and subsequent CBA decision. (4)
CEO tenure positively moderates the relationship between the multinational’s prior
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experience and subsequent CBA decision. At this point it will be appropriate to indicate that
the previous CBA experience of a firm is illustrated by a simple model which assumes that
the prior ownership CBA experience of a firm is simply found by subtracting the total number
of minority-owned CBAs from the total number of majority-owned CBAs that a certain
multinational firm has experienced. Here, a majority-owned CBA means that a multinational
firm has acquired more than 50% ownership in their target firm in the agreement of a cross
border acquisition, while a minority-owned CBA means having less than or equal to 50%
ownership. By applying the binary logistic regression model on their sample which includes
4800 acquisitions realized by firms from 72 industries, Dutta et al. (2016) proved their first
three hypotheses while they could not find significant level of support for the fourth one.
Briefly, Dutta et al. (2016) state that prior CBA experience creates path dependencies through
learning and routines, leading to a dominant role of structure in the internationalization
process and at some stage the multinational breaks out of the path dependencies, charting a
new course in its future CBA decisions. Dutta et al. (2016) suggest that in the beginning,
managers will benefit from the patterns of experiential learning based on the early CBA
acquisitions, leading to creation of routines as powerful structures that can aid in subsequent
decision-making. As an interesting outcome, Dutta et al. (2016) found that while CEO
overconfidence does tend to maintain the strategic persistence associated with CBA decisions,
CEO tenure does not.
Williams and Gregoire (2015) believe that studies do not weigh in the distance’s effects
regarding specific dimensions of distance (i.e., cultural, geographic, institutional, etc.) and out
of those dimensions coupled with different internationalization decisions.
Extant studies suggest that internationalization process start with making three main decisions:
location, timing and mode of entry. Internationalizing executives firstly prefer the markets
that are psychically close to their home country over the others. The reason is that executives
who face with uncertainty that comes with internationalization, believe that such process is
easier to go along in terms of cost. It is known that due to high level of uncertainty, firms
begin to internationalize when they have proved themselves in the market and gained
resources. Yet this idea has been challenged by the fact that there are young ventures who
start their internationalization journey early in the beginning of their lifecycles. They
accomplish to do this by benefiting from their competitive advantage and considering psychic
closeness. Also, internationalizing executives make choices on the mode of entry based on
guarding against cost, risk, control and uncertainty (Williams & Gregoire, 2015).
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In other words, firms tend to put reliance on similarities (distance-reducing commonalities)
when it comes to deciding where and when to internationalize. On the contrary,
internationalizing executives focus on dissimilarities (distance-augmenting differences) when
deciding how to internationalize due to defend themselves against potential risk, cost and
uncertainty. Similarly, an executive tend to prefer less committed entry modes (e.g., exporting
vs foreign direct investment) unless there are less alignable differences he/she perceives
between home country and a target country where to internationalize (Williams & Gregoire,
2015).
Williams and Gregoire (2015) suggest that greater prior international knowledge of an
executive causes him/her to realize and interpret more non-alignable differences. However,
executive’s knowledge may as well help him/her to understand which differences he/she can
overcome if internationalized. Therefore, this does not necessarily mean that the more
differences an informed executive perceive, the more he/she will be reluctant to
internationalize to the target country. In fact, if executives have greater prior knowledge of a
target country, they can more easily assess the impacts of non-alignable differences (Zhang &
Markman, 2001). Consequently, they may favor more committed entry modes such as foreign
direct investment.
The verbal study that is conducted by Williams and Gregoire (2015) shows that participants
of this study are influenced significantly on where, when and how to internationalized based
on distance-reducing commonalities and distance-augmenting differences that are considered
by them. Same study suggests that there is a notable positive correlation between
commonalities and decisions of location and timing of internationalization whereas the
correlation between commonalities and mode of entry is unimportant statistically. Similarly,
alignable differences correlate negatively with mode of entry (less committed to more
committed) but not with location and timing of internationalization. Another result is that
prior knowledge impacts the non-alignable differences perceived such that participants who
have greater prior knowledge of the target countries tend to decide to enter sooner with a
more committed mode of entry. Prior knowledge of a specific country, according to study,
also moderates the effects of perceived differences on the decision of location to
internationalize.
Due to salient nature of commonalities, executives make decisions where and when to
internationalize based on the countries where they perceive as psychically close to home
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country, ignoring the potential dangers of differences. Williams and Gregoire (2015) believe
that this is not an idiosyncratic bias yet individuals behave this way under the effect of
systematic cognitive tendency. Therefore, executives, consultants and policy experts should
not overlook the risks that are taken when deciding where and when to expand. By contrast,
executives tend to decide how to expand based on distance-augmenting differences while
neglecting the effect of distance-reducing commonalities. The advice that is put forward by
Williams and Gregoire (2015) is that decision makers should aid from contemplating on how
perceived distance-augmenting differences may impact their decisions of location and timing
whereas how perceived distance-reducing differences may influence mode-of-entry decisions.
Up to this point we had a broad understanding about the relationship between the personal
characteristics, experiences and backgrounds of CEOs or managers being fully responsible in
the decision making and the effects of these characteristics and capabilities on the
internationalization processes of multinational firms. Besides these, there are also some very
important experimental research on the risk, uncertainty and ambiguity senses of managers
and how their individual specific perceptions affect their internationalization decisions. Two
of these are our main starting point which shed light to our own research and experiments in
our study.
In the experiments conducted by Holt and Laury (2002), subjects were given choices that
allow conductors to measure their degree of risk aversion. Furthermore, they built up a
functional form regarding risk aversion degree in order to compare and understand the
behavior of subjects under real and hypothetical incentives, for lotteries changing from
several dollars to several hundred dollars (See Table 2 for risk aversion classifications). The
lottery consisted of two different options, one is safe (A) and one is risky (B), was played in
10 steps along with a decreasing expected payoff difference till 10th
step.
Most of the subjects chose the safe option (A) when the probability of the higher payoff was
small. Afterwards, they switched over to risky option (B) without ever choosing option A.
The experiment resulted in sharp increases in the frequencies of safe choices, implying that
risk aversion increases as real payoffs are increased, agreeing with the findings of Binswanger
(1980). However, increases in hypothetical payoffs did not affect the behavior significantly.
This implication contradicts with the supposition made by Kahneman and Tversky (1979),
“people often know how they would behave in actual situations of choice”. Moreover, it
seems that facing the high payoff treatment did not affect the choices made in the subsequent
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low payoff decision. In other words, unexpected earnings seem to have small or no impact on
the number of safe choices made by subjects. This might be explained by “isolation effect”
although no evidence has been found supporting that claim (Cox & Sadiraj, 2001).
Number of safe
choices
Range of relative risk aversion for
Risk preference
classification
0-1 r < -0.95 Highly risk loving
2 -0.95 < r < -0.49 Very risk loving
3 -0.49 < r < -0.15 Risk loving
4 -0.15 < r < 0.15 Risk neutral
5 0.15 < r < 0.41 Slightly risk averse
6 0.41 < r < 0.68 Risk averse
7 0.68 < r < 0.97 Very risk averse
8 0.97 < r < 1.37 Highly risk averse
9-10 1.37 < r Stay in bed
Table 2 - Risk Aversion Classifications Based on Lottery Choices (Holt and Laury, 2002)
Georgantzis et al. (2012) discusses the impacts of variability and uncertainty on the
internationalization strategies of firms. This discussion is illustrated on two different types of
internationalization strategies namely, exporting and foreign direct investment (FDI). An
external factor arising from market uncertainty and an internal one arising from risk aversion
behavior of decision makers are affecting the whole decision making process and are critical
factors for individuals when they are deciding which strategy to choose in the
internationalization process. Firstly, a representative model is introduced to illustrate the
decision-making algorithm in internationalization strategies. In this model trading costs
deriving from exporting strategy and fixed setup costs deriving from FDI strategy are the
parameters along with the variables of market uncertainty and risk aversion. In addition to that,
since there is almost no previous experimental work testing the theories of international
oligopoly, an experimental design is built relating to Oechssler and Schipper (2003)
differentiating by letting the subjects to decide whether to invest in a costly strategy to remove
the uncertainty and making them choose one of the output producing strategies under bad and
good state of demand characteristics considering the other local or foreign player in the
market with the assumption of no information asymmetries. According to their decisions,
experiment subjects will get pre-determined payoffs which are presented to them before. The
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critical point in this experiment is that FDI is a costly but uncertainty-reducing strategy,
whereas exports involve lower costs but a higher uncertainty concerning the demand
conditions in the local market.
This experiment shows that, for most of the times, local firms play their dominant strategy
regardless of the foreign firms’ strategies and informed foreign firms will play their dominant
strategy too. Another finding is that a more risk averse uninformed foreign firm has more
tendency to play the strategy of lower output. Besides, an increase in G (fixed cost of FDI)
implies less observed information purchase decision made. Moreover, initially informed firms
significantly vary their decisions according to the value of G. Specifically, in the low-G
treatment they abandon the dominant strategy B, in favor of cooperative market behavior in
almost twice as many cases as they do in the high-G treatment. Initially uninformed players
who have decided to become informed by paying a lower G, cooperates almost twice as
frequently than when having to pay a higher G. In addition, the behavior of initially
uninformed players who have decided to remain uninformed, significantly varies under
different values of G. To be specific, a lower G option makes an exporting firm which had
decided to remain uninformed behave significantly less cooperatively than under a higher one.
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3. METHODOLOGY
3.1. Experimental Methods in Management
Experimental method is a systematic and scientific approach to research in which the
researcher manipulates one or more variables, and controls and measures any change in other
variables. There are several steps involved conducting an experimental study which can be
shown as follows:
There are several data collection methods in management research. One of which is
experimentation and it is vital for the study’s aim to collect healthy data to test hypotheses
that are put forward with the study itself. Lancaster (2005) suggests that three main criteria
should be checked for data quality: validity, reliability, and generalizability. Validity
underpins whether the data collection or research method measures what must be measured
while reliability checks whether a particular data collection approach gives the same results
under different circumstances. Generalization, on the other hand, is another form of validity
with a difference that results from data can be generalized to other situations.
Identify and define the problem
Review relevant literature
Formulate hypothesis and
deduce their consequences
Construct and experimental design
Conduct the experiment
Compile raw data and condense to
usable form
Present findings and conclusions
Purpose of research
Researcher's skills
Cost/budgets Time Availability Consultants' preferences
Client preferences
Ethical, legal and other
issues
Figure 1 - Steps in Experimental Method Design
Figure 2 - Compliance List For Selecting Data Collection Method
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Lancaster (2005) indicates that before deciding the data collection method, several
compliance steps should be considered which are shown above. After these compliance
degrees have been matched up with the data collection method, necessary steps for raising
data can be taken.
3.2. Methodology of Our Research
In this section, the procedure we conducted to make qualitative and quantitative analysis for
ambiguity and risk aversion inclinations of the participants as well as for other effects on
internationalization process is laid out.
Methodology consists of two major parts: survey and experiment. We designed our survey
benefiting from several surveys that were applied for similar study purposes. The experiment,
on the other hand, subsists two distinct games, one revealing the risk aversion of subjects and
the other showing their decisions under ambiguity and uncertainty. One of these games that
participants attended was replicated exactly as it is designed in the study of Georgantzis et al.
(2012). However, participant selection for our study was done differently. The other game
also carried same design principles with the experiment that is done by Holt and Laury (2002)
although there are several changes had been made by us to simplify and shorten the game
process.
Consequently, all participants were initially given a survey to fill out then they played two
different games where they earned specific amount of prize money from one of the games that
they chose at the end of the experiment session. Overall interview including survey and the
experiment phase took around 2 hours for each participant. Each participant was interviewed
individually under the same environmental conditions. To avoid complications, each
participant was given a unique identification number in the beginning of interviews.
Participants entered their answers on computer during interviews. All the answers were
automatically transferred to an Excel document after all the interviews completed. Since all
Survey and Experiment
Design
Survey and Experiment Application
Preparation for Analysis
Statistical Analysis
Results and Hypotheses
Testing
Figure 3 - Steps of Methodology and Results
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participants were from Turkey, we conducted experiments in Turkish to advance
communication. Survey questions and all the instructions of experiment were also translated
into Turkish. The design of survey along with two games in the experiment will be given in
detail throughout this section of report.
3.2.1. Participant Selection
The participants for this study were four executives of four different firms from varying
industries. All of them were from Turkey specifically, because the study’s aim is to indicate
the behavioral effects on decision-making process throughout internationalization process,
specifically managed by executives who are from an emerging country. Our criteria for
selecting the participants were basically threefold as it can be seen in Table 3. We focused on
firms that are either internationalized or have taken some steps for internationalization namely
considering it seriously but not yet internationalized. Moreover, we conditioned that a
participant of this study must be the main decision-maker in the company especially for
internationalization policies. At last, we solely aimed at small or medium sized enterprises
since decision-making process for significant operations such as internationalization in large
companies is usually carried out collectively rather than depending upon one person. In this
case, experiment and survey should be designed differently as our data collection method is
designed to reveal the behavioral effects of an individual participant namely ambiguity and
risk aversion on decision-making influencing internationalization process substantially.
A participant
must
work at a firm that is either internationalized or in the
process of internationalization
be main decision-maker at the firm regarding
internationalization
work at a firm that is either small or medium sized
enterprise
Table 3 - Criteria For Participant Selection
Having set the aim of our study as well as the boundaries of participant selection, we drafted
an email explaining our study and the criteria and firstly sent it to the several prominent
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universities’ incubators and technology centers where they hold multiple small and medium
sized enterprises. After that, we got in touch with our first and second degree of our contacts.
Doing several pre-interviews for detailed explanation of our study and to ensure whether the
potential participants satisfy the criteria for our study, we ended up raising four willing
subjects.
3.2.2. Introduction of Participants
Participants of this study are all from Turkey and aged from 30 to 53. They all have
Bachelor’s degree yet one has also Master’s degree. Three of the subjects are founders of their
firms whereas one of them is a dominant decision-maker in terms of decisions related to
internationalization tasks. All participants but one had more than one year experience abroad
with the purpose of study and work. The overseas experiences are generally completed in
Western countries namely in Europe and North America yet one subject has also work
experience in Middle East, Iran. Interestingly, prior work experience in Iran led this
participant to run his business there as well currently. Herrman and Datta (2006) suggest that
executives make decisions fitting between desired strategies including expanding
internationally and their experiences.
Each participant’s company belongs to a different industry from the other. The industries are
mainly those following: industrial kitchen equipment, hard discount retail, information
technologies and jewelry.
3.2.3. Introduction of Companies
In this section, we introduce the companies of participants whom we carried out the
interviews for our study. These companies serve in different primary industries from the other.
Home country of all firms is Turkey yet one firm has also another home country which is
Switzerland. Firms’ annual turnover varies significantly, however considering profit margins
due to industry each operates, they can all be put in “small-medium sized enterprises”
category. Except for one, firms can be considered quite young. All the firms had started their
businesses with at least 2 founders although two of them currently have one founder. Three
participants we interviewed stated that their companies were already operating internationally
nonetheless, one said his company was considering it seriously and took some steps but not
operating internationally yet. Two of the firms that are operating internationally chose
exporting as mode of entry whereas the other decided to enter the market with Foreign Direct
Investment. On the other hand, the firm which is not operating internationally prefers to enter
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the market with exporting. Overall, the firms are serving in European, Middle Eastern and
Asian markets internationally while one of them focuses solely on Iranian market. Motivation
to expand for all firms is growth-oriented generally. Two of the companies stated that
language and cultural differences would be main problems for their internationalization or for
expanding more.
Furthermore, the detailed descriptions of companies are given to analyze companies
individually.
Mavi Alev:
The participant representing this firm is the manager who attends to tasks that are assigned
internationally to firm. He is the sole decision-maker in internationalization steps of the firm.
Mavi Alev operates in the primary industry “Industrial Kitchen Equipments”, and is a small-
sized enterprise. The firm produces wide variety of industrial kitchen appliances notably
chicken baking oven, food cart, baked potato furnace and so on. It targets all types of
corporations in the food industry. The firm started running business with founder’s own funds
and assets in fact, company was formed as a family owned business. Headquarter and
production site of firm are located in Bursa, Turkey. There are currently 16 personnel working
for the company including 2 managers responsible of administration and the others in labor
force. Mavi Alev has been serving the market for 33 years and currently, it has an annual
turnover amounted to €300.000. In the beginning phase of the company, there were two
founders however, due to decisions two founders made together, one of them sold his shares
to the other founder who currently owns the company. Owner of the firm has delegated most
of the tasks to his son whom we interviewed for our study. However, he contributes to
decision-making relating to shaping business strategies. Thus, there are three personnel who
are in charge of decision-making in shaping business strategies.
Azizler:
Azizler is in the industry of Hard Discount Retail Supermarket Chains, operating as a medium
sized enterprise. The firm offers retailing for basic consumption goods such as fast moving
consumer goods to the end consumer. Firm’s main consumer target is low-and-middle-income
group of consumers in Iran. Moreover, the firm has been funded by angel investors since its
foundation. As a matter of fact, company was formed through joint venture. The firm does not
only identify its home country as Turkey but also includes Switzerland, since one of the
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founders of Azizler has ties to a Swiss investor who also funds the firm, and so that the firm
takes advantage of Swiss trade agreements. Firm has overall 15 personnel in its organization
which is formed hierarchically with four founders in administration. Besides, Azizler has an
annual turnover of €80 million, serving approximately 400 clients in Iran per shop. However,
due to industry where the firm operates, the profit margin per sales is quite small. The firm
has entered the Iranian market one year ago and that time also corresponds to foundation date.
Azizler started its business with four founders and none of those has left the firm so far. Thus,
only those four founders are in charge of decision making in shaping business strategies.
Bilgi A.Ş.:
The primary industry of Bilgi A.Ş. is Information Technology, specifically IT solutions for
corporate companies. The company offers services namely, cash register renting, process
management software, data management software to firms operating in retail industry. The
target customer profile is firms operating in retail industry. Bilgi A.Ş. does not only have
external funders but also several investors fund the firm. Moreover, the firm identifies itself as
a goal-oriented company in terms of formation. Bilgi A.Ş. is headquartered in Istanbul,
Turkey therefore its home country is Turkey. There are currently three personnel employed by
the firm with an organizational scheme namely, two divisions (sales and software architecture)
reporting to general manager. Annual turnover of Bilgi A.Ş. is €2.5 million, serving currently
500 clients in Turkey. Thus, the firm can be put in a medium-sized enterprise category. Bilgi
A.Ş. has been in the business for one year and started its journey with three founders whom
still work for the company. There are, on the other hand, two professionals who oversee
decision-making in shaping business strategies.
Ulusoy Gold:
Ulusoy Gold serves in the industry of Jewelry primarily. More specifically, company does
jewelry sales to end consumers on the internet. The firm basically offers variety of gold and
silver jewelry as well as accessories online where end customers can preview and order
through an ecommerce website. The firm identifies its target customer profile as consumers
aged between 25-50 who are online shoppers. The firm also adds that consumers who live far
from city centers are also interested in jewelry ecommerce websites and do shopping heavily.
The firm has been budgeted by the founder’s own funds and assets and identifies itself as a
startup company. Ulusoy Gold is located and administered in Istanbul, Turkey. Currently,
there is only one employee in the firm who is founder himself. He manages everything from
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procurement to logistics. Additionally, the firm has an annual turnover of €205.000. Due to
nature of its industry, the sales bring relatively small profit margin. Ulusoy Gold serves
approximately 50 clients per month and it has been doing business for 2.5 years. The firm was
founded by two yet after a while, founders parted their ways, one selling his shares to the
current founder. Thus, there is today only one professional who is in charge of decision-
making in shaping business strategies.
3.2.4. Survey Design
The survey was basically designed due to understand and gather more information about the
participants’ characteristics as well as the firms they manage. Conceptual design of the survey
starts with the title “A Behavioral Study on Characteristics Of Managers In The Process Of
Internationalization” and it follows the brief explanation of what survey consists and aims.
This explanation follows as:
“This study is designed by two Master Degree students in Management
Engineering department of Politecnico di Milano. The aim of the study is to
understand the underlying effects of behavioral characteristics of founders and/or
managers who have the full responsibility in decision making processes of their
companies. Specifically, internationalization of firms will be our main focus. The
answers of this survey will be kept in supreme confidentiality and will be used for
only academic purposes. This survey consists of three main sections namely
individual, organizational and internationalization aspects. If requested, the
results of this study may be shared with the participants. It is estimated that the
survey will not take more than one hour. We truly appreciate your time and
participation in this study.”
We used several question preparation techniques in the survey including open-ended, multiple
choice, contingency questions and Likert response scale. In total, there are 41 questions,
however number of questions must be answered depends on the respondents’ answers to
contingency questions (please see Appendix). The questions in the survey are grouped in
three major sections where respondents answer the questions section by section.
First section respondents must answer is individual aspects. In this section, questions are
prepared in order to collect information regarding individual characteristics. Therefore,
questions like age, marital status, education level and so on are included in this section.
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Furthermore, questions about trustworthiness and international experiences of respondents are
added to this part. Overall, there are 12 questions in this part (please see Appendix).
In the second section of survey, respondents face questions regarding organizational aspects.
In this part, they are asked questions such as company name, role in the company and so on.
These questions are designed aiming at collecting information regarding the firms and how
those firms organized financially and strategically. As an illustration, we ask respondents their
companies’ annual returns, number of people working, target customer segments etc. to
understand the firm’s organizational structure clearly. In this section, respondents must
answer 14 questions (please see Appendix).
Third and final section of survey is called Internationalization Aspects. In this part, we get to
ask respondents the questions in term of their companies’ internationalization process. This
part starts with a contingency question where the next questions respondents will answer
change according to the answer they give to this particular question. Questions in this part are
vital to our study since a firm’s internationalization history and structure are investigated here.
Main questions in this part examine mode of entry, internationalization revenue percentage,
motivations, challenges and so on. Especially, last five questions in this section give us crucial
insights on decision-making for internationalization from the respondents’ perspective.
Overall, there are 13 questions in this part (please see Appendix).
3.2.5. Experiment Design
In the experiment phase, participants were subjected to play two different games. In terms of
content, duration of the first game was longer than the second one. However, we first applied
the second game to elicit participants’ preference towards risk, then we applied the first game
as the procedure was set this way by Georgantzis et al. (2012). Before starting the games, we
explained participants the instructions for both games and gave them the instructions in
writing and both in English and Turkish which can be found as follows (please see Appendix):
“Welcome and thank you for participating in this experimental session. By
following these instructions, you will earn an amount in Euros that will be paid in
cash at the end of the session.
Your earnings will be based entirely on your decisions and decisions of other
participants will affect your earnings.
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Decisions and earnings of each participant will remain anonymous throughout
the experiment. This means that no one will receive information on other
participants’ choices and earnings.
Please turn off your cell phones and do not talk or in any way communicate with
other participants.
If you have any question or problem at any point in this experiment, please raise
your hand and one of the assistants will answer you.
The following rules are the same for all participants.
The answers of this survey will be kept in supreme confidentiality and will be used
for only academic purposes. This survey consists of three main sections namely
individual, organizational and internationalization aspects. If requested, the
results of this study may be shared with the participants. It is estimated that the
survey will not take more than one hour. We truly appreciate your time and
participation in this study.”
We expect to see the evidence for the hypotheses that are put forward by Georgantzis et al.
(2012) after statistical analysis has been applied to the answers the respondents have given in
the experiment.
3.2.5.1. Design of Two-Stage Oligopoly Game Under Ambiguity
This game replicates the one designed by Georgantzis et al. (2012). The basic design principle
of this game is that in a two-stage oligopoly market where there is demand uncertainty and
asymmetric information, two players, foreign and local, are asked to specify moves under
different conditions. First, the foreign firm decides the mode of entry which is either
exporting or foreign direct investment to serve the market. After that, it decides the quantities
that will be produced to compete with the local player who has information advantage about
the market. If only foreign market decides to enter the market with a foreign direct investment,
it can become informed as the local firm is. Thus, foreign firm will see uncertainty is resolved,
meaning it finds out whether the market is in the good state or bad state of demand. However,
becoming informed for an uninformed player is subjected to a certain amount of cost which
players will decide whether to bear it both in low amount of cost and high amount of cost.
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Four subjects who had almost no theoretical economics knowledge participated to this game
that took place in 2 different sessions. Each participant made an independent observation for
each scenario where they also made decision. For these reasons, participants were given
specific description verbally and written about several concepts and theories for them to make
healthy observations and decisions in the scenarios they face (please see Appendix). This part
of the experiment conduct also differs from what Georgantzis et al. (2012) does. Hence, in
Georgantzis’s experiment subjects were undergraduate students in Economics major whereas
our sample group had almost no knowledge about theoretical economics whatsoever. We,
thus, spared some time to explain “strategic dominance”, “prisoners’ dilemma” and
“cooperation theory” until they understand these concepts fully. Explanations we basically did
as follows:
“Strategic Dominance: In game theory, strategic dominance occurs when one
strategy is better than another strategy for one player, no matter how that player's
opponents may play. For example, if B dominates A, this means choosing B
always gives a better outcome than choosing A, no matter what the other player(s)
do.
If both players have a strictly dominant strategy, players logically will play that
strategy in each game. However, this is not necessarily Pareto optimal, meaning
that there may be some outcomes of the game that would be better for both
players. The classic game used to illustrate this is the Prisoner's Dilemma.
Prisoners’ Dilemma: If we consider such a game that players are prisoners and
they will decide to stay silent about their crime, or to betray the other prisoner. If
prisoner A betrays and prisoner B remains silent, prisoner A will go free and B
will serve 3 years and vice versa. If they both betray, they will each serve for 2
years and if they both remain silent, they will serve just 1 year. In this case,
although their dominant strategy is to betray, they will get a better result if they
cooperate and remain silent.
Cooperation Theory: In some cases, players in a market may take decisions
cooperatively regarding the output number to meet the market demand rather
than in a competitive way. The reason is that each player knows that in some
cases, cooperation with the other actor/s brings higher return than in competition.
Our game in this experiment is an illustration to this phenomenon. For example,
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both players know that playing strategy A together brings higher return to both of
them than playing their dominant strategy B, if they are aware that they compete
in the good state of demand (Game R). However, this outcome depends on
whether or not the foreign firm is aware of the demand state i.e. whether or not
the foreign firm has paid the cost G of becoming informed. It can be assumed that
the foreign firm is more likely to play cooperatively if he has paid the value of
low-G to become informed. What’s more, this firm is even more likely to play
cooperatively if he has paid the value of high-G. Therefore, local firm will take
this into consideration and he will also tend to play more cooperatively against
that kind of a foreign firm. Yet, this is not the case all the time. Sometimes, the
foreign player may play in a competitive way resulting in the local player gaining
less return while she is receiving more (Game R) simply because the foreign
player seeks out more return or does not want to cooperate with the rival. The
determining factor here can be given as risk level of the foreign player. The
opposite of this case, meaning local does not seek out cooperation, may as well
occur and the reasons are the same.”
GAME L
Foreign/Local A B
A (11 , 11) (9 , 10)
B (10 , 9) (8 , 8)
Table 4 - Payoff Matrix of Game L, Bad State of the Demand (Georgantzis et al., 2012)
GAME R
Foreign/Local A B
A (18 , 18) (15 , 19)
B (19 , 15) (16 , 16)
Table 5 - Payoff Matrix of Game R, Good State of the Demand (Georgantzis et al., 2012)
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Table 4 above demonstrates the payoff matrix of Game L, meaning that the game is played
under the bad state of demand. Then, Table 5 above demonstrates the payoff matrix of Game
R, meaning that the game is played under the good state of demand. As can be seen, for an
informed player, A is the dominant strategy in the bad state of demand, Game L, and B is the
dominant strategy in the good state of demand, Game R.
Benefiting from the model that is put forward by Georgantzis et al. (2012), inverse demand
function in a homogeneous goods industry is as follows,
where is the stochastic price, and is the total output. The inverse demand intercept, ,
represents the characteristics of the local economy which can be either bad state (Game L) of
good state (Game R) of demand. The random variable is distributed as follows:
where and thus is called the good state and is the bad state. Theoretical model
suggests that stochastic price positively correlated with economy characteristics while it is
negatively correlated with total output.
As a matter of fact, strategy A corresponds to a low output and strategy B to high one in the
simplification of the quantity-setting game. It can be observed that Nash equilibrium is Pareto
dominant in the bad state of the demand while players do not cooperate in the good state of
demand, yielding a prisoners’ dilemma.
The game stipulates that foreign firm must submit a single strategy if they choose to remain
uninformed. In case they are willing to pay a fixed amount, €G they become informed,
resolving uncertainty about market condition. This fixed amount is FDI-related cost. They can
thus play two different strategies for each state of the demand. There are two different
treatments players face in this game, one with a low (€2.5) and another with a high (€5) value
of G. Georgantzis et al. (2012) suggests that risk neutral subjects should always choose to pay
low-G cost to become informed while in the high-G treatment, they choose to remain
uninformed, avoiding to pay the FDI-related fixed cost.
Each participant submitted a strategy both as a local and as a foreign firm as the subjects did
in the experiment conducted by Georgantzis et al. (2012). Participants submitted two different
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strategies for each state of the demand (Game L and Game R) in the scenario where they were
playing as local, considering the foreign rival’s information state (informed/uninformed). In
the scenario where participants were playing as foreign, they submitted a single strategy for
both bad and good states of the demand unless they chose to become informed. Alternatively,
participants who were playing as foreign decided whether to pay fixed FDI-related cost G to
become informed or not to pay the cost and selected exporting as an entry mode to market
(which means staying uninformed in our game).
Instructions for this game were also available in the instructions papers which were given to
participants in the beginning of the experiment (please see Appendix). Game was explained
verbally and in writing as follows:
“You will have to submit your strategies, A or B, in the following situation: Two
players an informed (I) and an initially un-informed (U) one, play one of the two
games, Left (L) and Right (R) whose payoffs are defined as in the table below
(payoffs in Euros). The game is played by I-U pairs. If you are an I-type player
(given that you know which game you are playing when submitting your strategy)
you can submit two (potentially different) strategies, one for each game. If you are
a U-type player (given that you do not know which game you will be actually
playing at the moment of submitting your strategy) you are obliged to submit one
strategy for both games. U players may become informed by paying an amount X,
which may take two values, X = 2.5 € and X = 5.0 €. This means that if you decide
to become informed you can submit different strategies for different games. The
initially informed player (I) will know whether you became informed or not.
Before you know which type of player you are (I or U), and, if you are I, which
game you play, and, if you are U-type, the actual value of X, you will have to
submit your strategy for each condition and role.
Once we collect your strategies under all possible scenarios, a random process
will determine your role and you will be matched with a player (whose identity
will not be revealed to you) of the other type. A random process will also
determine the actual game and the scenario regarding the value of X. Your
decisions and those of the other player under these conditions will be used to
determine your final reward. Use the following page to submit your strategies.
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When you finish, you will be informed on the actual scenario and your reward in
the experiments.”
With the aim of making the game structure more clear for participants, we prepared an
example answer to one of the scenarios that a participant would face. We explained the
example answer verbally and written down to instructions paper that we gave each participant
in the beginning of our experiment (please see Appendix). The example was given as follows:
“Playing the game under the scenario of X=€5.0, being an initially uninformed
foreign player against an informed local player I choose to be informed. I play
strategy A in the game L and strategy B in the game R.”
After each scenario was played by participants, and submitted online, calculation of prize
money was done and distributed to the participants. Then the experiment ended.
3.2.5.2. Design of Risk Aversion Game Experiment
In the paper of Georgantzis et al. (2012), two risk-elicitation tasks are implemented to the
subjects namely the one introduced in Holt and Laury (2002) and the other in Sabater-Grande
and Gerogantzis (2002). First one is generally used to categorize the subjects based on risk
attraction or risk aversion consequently whereas the second is designed to measure the risk
aversion degree of participants without considering risk attraction and risk neutral behavior.
However, we implemented the risk-elicitation method that is proposed by Holt and Laury
(2002) in our experiment since we had a small number of participant sample.
Different from the Holt and Laury experiment, we designed our payoff table based on 19
choices between paired lotteries (please see Table 6). As can be seen, payoffs for Lottery A,
€12 and €10, are closer than the payoffs for Lottery B, €22 and €0.50. Under these
circumstances, we identify Lottery A as the safe option while Lottery B as the risky option.
The probability of the high payoff for both lotteries is 1/20 in the first decision thus only an
extreme risk seeker would pick Lottery B. The probability of the high payoff outcome
increases decision by decision, moving down the table so that a person switches from lottery
A to lottery B at some step, depending on risk aversion/attraction degree. For instance, a risk
neutral participant would switch to Lottery B at tenth step whereas only an extreme risk
averse person would never switch to Lottery B.
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LOTTERY A LOTTERY B
L1 If the drawn ticket is no.1, you win €12; otherwise,
if the drawn ticket is between 2 and 20, you win
€10
If the drawn ticket is no.1, you win €22; otherwise,
if the drawn ticket is between 2 and 20, you win
0.50€
L2 If the drawn ticket is between 1 and 2, you win
€12; otherwise, if the drawn ticket is between 3 and
20, you win €10
If the drawn ticket is between 1 and 2, you win €22;
otherwise, if the drawn ticket is between 3 and 20,
you win €0.50
L3 If the drawn ticket is between 1 and 3, you win
€12; otherwise, if the drawn ticket is between 4 and
20, you win €10
If the drawn ticket is between 1 and 3, you win €22;
otherwise, if the drawn ticket is between 4 and 20,
you win €0.50
L4 If the drawn ticket is between 1 and 4, you win
€12; otherwise, if the drawn ticket is between 5 and
20, you win €10
If the drawn ticket is between 1 and 4, you win €22;
otherwise, if the drawn ticket is between 5 and 20,
you win €0.50
L5 If the drawn ticket is between 1 and 5, you win
€12; otherwise, if the drawn ticket is between 6 and
20, you win €10
If the drawn ticket is between 1 and 5, you win €22;
otherwise, if the drawn ticket is between 6 and 20,
you win €0.50
L6 If the drawn ticket is between 1 and 6, you win
€12; otherwise, if the drawn ticket is between 7 and
20, you win €10
If the drawn ticket is between 1 and 6, you win €22;
otherwise, if the drawn ticket is between 7 and 20,
you win €0.50
L7 If the drawn ticket is between 1 and 7, you win
€12; otherwise, if the drawn ticket is between 8 and
20, you win €10
If the drawn ticket is between 1 and 7, you win €22;
otherwise, if the drawn ticket is between 8 and 20,
you win €0.50
L8 If the drawn ticket is between 1 and 8, you win
€12; otherwise, if the drawn ticket is between 9 and
20, you win €10
If the drawn ticket is between 1 and 8, you win €22;
otherwise, if the drawn ticket is between 9 and 20,
you win €0.50
L9 If the drawn ticket is between 1 and 9, you win
€12; otherwise, if the drawn ticket is between 10
and 20, you win €10
If the drawn ticket is between 1 and 9, you win €22;
otherwise, if the drawn ticket is between 10 and 20,
you win €0.50
L10 If the drawn ticket is between 1 and 10, you win
€12; otherwise, if the drawn ticket is between 11
and 20, you win €10
If the drawn ticket is between 1 and 10, you win
€22; otherwise, if the drawn ticket is between 11
and 20, you win €0.50
L11 If the drawn ticket is between 1 and 11, you win
€12; otherwise, if the drawn ticket is between 12
and 20, you win €10
If the drawn ticket is between 1 and 11, you win
€22; otherwise, if the drawn ticket is between 12
and 20, you win €0.50
L12 If the drawn ticket is between 1 and 12, you win
€12; otherwise, if the drawn ticket is between 13
and 20, you win €10
If the drawn ticket is between 1 and 12, you win
€22; otherwise, if the drawn ticket is between 13
and 20, you win €0.50
L13 If the drawn ticket is between 1 and 13, you win
€12; otherwise, if the drawn ticket is between 14
and 20, you win €10
If the drawn ticket is between 1 and 13, you win
€22; otherwise, if the drawn ticket is between 14
and 20, you win €0.50
L14 If the drawn ticket is between 1 and 14, you win
€12; otherwise, if the drawn ticket is between 15
and 20, you win €10
If the drawn ticket is between 1 and 14, you win
€22; otherwise, if the drawn ticket is between 15
and 20, you win €0.50
L15 If the drawn ticket is between 1 and 15, you win
€12; otherwise, if the drawn ticket is between 16
and 20, you win €10
If the drawn ticket is between 1 and 15, you win
€22; otherwise, if the drawn ticket is between 16
and 20, you win €0.50
L16 If the drawn ticket is between 1 and 16, you win
€12; otherwise, if the drawn ticket is between 17
and 20, you win €10
If the drawn ticket is between 1 and 16, you win
€22; otherwise, if the drawn ticket is between 17
and 20, you win €0.50
L17 If the drawn ticket is between 1 and 17, you win
€12; otherwise, if the drawn ticket is between 18
and 20, you win €10
If the drawn ticket is between 1 and 17, you win
€22; otherwise, if the drawn ticket is between 18
and 20, you win €0.50
L18 If the drawn ticket is between 1 and 18, you win
€12; otherwise, if the drawn ticket is between 19
and 20, you win €10
If the drawn ticket is between 1 and 18, you win
€22; otherwise, if the drawn ticket is between 19
and 20, you win €0.50
L19 If the drawn ticket is between 1 and 19, you win
€12; otherwise, if the drawn ticket is no. 20, you
win €10
If the drawn ticket is between 1 and 19, you win
€22; otherwise, if the drawn ticket is no. 20, you
win €0.50
Table 6 - Risk Aversion Game Lottery Table, Holt and Laury (2002)
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With the aim of emphasizing the varying payoff difference based on probability, expected
payoffs in each step per option can be shown in Table 7 below. For instance, the expected
payoff difference between lottery A and lottery B decreases starting from the first step with a
value of €8.53. This means that considering weighted probabilities given in the table,
expected payoff incentive to choose lottery A in the first step €8.53 whereas this incentive in
the last step is (minus) -€9.03. Thus, it is plausible to assume that when the interval of
expected payoff difference is positive, choosing lottery B over A implies risk loving decision
is made. Conversely, when the interval is positive, choosing lottery A over B implies risk
averse decision is made. Additionally, crossovers that are done when the interval is close to ”0”
imply risk-neutral behavior. However, this assumption should be proven by the calculation of
risk preference through utility function.
LOTTERY A LOTTERY B Expected
Payoff Difference (€)
1/20 of €12, 19/20 of €10 1/20 of €22, 19/20 of €0.50 8.53
2/20 of €12, 18/20 of €10 2/20 of €22, 18/20 of €0.50 7.55
3/20 of €12, 17/20 of €10 3/20 of €22, 17/20 of €0.50 6.58
4/20 of €12, 16/20 of €10 4/20 of €22, 16/20 of €0.50 5.60
5/20 of €12, 15/20 of €10 5/20 of €22, 15/20 of €0.50 4.63
6/20 of €12, 14/20 of €10 6/20 of €22, 14/20 of €0.50 3.65
7/20 of €12, 13/20 of €10 7/20 of €22, 13/20 of €0.50 2.68
8/20 of €12, 12/20 of €10 8/20 of €22, 12/20 of €0.50 1.70
9/20 of €12, 11/20 of €10 9/20 of €22, 11/20 of €0.50 0.73
10/20 of €12, 10/20 of €10 10/20 of €22, 10/20 of €0.50 -0.25
11/20 of €12, 9/20 of €10 11/20 of €22, 9/20 of €0.50 -1.23
12/20 of €12, 8/20 of €10 12/20 of €22, 8/20 of €0.50 -2.20
13/20 of €12, 7/20 of €10 13/20 of €22, 7/20 of €0.50 -3.18
14/20 of €12, 6/20 of €10 14/20 of €22, 6/20 of €0.50 -4.15
15/20 of €12, 5/20 of €10 15/20 of €22, 5/20 of €0.50 -5.13
16/20 of €12, 4/20 of €10 16/20 of €22, 4/20 of €0.50 -6.10
17/20 of €12, 3/20 of €10 17/20 of €22, 3/20 of €0.50 -7.08
18/20 of €12, 2/20 of €10 18/20 of €22, 2/20 of €0.50 -8.05
19/20 of €12, 1/20 of €10 19/20 of €22, 1/20 of €0.50 -9.03
Table 7 - Expected Payoff Difference Table
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Due to its computational convenience and bid function linearity with uniformly distributed
private values, constant relative risk aversion is assumed in the literature regarding auctions.
The utility function is as follows:
with constant relative risk aversion for money and for . This implies risk preference
for , risk neutrality for , and risk aversion for . When , the natural
algorithm is used; divison by is necessary for increasing utility when .
Instructions for this game were also available in the instructions papers which were given to
participants in the beginning of experiment (please see Appendix). Game was explained
verbally and in writing as follows:
“The instructions of this experiment are simple. If you follow them carefully, at
the end of the session you may earn an amount of money.
In this experiment, our focus will be examining risk aversion degree of our
participants. For this purpose, now you will be asked to make a choice between
two strategies namely A and B. Strategy A will represent a safe option while
strategy B will represent a risky option. With the possibility, which are given in
the following table, you will get the high or low reward of your selected
option. We will ask for your selection between A and B for each 19 different
reward possibilities. Possibility of receiving the higher reward will gradually
increase by each step. For example, looking at the case L.10 with a possibility of
50%, you will receive the higher reward (€12) if you select option A. Similarly,
with a possibility of 50%, you will receive the higher reward (€22) if you choose
option B. Otherwise, you will be rewarded the lower option in both options with
the possibility of 50%.”
Having completed the two games, participants were asked to choose the game for the prize
money to be calculated. If they chose the oligopoly game, their answers in one scenario,
compared to another participant’s answers, and calculation was made accordingly.
Unfortunately, for the first participant, it was not possible to choose the oligopoly game, thus
he was rewarded based on the lottery in the risk aversion game. If the participant chose risk
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aversion game, the payment was made according to the step participant picked. Lottery was
carried out using a special program on computer which replicated the same lottery principle.
As it is also discussed throughout the report, we expect to show evidence for the hypotheses
that are developed by Georgantzis et al. (2012) with the analysis of the same experiment
subjecting different type of sample.
Hypothesis 1 Local firms will play the dominant strategy in the market game
regardless of the foreign firms’ strategies.
Hypothesis 2 Informed foreign firms will play the dominant strategy in the
market game.
Hypothesis 3 For any risk attitude an increase in G (cost of having information
about the demand in the local market) implies less observed
information purchase.
Hypothesis 4 For any probability of the good state of demand foreign firms are
more likely to purchase information the more risk averse they are.
Table 8 - Hypotheses
4. RESULTS
Until this point in our thesis, we have explained how we proceed to our research after
presenting the previous literature research and studies. We clarified that which specific factors
we focus on our study and defined our methodology by explaining how we created our survey,
how we designed our experiment and we presented our hypotheses. We also indicated what
kind of managers and CEOs would be suitable to conduct our experiment and survey by
mentioning the reasons.
After conducting our experiment on our managers and ask them to fill our survey we had
some interesting results. In this part, the reader can find the detailed results of both our survey
and our experiment. Finally, we will discuss our findings and explain how they helped to
prove our hypotheses.
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4.1. Results of Survey
In our sessions with our four selected managers, first we asked them to fill in our survey. In
this section, we will share the overall results for every question and try to relate them with our
experiment afterwards, if we see any correlation.
First of all, all our participants are male and Turkish citizens. Three of them are CEOs of their
companies while the remaining participant is also a top manager and he is fully responsible in
the decision-making processes of his company especially in its internationalization decisions.
Figure 4 below shows their age intervals:
Figure 4 - Age Interval Distribution of the Participants
All our managers have at least a Bachelor degree showing that we have an academically high
educated participant sample. The results are as following in Figure 5.
Figure 5 - Education Level Distribution of the Participants
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We obtained a normal distributed data with a mean of 3 for the answer of our question “how
would you rank the trustworthiness of people when working with them?” The results are as
following in Figure 6.
All of our participant managers have a previous international experience in the means of both
All of our participant managers have a previous international experience in the means of both
work and studying experiences abroad. When we ask about the total duration spent abroad for
studying and working activities together, their answers come up as in Figure 7, and when we
ask in which countries they have been to during that time, answers of each participant are as
in Table 9.
Figure 7 - International Experience of the Participants in Years
Trustworthiness level
Figure 6 - Trustworthiness Level Distribution of Participants
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Participant ID Countries
1 Germany, Italy, Canada
2 Germany, Italy, Switzerland
3 Belgium, United Kingdom, Iran
4 United States of America
Table 9 - International Experience of the Participants Based on Location
In terms of funds they have been using to finance their company since its foundation, we
obtain 3 different results as seen in Table 10 below.
Participant ID Funding Method
1 Own funds and assets
2 Angel Investors
3 External Funders and Investors
4 Own funds and assets
Table 10 - Company Funding Methods
4 different answers are collected for the question “How was your company formed?” and they
can be seen in Figure 8 below.
Goal-oriented Company
Figure 8 - Company Formations
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Home country of all the companies that our participant managers direct is “Turkey”. Besides
that, one company has a second home country which is “Switzerland”
As our main aspect in our research is internationalization decision making processes, we ask
the managers the internationalization status of their company and the results are as following
in Figure 9.
Figure 9 - Internationalization Status of the Firms
In more detail, one of these three companies which are already operating internationally has
been serving its international markets for 5 years, while the other 2 companies have been
operating internationally for around 1 year.
Another important question in our survey is about the entry mode of the companies in their
international markets. Keeping in mind that we have 3 companies that are currently operating
internationally, the following results are obtained in Figure 10.
Figure 10 - Mode of Entry Choices of the Firms
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The foreign markets that our companies operate in can be seen in Table 11 below.
Company ID Foreign Markets
1 Germany, UK, Israel, Thailand, USA, Latvia, Spain
2 Iran
3 Iran, Azerbaijan, Cyprus
Table 11 - International Markets Served
A brief summary of the operations of these 3 companies in their international markets can be
observed in Table 12 below.
Company
ID
Number of clients
served in the
foreign markets
Percentage of
revenues coming
from international
markets
Growth of international
investments
1 50 40% Sharp increase in the first
years, then became stable
2 60 100% Stable from the beginning
3 25 15% Continuously growing
Table 12 - Specific Information About International Operations of the Companies
The 4th
participant, who is the CEO of the company that is currently not operating
internationally, stated that he will prefer exporting as an entry mode in the foreign markets
and also indicated their target foreign markets as Russia, United Kingdom, France, Italy,
Germany and USA.
Some other commentary answers that we collected from our participants inform us about their
opinions, motivations, struggles etc. They can be seen in the following tables.
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Participant
ID
What are the motivations for your company to
internationalize?
1 Increasing revenues, easiness and trust in realizing cash flows,
incentives for exporting, tax reductions
2 High potential of Iran market, low competition
3 Growth opportunities, currency advantages
4 Stable revenue due to payment prior to shipping, high prices in the
market abroad, brand and firm awareness
Table 13 - Company Motivations For Internationalization
Participant
ID
What were the barriers for your company in the
internationalization process?
1 Language barrier, some cases need instant decision making,
damages realized in transportation
2 Bureaucratic obstacles such as tax rules and regulations, a culture
distant from corporate rules, high level of bribery and fraudulence,
3 Struggles experienced in banking system in the foreign country,
inconsistent custom tax and duties
4 Language barrier, difficulties in logistics and shipment, cultural
differences
Table 14 - Barriers for Companies In the Internationalization Process
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Participant
ID
Have you ever experienced unexpected benefits in this process?
If yes, can you specify them?
1 Rapid growth of business network, word of mouth marketing
2 Higher returns than expected
3 Rapid network growing realized, opportunities seen for new
products/solutions
4 Trustworthy consumers, higher prices in jewelry market due to
labor costs
Table 15 - Unexpected Benefits Experienced During Internationalization
Participant
ID
Have you ever experienced unexpected challenges in this
process? If yes, can you specify them?
1 Uncommon customer profiles, high quality expectations
2 Difficulties in bureaucratic procedures
3 None
4 Difficulties during exporting such as rules and regulations,
insurance costs of products to be shipped
Table 16 - Unexpected Challenges Experienced During Internationalization
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Participant
ID
What are the market success criteria for your company when it
is decided to internationalize?
1 Turkish population living in that country helps customer network
to grow more, easiness in doing business
2 Being the first discount retailer chain in the country
3 Number of competitors in the target market, level of technology
solutions used in the business environment
4 Number of competitors
Table 17 - Market Success Criteria of Companies to Internationalize
Participant
ID
What are the competitive advantages of your company when it
is decided to internationalize?
1 High customization of products, low cost products with high
quality
2 Competitive low prices of products
3 New, high quality and high level of technology solutions offered,
competent and competitive solutions offered
4 Lower labor costs, location of Turkey in terms of logistics, lower
shipment weights
Table 18 - Competitive Advantages of Companies to Internationalize
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Participant
ID
Do you think the characteristics of your home country have any
impact on your internationalization decisions? If yes, can you
explain how?
1 Having sea ports makes transportation cheaper, high skills of food
industry in Turkey
2
Similar consumer habits and culture compared with Turkey, Turkish
is understood by most Iranians, trade agreement between Switzerland
and Iran
3
Domestic market and opportunities have shrinked in Turkey recently,
economic power of investors has decreased. This made the company
look for new foreign clients
4 Lower labor costs and location of Turkey are critical factors for fast
delivery, especially to Europe
Table 19 - Effects of Home Country Characteristics On Internationalization
All these data are collected in order to have a deeper understanding of the personal
characteristics, motivations and experiences of our participant managers. In the following
chapter, we will focus on their risk aversion.
4.2. Results of Risk Aversion Game
As it was mentioned before in our thesis, one of our main focus in this research is finding a
correlation between individuals’ risk aversion perceptions and their decisions in the
internationalization processes. Holt and Laury (2002) conducted a similar experiment phase
as explained in detail before and we followed a similar approach during our research too. In
order to obtain the risk aversion degrees of our participants, first we ask them in which
occasion they will stop choosing the safe lottery option (A) and play the risky option (B)
instead for the first time. According to their answer, we conducted the required analysis and
calculated their level of “r” (degree of risk aversion) and place them in a risk aversion
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classification similar to Holt and Laury (2002). In Table 20 below, choices of our participants
and their corresponding risk aversion classes can be seen.
Participant
ID
The step a participant
chooses Lottery B over
Lottery A for the first time
Risk Aversion
Degree
Risk Aversion
Classification
1 L14 r>0.38 Risk Averse
2 L10 r<0.38 Risk Loving
3 L9 r<0.38 Risk Loving
4 L15 r>0.38 Risk Averse
Table 20 - Answers of Participants to Risk Aversion Game and Statistical Analysis Results
As it is clearly seen in Table 20, we have two managers who are risk averse, while the
remaining two managers have a risk loving attitude. After we declare the results of our next
experiment about oligopoly game, we will present some interesting comments on these
findings by relating these two separate experiments.
4.3. Results of Two-Stage Oligopoly Game Under Ambiguity
In this experiment, we followed a methodology which is very similar to Georgantzis et al.
(2002) as explained before in detail. The results coming from the answers of our participant
managers can be seen below in Table 21.
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Percentage of A
strategies under
each condition
Initially informed player
playing with
Informed (Uninformed) player
Finally Informed
foreign player
against informed
local player
Uninformed
foreign player
against
informed local
player
Treatments Game L Game R Game L Game R Both
Low G treatment
(100% buy info)
75% 50%
(100%) (25%) 100% 50% 25%
High G treatment
(50% buy info)
75% 25%
(100%) (0%) 100% 50% 50%
Table 21 - Distribution of Participants’ Answers for Each Scenario in the Two-Stage Oligopoly Game
In Table 21, the percentage of the participants who choose strategy A is indicated in 2 rows,
for the 2 different scenarios which are “under low G treatment” and “under high G treatment”.
To re-mention it again, a low G corresponds to paying an amount of €2.5 while a high G
corresponds to paying €5 in order to gain information to become informed as a foreign firm.
In the second column of the table, the choices of initially informed players, who are assumed
to be local firms in our model, are presented for both game L and game R, playing against an
informed rival (a foreign firm choosing to be informed, so adopting FDI). Results for the case
in which they are playing against an uninformed rival (a foreign firm not choosing to be
informed, so a foreign exporter) are shown in parentheses. Column three of the table
represents the choices of subjects who begin the game as an initially uninformed player but
purchase the information, thus become an informed player (a foreign firm adopting FDI in our
model) playing against a local rival. Lastly, the fourth column shows the choices of
uninformed foreign player who do not purchase information by paying G, thus continue
playing as an uninformed player (a foreign exporter in our model) against informed rivals.
After we examine this data of choices in the light of our research hypotheses, following
results can be inferred:
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Result 1: As it was predicted before the experiment, dominant strategy of the Game L
(strategy A) is preferred strongly by initially informed players (local firms) and also by finally
informed ones (foreign firms adopting FDI). The support for strategy A in Game L (bad state
of the demand) is 100% in all the cases but in the case in which a local firm plays against a
finally informed foreign firm. The possible reason for this exception will be discussed later in
this study.
Result 2: Dominant strategy (strategy B) in Game R (good state of the demand) gets strong
support by initially informed players (local firms) playing against uninformed rivals (foreign
exporters) There is no player choosing strategy A in the high G treatment and there is only 25%
support in the low G treatment.
These results provide full support for H1.
Result 3: Finally, informed foreign players (foreign firms adopting FDI) always play their
dominant strategy (strategy A) in Game L. However, we cannot claim that they are doing so
in Game R since only 50% of them prefer to play the dominant strategy of Game R (strategy
B) in both treatments. Therefore, we cannot confirm H2. A broad discussion about the reasons
of not preferring the dominant strategy in Game R will be presented in the next chapters.
Result 4: All the participant managers choose to get informed, to use FDI in other words, in
the low G treatment. However, only 50% of them choose to do so in the high G treatment.
This result can qualitatively prove H3. The reason is that the number of participants who
want to get information purchase has decreased sharply when the price of G doubles. We will
also show the relationship between tendency to get information purchase and risk aversion of
managers in the next result. Though, at this point it can clearly be seen that H3 can be
confirmed for our sample even without looking at their risk aversion degrees.
Result 5: After observing that an higher amount of G makes the participant managers tend to
get less information purchase, we can examine this occasion in more detail by comparing the
risk attitudes of the participants. Below in Table 22, risk aversion degrees and information
purchasing decisions of our subjects in high G treatment can be seen:
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Participant
ID
Risk Aversion
Classification
Decision to purchase
information
1 Risk Averse Purchase
2 Risk Loving No Purchase
3 Risk Loving No Purchase
4 Risk Averse Purchase
Table 22 - Risk Aversion Degrees of Participants and Their Choices for Purchasing Information
By evaluating the results in Table 22, it can obviously be stated that foreign firms are more
likely to purchase information the more risk averse they are, which confirms H4.
Indeed, there are some exceptions in previous literature conflicting with this hypothesis. For
example, in the Sabater-Grande and Georgantzis (2002) risk elicitation task, subjects who
have not purchased information in the low-G treatment have exhibited a weakly (Mann-
Whitney, p=0.1) higher degree of risk aversion (Georgantzis et al. 2012).
In addition to these results which we used to confirm our hypotheses, some other
interpretations may be done in the light of the data we gain from this experiment. These
results are mostly related to behavioral issues.
Result 6: Unexpectedly, initially informed players (local firms) remarkably change their
attitude in choosing the dominant strategy depending on the treatments. It can be clearly
understood that they do so in order to play cooperatively against informed entrants (foreign
firms adopting FDI) in Game R (good state of the demand). Interesting finding is that they
change the frequency of this behavior depending on the value of G. Specifically, in Game R,
in the low-G treatment they leave playing the dominant strategy B, in favor of cooperative
market behavior, in twice as many cases as they do in the high-G treatment (50% vs. 25%).
However, we cannot see a significant difference in the preferences of finally informed players
in terms of cooperative play in the two different G treatments. In both treatments, in Game R
they abandon their dominant strategy 50% of the total cases in order to play cooperatively.
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Result 6 imply an unexpected, although intuitively logical way of behavior. It can be
understood that foreign firms which pay the amount of G to purchase information and thus
have an FDI adoption target for higher earnings and this leads them to behave more
cooperatively in the foreign market than they would do otherwise. This is clearly shown by
their strategies.
On the other hand, it may be harder to understand the behavior of local firms which
significantly decrease their level of cooperative playing when G doubles. This may be
explained with the following phenomena. From Sabater-Grande and Georgantzís (2002), we
know that highly risk-averse subjects tend to behave less cooperatively in a prisoners’
dilemma (Georgantzis et al. 2012). This can be confirmed by our data, knowing that in high G
treatment our risk averse subjects choose to pay this high G amount to get information (to
adopt FDI) while risk loving subjects do not so. In our experiment, having a less cooperative
behavior in a prisoners’ dilemma corresponds to play strategy B in Game R. Therefore, local
firms seem to anticipate this behavior in their rivals’ strategy and most of the cases they
respond to this logically by playing strategy B in order to minimize the gaining of their rivals
while maximizing their own potential earnings.
Result 7: The behavior of initially uninformed players (foreign firms) who have decided to
remain uninformed (foreign exporters) significantly varies under different G treatments.
Specifically, a lower G (cost of adopting FDI) makes an exporting firm behave significantly
less cooperatively than under a higher one (25% vs 50%). This can be explained by a
psychological behavior point of view. Knowing that it is easier to pay a low amount of G in
order to get information than paying a higher one, naturally more people will select to pay G
in a low treatment scenario comparing to a high treatment scenario. Thus, it is reasonable to
claim that a person who do not pay a low G will also not pay a high G too. On the other hand,
there are possibly many people who are willing to play cooperatively and can afford to pay a
low G but not a high G. Therefore, considering that there are some people who remain
uninformed just because they could not afford a high G, it is not irrational to assume that they
will keep their cooperative behavior in both cases by playing strategy A against local firms.
However, it is very likely that if a firm chooses not to pay a low G, this is because they do not
want to play a cooperative strategy. By using this assumption, we can bring an explanation for
this different cooperative playing under two different G treatments.
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5. DISCUSSION AND REMARKS
After presenting the results of our conducted experiments and discussing how significant they
are for confirming our hypotheses, in this section we will present some extra comments and
discussion about our findings.
First of all, it is necessary to state that our experiments are very similar to those conducted in
Holt and Laury (2002) and Georgantzis et al. (2012) as mentioned before. This means that our
methodology is very similar to theirs. The main reason we want to conduct similar
experiments and test these hypotheses is that we wanted to see and test if they will also be
confirmed when applied to a sample of managers from a different cultural context. Although
our sample is very small comparing to the samples of Holt and Laury (2002) and Georgantzis
et al. (2012) we obtained some interesting differences.
Specifically, as we mentioned in the ‘Result 1’ of the oligopoly game experiment, support for
strategy A in Game L (bad state of the demand) is 100% in all of the cases except in the case
in which a local firm plays against a finally informed foreign firm. Although this does not
affect the correctness of H1, we find it essential to comment on the reason for such an
observation which is a little bit different than the findings of Georgantzis et al. (2012). Here
the critical issue is that Georgantzis et al. (2012) do not ask their experiment subjects about
the reasons of their preferred strategies but just ask them to indicate the strategies in each
specific scenario. This makes it harder to understand the underlying dynamics that are playing
some role in shaping the decision-making processes. After the results are obtained,
justifications are tried to be made by using some theoretical models but this may cause to
underestimate the effects of some extraordinary behavioral decisions of the managers. For that
purpose, in our own experiments we ask our participants about the reasons of their choices,
when we observed a slightly different result from one participant, even though this does not
change the overall results of the experiment.
When we ask our participant about the reason of his decision not to follow the dominant
strategy (strategy A) in the Game L (bad state of the demand) even though this is also a Pareto
optimal decision, he explained that his priority is to gain a reward which is absolutely greater
or equal to the reward of his opponent. Interestingly, although it is not a dominant strategy, by
choosing strategy B he guarantees his priority. In a possible scenario when he chooses
strategy A but his foreign informed rival chooses strategy B, this will cause him to gain a
reward which is less than his opponent’s. We think that this can be a good example for a
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contradictory decision making and the reason of such decisions cannot be understood easily
sometimes without asking the decision maker about his decision-making process.
Another interesting outcome we observe in our results which is different than the results of
Georgantzis et al. (2012) is that the percentage of people who abandon their dominant strategy
in order to play cooperatively with their rival is quite higher in our experiment results than the
ones in Georgantzis et al. (2012). This even yields to a conflict in H2, which states that
“informed foreign firms will play the dominant strategy in the market game”. The percentage
of subjects who reject to play their dominant strategy in Game R is 50% and this is pretty
much higher than 20% and 12% obtained in Georgantzis et al. (2012) for low and high G
treatments respectively. Underlying reasons for this outcome can be discussed. Since the main
difference between these two experiments is that their sample of participants consists of
people coming from different countries and cultures. It may be claimed that in some cultures
people tend to behave more cooperatively while they tend to do so less in another culture.
6. CONCLUSION
Throughout our research for our thesis, we tried to understand the dynamics affecting the
decision-making progress of companies in their internationalization processes. CEOs and the
managers have the most critical position and effect in this manner. Their characteristics and
way of understanding and perceiving the risk, uncertainty and ambiguity in their business
environment have a vital importance which is directly affecting the future and the
internationalization progress of the companies operating all over the world.
After presenting an extensive literature review about the previous studies and experiments
conducted in different countries and in different circumstances and evaluating their key points
we developed our own methodology. First we presented a model of survey to be filled by
selected managers who have full responsibility in international decision making for their
companies founded in Turkey and we wanted to have a detailed information about their
personal characteristics, backgrounds and previous experiences. Moreover, we had the
possibility to have a deeper knowledge about their companies. Some critical information such
as the industry, products and services produced, internationalization progress of the firm,
motivations, advantages, challenges and expectations from the business operations are gained
by applying this survey.
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Then, a two-step experimental design was developed to be conducted with our selected
participant managers. In the first step, an experiment aiming to measure the risk aversion
degrees of our subjects was prepared. This experiment has its origins from a similar one
presented in Holt and Laury (2002). Basically, the participants are asked to choose a point on
a scale where they will prefer a risky option instead of a safe option for the first time and this
is used to measure their risk aversion degree. Two of our subjects are placed in ‘risk averse’
category while the other two are placed in ‘risk lover’ category considering the results of this
experiment.
In the second step of this experimental session, we conducted an experiment on the same
subjects in order to understand their decision-making processes under “ambiguity and
uncertainty” and we tried to relate their decisions with their corresponding “risk aversion”
degrees. Another factor which is directly affecting the results is “cooperation theory”.
Therefore, we also wanted to test how the dynamics of cooperation theory will affect the
decisions of the subjects when they have a dominant strategy in a defined scenario. This
experiment has its roots from the research of Georgantzis et al. (2012) and our aim was to test
the similar hypothesis in a different cultural context.
According to our results the following hypotheses are confirmed:
H1: Local firms will play the dominant strategy in the market game regardless of the foreign
firms’ strategies.
H3: For any risk attitude, an increase in G implies less observed information purchase.
H4: For any probability of the good state of demand foreign firms are more likely to purchase
information the more risk averse they are.
On the other hand, H2, stating that “informed foreign firms will play the dominant strategy in
the market game.” could not be significantly confirmed.
After obtaining the results it can be confirmed that there is a strong correlation between risk
aversion and tendency to avoid ambiguity when having to decide in uncertain circumstances.
Therefore, it can be claimed that risk aversion and ambiguity aversion degrees of decision
makers have a vital effect on the future plans, operations and decisions of international
companies.
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It is also crucial to state that the implementation of these experimental studies may not give
the same results in every context. First of all, our sample is relatively smaller than those we
tried to re-model. Second, we certainly believe that the cultural background of participants
also directly affect their way of thinking and thus their decision-making methods. For
example, cooperation can have a significant importance and moral value in a culture while
individualism can be much more important than that in another culture. As it is seen in our
results, this can even change the correctness of some hypotheses.
Finally, further questions can be asked to participants in order to examine the other factors
that may underlie in their decision-making processes. These factors that are currently not
involving in theoretical models should be examined in other studies in order to extend the
framework. It is obvious that this may be possible by collaboration of various disciplines such
as industrial economics, psychology, statistics and business management.
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BIBLIOGRAPHY
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APPENDIX
Survey – English Version
Title: A BEHAVIORAL STUDY ON CHARACTERISTICS OF MANAGERS IN THE
PROCESS OF INTERNATIONALIZATION
Instructions:
This study is designed by two Master Degree students in Management Engineering
department of Politecnico di Milano. The aim of the study is to understand the underlying
effects of behavioral characteristics of founders and/or managers who have the full
responsibility in decision making processes of their companies. Specifically,
internationalization of firms will be our main focus. The answers of this survey will be kept in
supreme confidentiality and will be used for only academic purposes. This survey consists of
three main sections namely individual, organizational and internationalization aspects. If
requested, the results of this study may be shared with the participants. It is estimated that the
survey will not take more than one hour. We truly appreciate your time and participation in
this study.
Questions
Individual Aspects
1. Please indicate your ID
2. Gender
o Male
o Female
3. Age
4. Marital Status
o Married
o Single
5. Nationality
6. Educational Level
o Primary Education
o Secondary Education
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o Bachelor Degree
o Master Degree
o Doctoral Degree
7. What is your role in the company? (If you are not a founder of the company please
specify your tasks or division, e.g. HR, Finance etc.)
o Founder
o Other
8. Generally speaking, in a scale, how would you rank the trustworthiness of people
when working with them? (Not trustworthy at all; 1-5; Extremely trustworthy)
o 1
o 2
o 3
o 4
o 5
9. Do you have any kind of experience abroad?
o Yes
o No
10. Can you classify the type of experience/s?
o Study
o Work
o Other
11. In which country/s were you present during your experience/s?
12. How long was your total experience?
o 0-1 year
o 1-2 years
o More than 2 years
Organizational Aspects
13. What is the name of your company?
14. What is the primary industry of your company?
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15. What are the services/products you offer to the market?
16. Can you specify your target customer profile? (E.g. People aged between 18-25 who
are following new trends in social media)
17. How has your business been funded since its foundation?
o Crowdfunding
o Angel Investors
o Bank Loans
o Other
18. How was your company formed?
o Spin-off
o Joint Venture
o Start up
o Other
19. What is the home country of your company?
20. How many personnel are currently employed by your company? (Local and
Worldwide)
21. What kind of organizational structure do you have?
22. What is the annual turnover of your company?
23. How many clients are you currently serving?
24. For how long are you in the business?
25. How many founders are there in the company?
26. How many professionals are in charge of decision making in shaping business
strategies?
27. How many clients are you serving in international markets?
Internationalization Aspects
28. Can you specify the internationalization status of your company?
o Our firm is already operating internationally
o We have taken some steps but we are not operating yet
o We intend to internationalize in the near future
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Internationalization Aspects-1
29. Since when has your company been operating internationally?
30. Can you specify the mode of entry?
o Exporting
o Franchising
o Foreign Direct Investment
o Joint Venture
o Licensing
o Other
31. Which market/s are you operating in?
32. How many clients are you serving in international markets?
33. What percentage of your revenues come from international markets?
34. Have you experienced a continuous growth in your investments or was there any point
that you had to stop or diminish them?
Internationalization Aspects-2
35. Which mode of entry would you choose?
o Exporting
o Franchising
o Foreign Direct Investment
o Joint Venture
o Licensing
o Other
36. Which markets would you operate in?
Internationalization Aspects-3
37. What are/were the motivations for your company to internationalize?
38. What are/were the barriers for your company in the internationalization process?
39. Have you ever experienced unexpected benefits/challenges in this process? If yes, can
you specify them?
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40. What are the market success criteria/competitive advantages for your company when it
is decided to internationalize? (e.g. Easiness of doing business, Income level of the
country, Labor costs, Skill of employees etc.)
41. Do you think the characteristics of your home country have any impact on your
internationalization decisions? If yes, can you explain how?
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Instructions Paper
Welcome!
Welcome and thank you for participating in this experimental session. By following these
instructions, you will earn an amount in EUROS that will be paid in cash at the end of the
session.
Your earnings will be based entirely on your decisions: decisions of other participants will
affect your earnings.
Decisions and earnings of each participant will remain anonymous throughout the experiment.
This means that no one will receive information on other participants’ choices and earnings.
Please turn off your cell phones and do not talk or in any way communicate with other
participants.
If you have any question or problem at any point in this experiment, please raise your hand
and one of the assistants will answer you.
The following rules are the same for all participants.
The answers of this survey will be kept in supreme confidentiality and will be used for only
academic purposes. This survey consists of three main sections namely individual,
organizational and internationalization aspects. If requested, the results of this study may be
shared with the participants. It is estimated that the survey will not take more than one hour.
We truly appreciate your time and participation in this study.
GAME A
You will have to submit your strategies, A or B, in the following situation: Two players an
informed (I) and an initially un-informed (U) one, play one of the two games, Left (L) and
Right (R) whose payoffs are defined as in the table below (payoffs in Euros). The game is
played by I-U pairs. If you are an I-type player (given that you know which game you are
playing when submitting your strategy) you can submit two (potentially different) strategies,
one for each game. If you are a U-type player (given that you do not know which game you
will be actually playing at the moment of submitting your strategy) you are obliged to submit
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one strategy for both games. U players may become informed by paying an amount X, which
may take two values, X = 2.5 € and X = 5.0 €. This means that if you decide to become
informed you can submit different strategies for different games. The initially informed player
(I) will know whether you became informed or not. Before you know which type of player
you are (I or U), and, if you are I, which game you play, and, if you are U-type, the actual
value of X, you will have to submit your strategy for each condition and role.
Once we collect your strategies under all possible scenarios, a random process will determine
your role and you will be matched with a player (whose identity will not be revealed to you)
of the other type. A random process will also determine the actual game and the scenario
regarding the value of X. Your decisions and those of the other player under these conditions
will be used to determine your final reward. Use the following page to submit your strategies.
When you finish, you will be informed on the actual scenario and your reward in the
experiments.
Payoff matrices for the two games potentially played by the subjects depending on the bad
(L) or the good (R) state of the demand:
Game L
Foreign/Local A B
A (11,11) (9,10)
B (10,9) (8,8)
Game R
Foreign/Local A B
A (18,18) (15,19)
B (19,15) (16,16)
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Example Answer:
Playing the game under the scenario of X=€5.0, being an initially uninformed foreign player
against an informed local player I choose to be informed. I play strategy A in the game L
and strategy B in the game R.
Additional Information
Strategic Dominance: In game theory, strategic dominance occurs when one strategy is
better than another strategy for one player, no matter how that player's opponents may play.
For example, if B dominates A, this means choosing B always gives a better outcome than
choosing A, no matter what the other player(s) do.
If both players have a strictly dominant strategy, players logically will play that strategy in
each game. However, this is not necessarily Pareto optimal, meaning that there may be some
outcomes of the game that would be better for both players. The classic game used to
illustrate this is the Prisoner's Dilemma.
Prisoner’s Dilemma: If we consider such a game that players are prisoners and they will
decide to stay silent about their crime, or to betray the other prisoner. If prisoner A betrays
and prisoner B remains silent, prisoner A will go free and B will serve 3 years and vice versa.
If they both betray, they will each serve for 2 years and if they both remain silent, they will
serve just 1 year. In this case, although their dominant strategy is to betray, they will get a
better result if they cooperate and remain silent.
Cooperation Theory: In some cases, players in a market may take decisions cooperatively
regarding the output number to meet the market demand rather than in a competitive way. The
reason is that each player knows that in some cases, cooperation with the other actor/s brings
higher return than in competition. Our game in this experiment is an illustration to this
phenomenon. For example, both players know that playing strategy A together brings higher
return to both of them than playing their dominant strategy B, if they are aware that they
compete in the good state of demand (Game R). However, this outcome depends on whether
or not the foreign firm is aware of the demand state i.e. whether or not the foreign firm has
paid the cost G of becoming informed. It can be assumed that the foreign firm is more likely
to play cooperatively if he has paid the value of low-G to become informed. What’s more, this
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firm is even more likely to play cooperatively if he has paid the value of high-G. Therefore,
local firm will take this into consideration and he will also tend to play more cooperatively
against that kind of a foreign firm. Yet, this is not the case all the time. Sometimes, the
foreign player may play in a competitive way resulting in the local player gaining less return
while she is receiving more (Game R) simply because the foreign player seeks out more
return or does not want to cooperate with the rival. The determining factor here can be given
as risk level of the foreign player. The opposite of this case, meaning local does not seek out
cooperation, may as well occur and the reasons are the same.
An Experiment of Two-Stage Oligopoly Game Under Ambiguity
1. Please indicate your ID
Experiment Phase
Answer the questions considering that you are playing as an informed player against an
initially uninformed player
2. In X=2.5 € scenario, if you play against someone who chose to remain uninformed,
what would be your strategies? (Please choose one strategy for each game)
o In game L, I would play A
o In game L, I would play B
o In game R, I would play A
o In game R, I would play B
3. In X=5.0 € scenario, if you play against someone who chose to remain uninformed,
what would be your strategies? (Please choose one strategy for each game)
o In game L, I would play A
o In game L, I would play B
o In game R, I would play A
o In game R, I would play B
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4. In X=2.5 € scenario, if you play against someone who chose to become informed,
what would be your strategies? (Please choose one strategy for each game)
o In game L, I would play A
o In game L, I would play B
o In game R, I would play A
o In game R, I would play B
5. In X=5.0 € scenario, if you play against someone who chose to become informed,
what would be your strategies?
o In game L, I would play A
o In game L, I would play B
o In game R, I would play A
o In game R, I would play B
Answer the questions considering that you are playing as an initially uninformed player
against an informed player
6. Would you choose to become informed with a price of X= €2.5 ?
o Yes, I would want to become informed
o No, I would want to remain uninformed
Answer the questions considering that you are playing against an informed player
7. Which strategies would you choose in this case? (Please choose one strategy for each
game)
o In game L, I would play A
o In game L, I would play B
o In game R, I would play A
o In game R, I would play B
Answer the questions considering that you are playing against an informed player
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8. Which strategy would you choose in this case? (Please choose your strategy
considering that you are uninformed about the game you are playing. This means you
have the possibility to submit only one strategy.)
o In both games, I would play A
o In both games, I would play B
Answer the questions considering that you are playing as an initially uninformed player
against an informed player
9. Would you choose to become informed with a price of X= €5.0 ?
o Yes, I would want to become informed
o No, I would want to remain uninformed
Answer the questions considering that you are playing against an informed player
10. Which strategies would you choose in this case? (Please choose one strategy for each
game)
o In game L, I would play A
o In game L, I would play B
o In game R, I would play A
o In game R, I would play B
Answer the questions considering that you are playing against an informed player
11. Which strategy would you choose in this case? (Please choose your strategy
considering that you are uninformed about the game you are playing. This means you
have the possibility to submit only one strategy.)
o In both games, I would play A
o In both games, I would play B
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GAME B
The instructions of this experiment are simple. If you follow them carefully, at the end of the
session you may earn an amount of money.
In this experiment, our focus will be examining risk aversion degree of our participants. For
this purpose, now you will be asked to make a choice between two strategies namely A and B.
Strategy A will represent a safe option while strategy B will represent a risky option. With the
possibility, which are given in the following table, you will get the high or low reward of your
selected option. We will ask for your selection between A and B for each 19 different reward
possibilities. Possibility of receiving the higher reward will gradually increase by each step.
For example, looking at the case L.10 with a possibility of 50%, you will receive the higher
reward (12 €) if you select option A. Similarly, with a possibility of 50%, you will receive the
higher reward (22 €) if you choose option B. Otherwise, you will be rewarded the lower
option in both options with the possibility of 50%.
Please do not hesitate to ask any question if the instructions are not clear.
Thank you for your participation.
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Survey – English&Turkish Version
Title: A BEHAVIORAL STUDY ON CHARACTERISTICS OF MANAGERS IN THE
PROCESS OF INTERNATIONALIZATION (ULUSLARARASILAŞMA SÜRECİNDE
YÖNETİCİLERİN KARAKTER ÖZELLİKLERİ ÜZERİNE BİR DAVRANIŞSAL ANALİZ
ÇALIŞMASI)
Instructions:
This study is designed by two Master Degree students in Management Engineering
department of Politecnico di Milano. The aim of the study is to understand the underlying
effects of behavioral characteristics of founders and/or managers who have the full
responsibility in decision making processes of their companies. Specifically,
internationalization of firms will be our main focus. The answers of this survey will be kept in
supreme confidentiality and will be used for only academic purposes. This survey consists of
three main sections namely individual, organizational and internationalization aspects. If
requested, the results of this study may be shared with the participants. It is estimated that the
survey will not take more than one hour. We truly appreciate your time and participation in
this study.
Bu çalışma Politecnico di Milano üniversitesinde İşletme Mühendisliği alanında yüksek lisans
yapmakta olan iki öğrenci tarafından tasarlanmıştır. Çalışmamızın amacı, bulundukları
şirkette kurucu ya da üst düzey yönetici olarak karar verme mekanizmasında tam yetki sahibi
olan kişilerin davranışsal karakter özelliklerinin verdikleri iş kararları üzerindeki etkilerini
araştırmaktır. Şirketlerin uluslararası faaliyet planları ve kararları ise çalışmamızın odak
noktasını oluşturmaktadır. Bu ankette vereceğiniz bütün cevaplar gizli tutulacak ve
çalışmamızın amacı dışında kesinlikle kullanılmayacak ve paylaşılmayacaktır. Anket üç ana
bölümden oluşmakta olup sırasıyla bireysel, organizasyonel ve uluslararası faaliyetlerle ilgili
sorulara cevap vermeniz istenecektir. İstenildiği takdirde çalışmamızın sonuçları bireysel
olarak katılımcılarımızla paylaşılacaktır. Anketimizi tamamlamak tahmini olarak en çok bir
saatinizi alacaktır. Zamanınızı ayırdığınız ve çalışmamıza katıldığınız için teşekkür ederiz.
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Questions
Individual Aspects (Bireysel Özellikler)
13. Please indicate your ID
14. Gender (Cinsiyet)
o Male (Erkek)
o Female (Kadın)
15. Age (Yaş)
16. Marital Status (Medeni Durum)
o Married (Evli)
o Single (Bekar)
17. Nationality (Uyruk)
18. Educational Level (Eğitim Seviyesi)
o Primary Education (İlköğretim)
o Secondary Education (Lise)
o Bachelor Degree (Lisans mezunu)
o Master Degree (Yüksek lisans mezunu)
o Doctoral Degree (Doktora mezunu)
19. What is your role in the company? (If you are not a founder of the company please
specify your tasks or division, e.g. HR, Finance etc.) (Şirketin kurucusu değilseniz
lütfen çalıştığınız birimi veya görevinizi yazınız, örn. İK, Finans vb.)
o Founder (Kurucu)
o Other (Diğer)
20. Generally speaking, in a scale, how would you rank the trustworthiness of people
when working with them? (Not trustworthy at all; 1-5; Extremely trustworthy)
(Beraber çalıştığınız insanların güvenilirliklerine ölçek üzerinde bir puan verecek
olsaydınız kaç puan verirdiniz?) (Kesinlikle güvenilir; 1-5; Son derece güvenilmez)
o 1
o 2
o 3
o 4
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o 5
21. Do you have any kind of experience abroad? (Herhangi bir yurtdışı deneyiminiz oldu
mu?)
o Yes (Evet)
o No (Hayır)
22. Can you classify the type of experience/s? (Deneyim(ler)inizi belirtiniz)
o Study (Eğitim)
o Work (İş)
o Other (Diğer)
23. In which country/s were you present during your experience/s? (Deneyim(ler)iniz
hangi ülke(ler)de gerçekleşti?)
24. How long was your total experience? (Toplam olarak kaç yıllık bir deneyiminiz oldu?)
o 0-1 year (0-1 yıl)
o 1-2 years (1-2 yıl)
o More than 2 years (2 yıldan fazla)
Organizational Aspects (Organizasyonel Özellikler)
28. What is the name of your company? (Şirketinizin adı nedir?)
29. What is the primary industry of your company? (Şirketinizin ana sektörü nedir?)
30. What are the services/products you offer to the market? (Pazara sunduğunuz ürün veya
hizmetler nelerdir?)
31. Can you specify your target customer profile? (E.g. People aged between 18-25 who
are following new trends in social media) (Hedef müşteri profilinizi belirtiniz) (Örn.
18-25 yaş arasında sosyal medyadaki yeni trendleri takip eden gençler)
32. How has your business been funded since its foundation? (Şirketiniz kuruluşundan
itibaren mali kaynağını nasıl sağladı?)
o Crowdfunding (Kitlesel fonlama)
o Angel Investors (Melek yatırımcılar)
o Bank Loans (Banka kredileri)
o Other (Diğer)
33. How was your company formed? (Şirketinizin ortaya çıkış şekli nasıl oldu?)
o Spin-off
o Joint Venture
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o Start up
o Family Owned Business (Aile Şirketi)
o Other (Diğer)
34. What is the home country of your company? (Şirketiniz hangi ülke kaynaklıdır?)
35. How many personnel are currently employed by your company? (Local and
Worldwide) (Şirketinizde toplam kaç kişi çalışmaktadır? Yurt içi ve dışında)
36. What kind of organizational structure do you have? (Organizasyon şemanızı
açıklayabilir misiniz?)
37. What is the annual turnover of your company? (Şirketinizin yıllık cirosu ne kadardır?)
38. How many clients are you currently serving? (Şu anda kaç müşteriye hizmet
vermektesiniz?)
39. For how long are you in the business? (Ne kadar süredir şirketiniz piyasanın içinde yer
almakta?)
40. How many founders are there in the company? (Şirketinizin kaç kurucusu vardır?)
41. How many professionals are in charge of decision making in shaping business
strategies? İş stratejileri ile ilgili karar verme sürecinde kaç kişi doğrudan yetkilidir?)
Internationalization Aspects (Uluslararası Özellikler)
42. Can you specify the internationalization status of your company? (Şirketinizin
uluslararasılaşma durumunu belirtiniz)
o Our firm is already operating internationally (Şirketimiz halihazırda
uluslararası düzeyde faaliyet göstermektedir)
o We have taken some steps but we are not operating yet (Uluslararası düzeyde
faaliyete geçmek için bazı adımları attık ancak henüz faaliyete başlamadık)
o We intend to internationalize in the near future (Yakın gelecekte uluslararası
düzeyde faaliyete geçmek düşüncesindeyiz)
Internationalization Aspects-1 (Uluslararası Özellikler-1)
43. Since when has your company been operating internationally? (Şirketiniz ne
zamandan beri uluslararası düzeyde hizmet vermektedir?)
44. Can you specify the mode of entry? (Uluslararası operasyonlarınızı hangi modelde
yürütmektesiniz?)
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o Exporting (İhracat)
o Franchising (Bayilik verme)
o Foreign Direct Investment (Doğrudan yabancı yatırım)
o Joint Venture (Ortak girişim)
o Licensing (Lisans anlaşması)
o Other (Diğer)
45. Which market/s are you operating in? (Hangi ülke pazarlarında faaliyet
göstermektesiniz?)
46. How many clients are you serving in international markets? (Uluslararası pazarlarda
toplam kaç müşteriye hizmet vermektesiniz?)
47. What percentage of your revenues come from international markets? (Gelirlerinizin
yüzde kaçı uluslararası pazarlardaki faaliyetlerinizden sağlanmaktadır?)
48. Have you experienced a continuous growth in your investments or was there any point
that you had to stop or diminish them? (Yatırımlarınız sürekli olarak artış mı gösterdi
yoksa yatırımlarınızı azaltmak ya da durdurmak durumunda kaldığınız bir durum
yaşandı mı?)
Internationalization Aspects-2 (Uluslararası Özellikler-2)
37. Which mode of entry would you choose? (Uluslararası operasyonlarınız için hangi
modeli uygun görüyorsunuz?)
o Exporting (İhracat)
o Franchising (Bayilik verme)
o Foreign Direct Investment (Doğrudan yabancı yatırım)
o Joint Venture (Ortak girişim)
o Licensing (Lisans anlaşması)
o Other (Diğer)
38. Which markets would you operate in? (Hangi ülke pazarlarında faaliyet gösterme
niyetindesiniz?)
Internationalization Aspects-3 (Uluslararası Özellikler-3)
42. What are/were the motivations for your company to internationalize? (Şirketinizi
uluslararası boyuta taşımanız için motivasyon kaynaklarınız nelerdir?)
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43. What are/were the barriers for your company in the internationalization process?
(Uluslararasılaşma sürecinde ne gibi zorluklarla karşılaştınız?)
44. Have you ever experienced unexpected benefits/challenges in this process? If yes, can
you specify them? (Bu süreçte herhangi beklemediğiniz bir kazanım ya da zorlukla
karşılaştınız mı? Karşılaştıysanız bunları belirtebilir misiniz?)
45. What are the market success criteria/competitive advantages for your company when it
is decided to internationalize? (e.g. Easiness of doing business, Income level of the
country, Labor costs, Skill of employees etc.) (Uluslararasılaşma sürecinde girdiğiniz
ya da girmeyi düşündüğünüz pazarlarda başarı kriterleriniz ve şirketinizi öne
çıkaracak rekabetsel avantajlarınız nelerdir?) (Örn. ticari kolaylıklar, ülkenin gelir
düzeyi, işçi maaliyetleri, çalışanların nitelikleri vb.)
46. Do you think the characteristics of your home country have any impact on your
internationalization decisions? If yes, can you explain how? (Uluslararasılaşma
kararlarınızda şirketinizin ana ülkesinin sahip olduğu özelliklerin bir etkisi olduğunu
düşünüyor musunuz, düşünüyorsanız açıklayabilir misiniz?)
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Instruction of Experiment In Turkish
Yönergeler Kağıdı
Hoşgeldiniz!
Deneysel çalışmamıza katılımınız için teşekkür ederiz. Aşağıdaki yönergeleri takip ederek
çalışmamızı tamamladığınızda önceden belirlenen bir miktarda para ödemesi de almaya hak
kazanacaksınız.
Kazanacağınız miktar çalışmamızda vereceğiniz kararlara gore belirlenmiş olup diğer
katılımcıların verdiği kararlara göre değişecektir.
Her katılımcının kararları ve karşılık gelen kazançları gizli tutulacaktır. Bunlarla ilgili diğer
katılımcılara herhangi bir bilgi verilmeyecektir.
Lütfen çalışmamız boyunca telefonlarınızı sessiz durumda bulundurunuz ve diğer
katılımcılarla konuşmayınız.
Herhangi bir sorunuz ya da probleminiz olması durumunda lütfen elinizi kaldırınız ve
ekibimizden birisinin size yardımcı olmasını bekleyiniz.
Çalışmamız boyunca vereceğiniz bütün cevaplar gizli tutulacak ve çalışmamızın amacı
dışında kesinlikle kullanılmayacak ve paylaşılmayacaktır.
Deneysel çalışmamızdan sonra cevaplamanız gereken anketimiz üç ana bölümden oluşmakta
olup sırasıyla bireysel, organizasyonel ve uluslararası faaliyetlerle ilgili sorulara cevap
vermeniz istenecektir. İstenildiği takdirde çalışmamızın sonuçları bireysel olarak
katılımcılarımızla paylaşılacaktır. Anketimizi tamamlamak tahmini olarak en çok bir saatinizi
alacaktır. Zamanınızı ayırdığınız ve çalışmamıza katıldığınız için teşekkür ederiz.
OYUN A
Bu deneysel çalışmada birazdan açıklanacak olan durumda A ya da B stratejilerinden
hangisini seçeceğinizi belirtmeniz gerekmektedir. Biri daha önceden bilgilendirilmiş ve diğeri
bilgilendirilmemiş olan iki oyuncu, “L” ve “R” oyunlarını oynayacaktır ve bu oyunlarda
verdikleri kararlara göre alacağı ödüller aşağıdaki tabloda verilmiştir. Bu oyunda
bilgilendirilmiş (I) ya da bilgilendirilmemiş (U) oyuncular olarak ayrı ayrı karar vermeniz
istenecektir. Eğer I oyuncusu durumundaysanız (L ve R oyunlarından hangisini oynadığınızı
biliyorsunuz demektir) her oyun için ayrı iki strateji belirleme hakkına sahip olacaksınız. Eğer
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U oyuncusu durumundaysanız (bu durumda oynadığınız oyunun L mi yoksa R oyunu mu
olduğu bilgisine sahip değilsiniz demektir) her iki oyun için de ortak tek bir strateji kararı
vermeniz gerekecektir. U oyuncuları bir bedel (X) ödeyerek I oyuncusu konumuna geçme
hakkına sahip olacaklardır. X bedeli €2.5 veya €5 olacaktır. Bunu istemeniz durumunda iki
oyun için de farklı iki strateji seçme hakkına sahip olacaksınız. Senaryodaki diğer oyuncu (I)
sizin bilgilendirilmiş olmayı seçip seçmediğiniz konusunda bilgilendirilecektir. Size verilecek
olan ankette her durum tanımlanmış olup, her durum ve senaryo için vereceğiniz kararları
vermeniz istenmektedir.
Cevaplarınız kaydedildikten sonra, rastsal olarak sizin rolünüz ve karşınızdaki kişinin
kararları belirlenecektir. Sizin ve eşleştiğiniz senaryodaki kişinin verdiği kararlara göre
alacağınız ödül belirlenmiş olacaktır.
Lütfen size verilen formda her durum için vereceğiniz kararları seçiniz. Bitirdiğinizde size
atanan senaryo ve aldığınız ödül hakkında bilgilendirileceksiniz.
L ve R oyunları için oyuncuların verdikleri karara göre alacakları ödül matrisi:
Oyun L
Yabancı/Yerel A B
A (11,11) (9,10)
B (10,9) (8,8)
Oyun R
Yabancı/Yerel A B
A (18,18) (15,19)
B (19,15) (16,16)
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Örnek Cevap:
X=€5.0 iken ve oyuna bilgilendirilmemiş bir yabancı firma olarak başlayıp bilgilendirilmiş
yerel bir firmaya karşı oynadığımda bilgilendirilmeyi tercih ediyorum. L oyununda A
stratejisini, R oyununda ise B stratejisini oynamayı tercih ediyorum.
Ek Bilgilendirme
Stratejik Baskınlık: Oyun teorisine göre bir oyuncu için bir strateji rakibinin ne
oynadığından bağımsız olarak her zaman diğer stratejiden daha iyi sonuç getiriyorsa, o strateji
diğerine baskındır diyebiliriz. Örneğin, B stratejisi A’ya baskın ise, bir oyuncu için B’yi
seçmek rakibinin ne seçtiğine bakmaksızın her zaman A’yı seçmekten daha iyi sonuç verir.
Eğer iki oyuncu da bu baskın stratejiye sahipse, mantıklı olarak her oyunda bunu
oynayacaklardır. Ancak bu her zaman Pareto optimal bir durum değildir. Yani bazı
durumlarda iki oyuncu için de daha iyi sonuç verecek stratejiler var olabilir. Buna Tutsak
İkilemi oyununu örnek olarak gösterebiliriz.
Tutsak İkilemi: Bu oyunda oyuncuların hapishane mahkumları olduğunu ve karşı taraf
aleyhinde itirafçılık yapma ya da sessiz kalma kararlarından birini vereceğini varsayıyoruz.
Eğer A mahkumu itirafçılık yapar ve B mahkumu sessiz kalırsa, A mahkumu serbest kalacak
ve B mahkumu 3 yıl hapis yatacaktır. Oyuncuların rolleri değiştiğinde de aynı durum
olacaktır. İki oyuncu da itirafçılık yaparsa 2şer yıl hapis yatacaklardır. İki oyuncu da sessiz
kalırsa 1er yıl hapis yatacaklardır. Böyle bir durumda, mahkumların baskın stratejisi itirafçılık
yapmak olmasına rağmen, eğer işbirliği yapsalar ve sessiz kalsalar diğer durumda ortaya
çıkacak sonuca göre daha iyi bir sonuç elde etmiş olacaklardı.
İşbirliği Fenomeni: Bazı durumlarda bir marketteki oyuncular talebi karşılamak için üretim
miktarına karar verirken rekabet yerine işbirliği içerisinde hareket edebilirler. Bunun sebebi
ise diğer oyuncularla işbirliği içerisinde hareket ederek daha fazla talebi karşılayabiliyor
olmaları ve dolayısıyla daha fazla kar yapmalarıdır. Çalışmamıza konu olan oyunda da bu
durumla karşılaşmak mümkündür. Örneğin, iyi talep senaryosunda (R oyunu), her iki oyuncu
da işbirliği içerisinde A stratejisini izleyerek dominant stratejileri olan B stratejisini oynamaya
kıyasla daha fazla getiri sağlayabilirler. Ancak bu durum yabancı oyuncunun oynadığı
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senaryoyu bilip bilmemesine bir başka deyişle o markete G değerinde bir yatırım yapıp
yapmamasına bağlıdır. Eğer yabancı oyuncu düşük-G değerinde bir yatırım gerçekleştirip
oynadığı oyun hakkında bilgi sahibi olursa, işbirliği için çaba gösterdiği sonucuna varılabilir.
Aynı şekilde yüksek-G yatırımını yapan oyuncu da işbirliğine çok daha yatkın diyebiliriz. Bu
durumda karşıdaki oyuncu da bu tarz oyunculara karşı oynarken işbirliğine daha yatkın
olacaktır. Ancak bu durum her zaman geçerliliğini korumaz. Bazen yerel oyuncu işbirliği
yerine rekabeti seçerek kendisinin daha fazla rakibinin ise daha az getiri almasını isteyebilir.
Buna sebep olarak yerel oyuncunun daha fazla kâr elde etmek istemesi veya işbirliğine
yanaşmak istememesi verilebilir. Burada belirleyeci faktör yerel oyuncunun risk eğilimidir.
Bu durumun tam tersi yani yabancı oyuncunun işbirliğine yanaşmaması da meydana gelebilir
ve sebepler yine aynıdır.
OYUN B
Bu deneysel çalışmamızın yönergeleri oldukça basit. Dikkatli bir şekilde yönergeleri
uyguladığınızda çalışma sonunda bir para ödülü elde edeceksiniz.
Bu çalışmamızda hedefimiz katılımcılarımızın riskten kaçınma derecelerini tespit etmek
olacaktır. Bu amaç doğrultusunda sizden A ve B stratejilerinden birini tercih etmeniz
istenmektedir. A stratejisi güvenli bir seçime karşılık gelirken B stratejisi ise daha riskli bir
seçim demek olacaktır. Size ekte verilen tablodaki olasılıklara bağlı olarak seçiminize karşılık
gelen büyük ya da küçük ödülü alacaksınız. Sizden olasılıkların değişeceği 19 ayrı durum için
A ve B stratejileri arasında bir tercih yapmanız istenecektir. Adımlar ilerledikçe yüksek ödülü
alma ihtimaliniz giderek artıyor olacaktır. Örneğin, L.10 durumunda A stratejisini seçtiğinizde
50% ihtimalle büyük ödülü alırken (€12) B stratejisini seçtiğinizde yine 50% ihtimalle büyük
ödülü (€22) alacaksınız. Diğer durumda, 50% ihtimalle, her iki stratejinin de küçük ödülünü
alacaksınız.
Yönergeler açık değilse ve herhangi bir sorunuz olursa çekinmeden sorabilirsiniz.
Katılımınız için teşekkür ederiz.