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THE IMPACT OF CAUSATION AND EFFECTUATION

ON INTERNATIONALISATION PROCESS:

THE MULTI-DIMENSIONAL ANALYSIS

BY

MR. THAKSAKORN LERTBOONSUPA

AN INDEPENDENT STUDY SUBMITTED IN PARTIAL

FULFILLMENT OF THE REQUIREMENTS FOR

THE DEGREE OF MASTER OF SCIENCE

PROGRAM IN MARKETING MANAGEMENT

FACULTY OF COMMERCE AND ACCOUNTANCY

THAMMASAT UNIVERSITY

ACADEMIC YEAR 2016

COPYRIGHT OF THAMMASAT UNIVERSITY

Ref. code: 25595802115179BQU

THE IMPACT OF CAUSATION AND EFFECTUATION

ON INTERNATIONALISATION PROCESS:

THE MULTI-DIMENSIONAL ANALYSIS

BY

MR. THAKSAKORN LERTBOONSUPA

AN INDEPENDENT STUDY SUBMITTED IN PARTIAL

FULFILLMENT OF THE REQUIREMENTS FOR

THE DEGREE OF MASTER OF SCIENCE

PROGRAM IN MARKETING MANAGEMENT

FACULTY OF COMMERCE AND ACCOUNTANCY

THAMMASAT UNIVERSITY

ACADEMIC YEAR 2016

COPYRIGHT OF THAMMASAT UNIVERSITY

Ref. code: 25595802115179BQU

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Independent Study Title THE IMPACT OF CAUSATION AND

EFFECTUATION ON

INTERNATIONALISATION PROCESS: THE

MULTI-DIMENSIONAL ANALYSIS

Author Mr. Thaksakorn Lertboonsupa

Degree Master of Science (Marketing Management)

Major Field/Faculty/University Maketing Management

Faculty of Commerce and Accountancy

Thammasat University

Independent Study Advisor Assistant Professor Pattana Boonchoo, Ph.D.

Academic Year 2016

ABSTRACT

Firms’ internationalisation process involves various steps and patterns

across five major dimensions, namely, market, operation, product, time and

performance dimensions. Based on the Uppsala model and other international

business theories, our research examines the extent to which the decision-making

logic, causation and effectuation relate to the internationalisation process of a firm in

a holistic fashion. In addition, we examine the interaction effect of causation and

effectuation by substantiating the moderating effect of effectuation on the relationship

between causation and internationalisation. Several regression analyses were adopted

to test such relationships on the sample of 79 exporting manufacturing SMEs in

Thailand. The results indicate that, in terms of international market selection,

causation and effectuation approaches do not influence how firms choose the

international markets they want to enter. Causal thinking, on one hand, affects how

firms adapt their products in foreign markets to a higher extent than firms applying

effectual thinking. Contrary to the extant literature, effectual logic, on the other hand,

affects a firm’s decision to employ market entry modes which are riskier and require

more resource commitment, such as wholly-owned subsidiaries. The effectuation

approach, surprisingly, is found to positively relate to the international performance of

firms.

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Keywords: International business, International entrepreneurship, Causation,

Effectuation, Internationalisation, International market selection, Entry mode choice,

Product adaptation, International performance, SMEs

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ACKNOWLEDGEMENTS

First, I would like to express my sincerest gratitude to my advisor, Dr

Pattana Boonchoo, for his unwavering assistance, patience, and motivation throughout

months of conducting this research. The door to his office was always open whenever

I ran into a trouble spot or had a question about my research or even personal

problems. I could not have imagined having a better advisor.

Besides my advisor, I would like to thank my research examiner, Dr

Monthon Sorakraikitikul, for his insightful comments and thorough review of my

independent study.

I would also like to thank the experts who were involved in the validation

survey for this research project: Dr Jittima tongurai and Dr Kaveepong Lertwachara.

Without their passionate participation and input, the validation survey could not have

been successfully conducted.

I am also indebted to all exporting SMEs managers and entrepreneurs

who kindly participated in this study. Without their contribution, this research would

not have materialised.

I am grateful for the camaraderie and support given by my IBMP friends

at Thammasat Business School, especially Korawit Suchadapong and Gun Thaploka

who are my fellow students under the apprentinceship of Dr Pattana Boonshoo. Their

friendship and companionship have made the process of learning less burdensome and

instead more entertaining.

My special thanks also goes to Veerapong Vattavoravet for bringing me

to hospital. Your help is a helping hand at just the right moment.

Finally, I must express my earnest thanks to my parents and friends who

always provide me with unquestioning support and continuous encouragement

throughout my years of study. My arduous journey to my Master degree becomes

memorable because of them. Thank you!

Mr Thaksakorn Lertboonsupa

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TABLE OF CONTENTS

Page

ABSTRACT (1)

ACKNOWLEDGEMENTS (3)

LIST OF TABLES (7)

LIST OF FIGURES (8)

LIST OF ABBREVIATIONS (9)

CHAPTER 1 INTRODUCTION 1

1.1 Background and Importances 1

1.2 Research Objectives 3

1.3 Major Contributions of the Study 4

1.4 Scope of the Study 5

CHAPTER 2 LITERATURE REVIEW 6

2.1 Internationalisation of SMEs 6

2.1.1 Market Dimension 7

2.1.2 Operation Dimension 8

2.1.3 Product Dimension 9

2.1.4 Time Dimension 10

2.1.5 Performance Dimension 11

2.2 Causation & Effectuation 12

2.1.1 Causation & Effectuation in Internationalisation Context 15

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2.3 Hypotheses 17

2.3.1 Causation & Effectuation and Internationalisation 18

2.3.1.1 Causation & Effectuation and Market Dimension 18

2.3.1.2 Causation & Effectuation and Operation Dimension 19

2.3.1.3 Causation & Effectuation and Product Dimension 20

2.3.1.4 Causation & Effectuation and time Dimension 21

2.3.1.5 Causation & Effectuation and Performance Dimension 22

2.3.2 The Moderating Effect of Effectuation on the Relationship 23

of Causation and Internationalisation

2.3.2.1 The Moderating Effect of Effectuation on the Relationship 23

of Causation and Market Dimension

2.3.2.2 The Moderating Effect of Effectuation on the Relationship 24

of Causation and Operation Dimension

2.3.2.3 The Moderating Effect of Effectuation on the Relationship 25

of Causation and Product Dimension

2.3.2.4 The Moderating Effect of Effectuation on the Relationship 26

of Causation and Time Dimension

2.3.2.5 The Moderating Effect of Effectuation on the Relationship 27

of Causation and Performance Dimension

CHAPTER 3 RESEARCH METHODOLOGY 29

3.1 Data Collection 29

3.1.1 Population and Sample 29

3.1.2 Measures of Key Research Variables in the Survey Instrument 30

3.2 Data Analysis 32

3.2.1 Data Coding and Missing Values Analysis 32

3.2.2 Reliability Analysis 32

3.2.3 Validity Analysis 33

3.2.4 Data Analysis Procedures 34

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CHAPTER 4 RESULTS AND DISCUSSION 35

4.1 Findings 35

CHAPTER 5 CONCLUSIONS AND RECOMMENDATIONS 40

5.1 Discussions 40

5.2 Contributions 43

5.2.1 Theoretical Contributions 43

5.2.2 Managerial Contributions 44

5.2.3 Policy-making Contributions 45

5.3 Limitation & future study 46

REFERENCES 48

Books and Book Articles 48

Articles 49

Electronic Media 58

Thesis or Dissertation 58

Conferences 59

APPENDICES

APPENDIX A 62

BIOGRAPHY 78

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LIST OF TABLES

Tables Page

2.1 Contrasting Causation and Effectuation 13

3.1 Summary of Measurement Items 33

4.1 Regression Analysis of Market Dimension 35

4.2 Regression Analysis of Operation Dimension 36

4.3 Regression Analysis of Product Dimension 37

4.4 Regression Analysis of Performance Dimension 38

4.5 Correlation 39

5.1 Summary of Hypotheses Testing 42

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LIST OF FIGURES

Figures Page

2.1 Effectual Process 15

2.2 The Impact of Causation & Effectuation on Internationalisation Process 17

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LIST OF ABBREVIATIONS

Symbols/Abbreviations Terms

MNEs Multi National Enterprises

SMEs Small and Medium Enterprises

IMS International Market Selection

C&E Causation & Effectuation

N.S. Not Significant

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CHAPTER 1

INTRODUCTION

The importance of doing business across borders has led many scholars

from various fields to study the internationalisation process of a firm. As a firm grows

over time, the opportunities within its domestic market become limited (Kotler &

Keller, 2016). Thus, seeking additional market(s) could be viewed as a way to help

firms to expand their operations. However, managing across borders is challenging, as

the international environment is considered highly uncertain and complex

( orsa ien varonavi ien , 2012). As such, the study of internationalisation

differs significantly from growing a business within a domestic market and requires

some certain domain of knowledge devoted to this area of investigation.

1.1 Background and importance

In the 1960s, the international business literature focused on multinational

enterprises and their international activities, resulting in the first stream of theories,

e.g. internalisation theory, the transaction cost theory, the eclectic paradigm, the

monopolistic advantage theory etc. In 1970s, Nordic scholars introduced another

stream of theories treating internationalisation as a behavioural process (a.k.a. a

process approach). This stream initially emerged from Johanson and Vahlne's (1977)

seminal Uppsala model. Johanson and Vahlne (1977) view internationalisation as

serial stages of a firm’s international development. However, the stage-based

internationalisation was criticised for being too deterministic and restricted to an ideal

route that neglected phenomena, such as leap-frogging from one stage to the other. As

such, the role of networks was introduced as an alternative means to facilitate the

internationalisation of firms (Johanson & Vahlne, 1977; 1990).

Contrary to multinational enterprises, SMEs and their internationalisation

have recently gained greater attention from scholars (Ruzzier et al., 2006). The study

of SME internationalisation often adopts a process approach rather than an economic

approach. However, these two approaches still neglect the influence of entrepreneurs

and how they make strategic choices (Andersson, 2000; Ruzzier et al., 2006). In

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addition, the emergence of international new ventures where entrepreneurs take a key

role in their business’s start-up process (Oviatt & McDougall, 1994, 1995) also

emphasises the importance of entrepreneurs to a firm’s internationalisation process.

Here, international entrepreneurship was proposed as a new domain of study to help

us to better understand these specific types of internationalisation and how they could

be integrated with earlier internationalisation process concepts to assess how SMEs

select their international markets and choose the appropriate way to enter a specific

foreign market (Jones & Coviello, 2005; Harm & Schiele, 2012).

The critical analysis of international entrepreneurship studies (Peiris et al.,

2012) shows that the most recent stream of internationalisation studies is rooted in

‘effectuation logic’, the concept made famous by Sarasvathy (2001). The concept of

effectuation is a means-driven behaviour which entrepreneurs use during venture

creation when the possible outcome is selected from the given means (Saravasthy,

2001). On the other end of the effectual logic is causation. Causal logic is a rational

business planning approach focusing on how to create a strategy to reach desired

outcomes or effects (ibid.). Dew and Sarasvathy (2002) point out that effectuation is a

method for problem solving in situations characterised by Knightian uncertainty

(Knight, 1921), Marchian goal ambiguity (March, 1982) and Weickian enactment

(Weick, 1979). This kind of situation is like those in which SMEs initiate their

internationalisation process (Sarasvathy et al., 2014; Schweiser et al., 2010); thus, it

seems reasonable to apply effectuation to internationalisation studies. Similarly,

Harms and Schiele (2012) also argue that internationalisation can be framed as a

decision-making problem under uncertainty; hence, effectuation theory appears to be

a suitable building block for internationalisation theory.

As mentioned earlier, effectuation theory has been used to understand

new international ventures and their processes. Based on Johanson and Vahlne’s

(2009) extended Uppsala model, Schweiser et al. (2010) introduced effectuation to a

previous theory to complete the entrepreneurial aspect of internationalisation. Kalinic

et al. (2014) also introduce how ‘unplanned’ internationalisation can be better

understood with effectuation. However, to date, studies integrating both effectuation

theory and internationalisation theories are still limited within early phrases of SMEs’

internationalisation or new international ventures. Schweiser (2015) argues that the

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use of effectuation logic does not change over time but, rather, depends on decision

makers and the situations they face. Additionally, many scholars (e.g. Wiltbank et al.,

2006; Harm & Schiele, 2011; Perry et al., 2012) agree that causation and the

effectuation construct are not diametrically opposed; some scholars claim that both

can be used simultaneously and even successfully combined. As a result, it may be

reasonable to assume that the explanatory power of effectuation is not limited only to

the early phases of internationalisation or venture creation.

1.2 Research objectives

Many scholars (Chandra, 2007; Schweiser et al., 2010; Andersson, 2011;

Harms & Schiele, 2012; Kalinic et al., 2013; Sarasvathy et al., 2014; Chetty et al.,

2015; Schweiser, 2015) call for further empirical evidence of how effectual logic

influences a firm’s internationalisation, as the research in this area is still in its early

stage of development. The quantitative study of how effectuation influences the

internationalisation process seems to be underdeveloped and notably rare (Harms &

Schiele, 2012). In addition, Read et al. (2009b) propose that the combination of

causation and effectuation should be further explored, including its antecedents and

consequences. Thus, based on Harms and Schiele (2012) and Antoncic and Hisrich’s

(2000) models, the key purpose of this study is to empirically test the consequences of

effectuation- and causation-based decision ma ing towards the SMEs’ outward

internationalisation and their internationalisation process in a more holistic fashion.

Moreover, the combination of causation and effectuation logics is also empirically

tested in a firm’s internationalisation context. hereby, this study see s to achieve the

following objectives:

1) To examine the consequences of effectuation-based decision making

on SMEs’ internationalisation process in a more holistic fashion.

2) To examine the consequences of causation-based decision making on

SMEs’ internationalisation process in more holistic fashion.

3) To examine the moderating effect of effectuation on the relationship

between causation and SMEs’ internationalisation process.

4) To describe the effectuation and causation characteristics of Thai

export firms.

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1.3 Major contributions of the study

This study contributes to the field of international entrepreneurship on

theoretical, managerial and policy-making levels in the following ways.

From a theoretical perspective, this study further explores the explanatory

power of effectuation theory on the internationalisation process contributing to the

international business and international entrepreneurship literatures (Jones &

Coviello, 2005; Harm & Schiele, 2012). Moreover, the operationalisations of

causation and effectuation constructs have only been recently applied in quantitative

research of international entrepreneurship (Harm & Sciele, 2012). This study appears

to be among the very first to explore this type of relationship. In addition, this

research could also be deemed a pioneering study to substantiate the effect of both

causation and effectuation on internationalisation.

From a managerial perspective, this research provides managers with how

effectuation and causation logics affect the pattern of a firm’s internationalisation. A

better understanding of how these ways of thinking affect different dimensions of

internationalisation can also help managers to employ suitable decision-making logic

to set foot onto international ground more effectively.

Finally, from a policy-making perspective, the regulators, the Thai

government, can benefit from an understanding of how the two types of thinking

affect the pattern of a firm’s internationalisation and international activities. he

government can provide entrepreneurs and managers with favourable policies to

stimulate the growth of international activities of their firms, resulting in the increase

in export volume and value. For instance, the business network and relationship may

affect the pattern of the firm’s internationalisation and their exposure to international

markets. This policy-making implication can also be applied to other developing

countries where the institutional environment is like that of Thailand.

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1.4 Scope of the study

This study was conducted within the setting of manufacturing SME

exporters in Thailand. The unit of analysis for this study is the entrepreneur or

decision-maker, likely at the top management level, to understand the influences of

their actions and how strategic choices are to be made. This study assumes that the

strategic choices considered or made by the firm reflect either the causation or

effectuation approach, or both. The entrepreneurs or managers who responded to the

self-administered mail survey were assumed to be good representatives of their firms

and provide accurate information.

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CHAPTER 2

LITERATURE REVIEW

2.1 Internationalisation of SMEs

he study of firm internationalisation involves a firm’s development and

decision making in countries rather than the home country. The main concept behind

internationalisation is the behaviours behind a firm’s decision to expand its operations

abroad. Through various definitions and approaches, there are two streams of

literature on SME internationalisation. First, the modified Ansoff’s model introduced

by Loustarinen (1979) emphasises the product-market concept, incorporating the

operation dimension and resulting in studies of the process of internationalisation as

an evolutionary approach (Luostarinen, 1979; Johanson & Wiedersheim-Paul, 1975).

The Nordic studies also support this view, as it defines internationalisation as 'the

process of increasing involvement in international operations’ (Welch & Luostarinen,

1993, p. 156). This process has been widely recognised as gradual and sequential;

sometimes, it is referred to as a stage-based model. The other stream emphasises the

concept of a business network. In other words, internationalising firms utilise

networks of business relationships in other countries through extension, penetration

and integration (Johanson & Vahlne, 1990). By integrating the abovementioned

concepts, the phenomenon of internationalisation proposed to be examined in this

study is multi-dimensional in nature (Welch & Loustarinen, 1993). However, the

extant literature on internationalisation is considered incomplete, as firms do not

follow the stage approach of internationalisation. Instead, they operate internationally

from their inception (Oviatt & McDougall, 1994; Oviatt, McDougall, & Loper, 1995;

Madsen & Servais, 1997). Therefore, some scholars (Antoncic & Hisrich, 2000; Jones

& Coviello, 2005) proposed that the time dimension needs to be assessed in the

internationalisation process. As such, in this study, there are five dimensions of

internationalisation, including market, operation, product, time and performance.

Each of these five dimensions will be discussed in turn.

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2.1.1 Market dimension

The internationalisation process takes place when firms enter a new

foreign market. Welch and Luostarinen (1988) explain that, when a firm develops its

operations and offerings in other markets, their target markets may differ from the

home country because of existing market knowledge and market conditions.

Traditional approaches to international market selection can be

divided into systematic and non-systematic. The traditional systematic approach

requires a decision maker to be able to go through and perform various activities: (1)

Define the problem; (2) Identify the choice criteria – various country-specific or

market-specific indicators may be included in this step; (3) Weight the criteria; (4)

Generate alternatives; (5) Rate each alternative on each criterion; and (6) Compute the

optimal decision – a statistical model may be involved in this stage (Andersen &

Buvik, 2002, p. 348–349).

As for the use of a non-systematic approach, a decision-maker may

have limited information-processing capacity or decide to expand on an opportunistic

basis (ibid.). The Uppsala model (Johanson & Vahlne, 1977; 1990), which is one of

the well-known non-systematic approaches, proposes that psychic distance influences

the selection of foreign market. The concept of psychic distance has been defined as

factors preventing the flow of information between the firm and market, including

factors such as differences in language, culture, political systems, level of education

or level of industrial development (Johanson & Vahlne, 1977, p. 24). Because the

Uppsala model sees both general and experiential knowledge as required information

for internationalisation across markets (Andersson, Evers, & Kuivalainen, 2014),

firms enter new markets that are progressively more psychically distant (Johanson &

Wiedersheim-Paul, 1975; Johanson & Vahlne, 1990). For new ventures beginning

their international operations, management’s experience has a strong effect on

internationalisation (Reuber & Fischer, 1997); thus, it can be implied that psychic

distance seems to be working for, at least, new and early internationalising firms.

Nowadays, the explanatory power of psychic distance may be lower due to the

increase of consulting services. Nonetheless, psychic distance may still be an

influence at the decision-maker level (Johanson & Vahlne, 2009). Many scholars

agree upon the use of distance concepts, and thus, the definition has been further

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developed in different problem spaces. For instance, see Loustrarinen (1979) for

business distance and Kogut and Singh (1988) and Benito and Gripsrud (1992) for

cultural distance.

The use of traditional approaches, both systematic and non-

systematic, assumes a customer or partner to be out there (Andersen & Buvik, 2002).

Moreover, previous studies have been focused on the market selection process of the

seller, neglecting the role of buyer or other players in the establishment of an

exchange transaction. As a result, the relationship approach has been proposed, and

thus a business relationship becomes a unit of analysis (ibid.). Johanson and Mattsson

(1988) propose that firms can internationalise through developing their business

relationships and achieving the extension, penetration and integration of international

networks (Johanson & Vahlne, 1990). Therefore, the bridges between a firm and

partner(s) may trigger the firm to select a specific country on either a voluntary or

compulsory basis (Johanson & Sharma, 1987; Johanson & Vahlne, 1990).

2.1.2 Operation dimension

As Maignan and Lukas explain (1997, p. 7): ‘Once a business has

decided to internationalise its activities in a given country or region of the world, it

has to select the process it will rely on to penetrate this foreign mar et’. his process

is known as entry mode selection. The selection of an entry mode is a key decision to

be made in the internationalisation process (Canabal & White, 2008). Once the entry

mode is established, it would be too demanding to make any future alterations; thus,

the entry mode selection has long-term consequences for the firm (Benito & Welch,

1994; Benito, Larimo, Narula, & Pedersen, 2002).

Because the internationalisation process is developmental and

evolutionary, the earlier-mentioned entry mode may evolve over time, resulting in an

expansion of operating modes. Although a network may have no specific pattern of

internationalisation, the increase in commitment within a network may also indirectly

reflect the increase in commitment in terms of operational development, thus

influencing the process of selection entry or operating modes (Welch & Welch, 1996).

To study the development within a specific country, the establishment chain, the

concept of increasing commitment in an international operation, has been suggested

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as an important indicator (Johanson & Vahlne, 1977; Root, 1987). The classification

of operating modes appears to be two main streams providing different meanings for

entry modes alongside contractual cooperation with an organisational structure. (For a

comprehensive review, see Brouthers & Hennart, 2007.) Despite the range of

operating modes, three main types of operating modes have been identified, namely,

export entry modes, contractual entry modes and investment entry modes (Root,

1994). In addition, as Brousthers and Hennart (2007, p. 397) state: ‘Along a

continuum of increasing control, commitment, and risk, with [wholly-own

subsidiaries] chosen when firms want maximum control and are willing to make

maximum commitment and ta e on maximum ris ’, the footprint of operating modes

can be analysed through the level of control, commitment and risk that the firm

commits. The relationship between these concepts can be implied so that, when a firm

decides to gain greater control, it needs to commit greater resources and is required to

bear greater risk.

2.1.3 Product dimension

As a firm’s involvement in international activities increases over

time, it is hypothesised that its offerings would deepen and diversify towards foreign

markets (Luostarinen, 1979). Welch and Luostarinen (1988) propose that these

activities may occur at two levels: (1) the expansion of the product portfolio (Price

Waterhouse Associates, 1982) and (2) integrating ‘hardware’ and ‘software’

components into packaged form (Hornell & Vahlne, 1982).

The expansion of a firm’s international product portfolio may result

in the breadth and/or depth of their international product portfolio. In other words, the

new product can be added to an existing or new product line (Price Waterhouse

Associates, 1982). As business units can offer different product lines, the vertical and

horizontal expansion of the business unit should also be addressed as the expansion of

a product portfolio. Moreover, the setup of a new, different business unit, in which the

different product line is offered, can also create the new separate notion connecting

the firm with the corporate network (Forsgren & Johanson, 1992).

The typology of a product offering introduced by Loustarinen

(1979) consists of four categories: physical goods, services, know how and the

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system. The service can be classified into pure services, services delivered through

goods and services embodied with goods (Gronroos, 1990, cited in Korhonen, 1999).

The know how may consist of technical, marketing, R&D know how etc. Loustarinen

(1979) proposes that the introduction of a product offering into a new foreign market

begins with the simplest form, physical goods. Then, the increase of knowledge

regarding foreign markets helps firms blend services and know how (software) with

physical goods (hardware); thus, a firm’s product offering has developed into a more

complete offering package, called a system (Loustarinen, 1979; Hornell & Vahlne,

1982). This pattern of internationalisation means that the integration of hardware and

software seems to be evolutionary.

The decision related to an international product portfolio also

concerns the standardisation/adaptation of a company’s international marketing

strategies in a different product-market context (Cavusgil, Zou, & Naidu, 1993; cited

in Ruzzier, Antoncic, & Hisrich, 2007). Although product adaptation can be

considered a product-line extension into foreign markets (Calantone, Tamer Cavusgil,

Schmidt, & Shin, 2004), the decision about adapting a product to a foreign country’s

market seems to be more complex since different markets require different

understandings of customers’ needs and their environment. As such, we agree with

Ruzzier et al. (2007) that the product dimension should be addressed by locating it on

a product-market standardisation-adaptation continuum, rather than being

standardised as a global product or fully customised for a particular market (ibid.).

The extent of the standardisation of a firm’s international marketing strategy is

dependent on organisational and environmental factors (Zou, Andrus, & Wayne

Norvell, 1997). Nonetheless, the decision becomes more demanding for emerging

market firms (EMFs) which have to overcome both foreignness and country-of-origin

liabilities (Nicholson & Khan, 2017).

2.1.4 Time dimension

The time element is a new dimension trying to address the

intersection of international business and international entrepreneurship.

Traditionally, the Uppsala model (Johanson & Vahlne, 1977; 1990) introduced the

element that a firm will internationalise incrementally. However, the rising in the

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number of SMEs operating internationally from their inception appears to be

contradictory. This phenomenon appears to be a result of entrepreneurial behaviour

(McDougall & Oviatt, 2000) which stimulates the commitment of resources across

international markets. Moreover, the entrepreneurial concept such as opportunity

recognition can be considered an element which accelerates the internationalisation

process. Therefore, time becomes a strategic dimension of internationalisation which

bridges the incremental stage-based internationalisation and internationalisation of

international new venture firms (INVs) (Antoncic & Hisrich, 2000).

The concept of network internationalisation theories can also be

addressed by using the time dimension. As firms increase the commitment in their

business network, they gain a better position in their international network (Johanson

& Vahlne, 1990). The role of time can help firms make better decisions to advance in

their business network by measuring, for instance, how long a firm takes to gain a

substantial position within its foreign network or how long a firm has been developing

its relationship with particular foreign firms or networks. As a result, time can help

determine when to start (and stop) international activities at different stages (Reuber

& Fischer, 1997; Ruzzier, Hisrich, & Antoncic, 2006).

2.1.5 Performance dimension

Firms’ international performance is the most commonly used

indicator of the degree of internationalisation (Ruzzier et al., 2006). Internationalising

firms enjoy the benefits of operating in different countries’ mar ets. As firms could

exploit new international opportunities which increase their sources and diversity of

income across foreign markets, it seems reasonable to assume that the increase of

international income can reflect the extent to which the firm runs internationally along

with its growth and profitability. On the other hand, the performance can also

determine the declination and survivability of the firm. As a result, we can assume the

performance dimension can help us understand the behaviour and means employed by

internationalising firms at different stages.

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2.2 Causation & Effectuation

Sarasvathy (2001) explains that the economics and management literature

sees processes related to business ventures as causation processes. She argues that the

venture creation process of an entrepreneur seems to be different from this process;

hence, she introduces the concepts of causation and effectuation. The causation

process is an effect-driven process where a firm focuses on selecting how to create

that effect. In contrast, the effectuation process is a means-driven process where a

firm focuses on selecting the possible effects that can be created with that set of

means (Sarasvathy, 2001, p. 245). In other words, the logic behind causation

processes is ‘to the extent that we can predict the future, we can control it’. However,

the logic behind effectuation processes is ‘the extent to which we can control what we

are doing. In case we can control what we are doing, we do not need to predict it’

(Sarasvathy, 2001, p. 252). Sarasvathy (2001) also provides a framework contrasting

the characteristics of causation and effectuation (see Table 2.1, p. 15). The conceptual

differences between both processes do not determine that either of them is better or

more efficient, but Saravasthy argues that the use of any process is dependent on the

situation. Dew and Sarasvathy (2002) proposed that effectuation is a problem-solving

method that helps overcome situations characterised by Knightian uncertainty

(Knight, 1921), Marchian goal ambiguity (March, 1982) and Weickian enactment

(Weick, 1979). In such situations, predictability, a given goal or an independent

environment is not available to the decision maker.

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Table 2.1 Contrasting Causation and Effectuation

Categories of

differentiation

Causation processes Effectuation processes

Givens Effects are given Only some means or tools are given

Decision-making

selection criteria

Help choose between means to

accomplish the given effect(s)

Help choose between possible

effects that can be created with

given means

Selection criteria based on expected

return

Selection criteria based on

affordable loss or acceptable risk

Effect dependent: choice of means is

driven by characteristics of the

effect the decision-maker(s) want to

create and their knowledge of the

possible means

Actor dependent: given specific

means, choice of effect is driven by

characteristics of the actor(s) and

their abilities to discover and use

contingencies

Competencies

employed

Excellent at exploiting knowledge Excellent at exploiting contingencies

Context of

relevance

More ubiquitous in nature More ubiquitous in human action

More useful in static, linear and

independent environments

Explicit assumption of dynamic,

non-linear and ecological

environments

Nature of

unknowns

Focused on predictable aspects of an

uncertain future

Focused on controllable aspects of

an unpredictable future

Underlying logic To the extent we can predict the

future, we can control it

To the extent we can control the

future, we do not need to predict it

Outcomes Market share in existing markets

through competitive strategies

New markets created through

alliances and other cooperative

strategies

Note. Adapted from Sarasvathy (2001, p.251)

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Following the logic of control, an effectuator relies on five distinctive

principles which invert the rational choice seen in the causation approach, as follows

(Sarasvathy, 2008):

(1) Bird-in-Hand – Effectuation emphasises means-based logic which can be seen

when an effectuator asks means-based questions: (1) who am I? (identity), (2)

what do I know? (knowledge) and (3) whom do I know? (networks).

(2) Affordable Loss – Instead of trying to predict the possible gain, an effectuator

focuses on controlling the downside scenarios.

(3) Crazy Quilt – Through risking only affordably lost resources, an effectuator

decides to contract with other stakeholders to expand their resource pool, thus

guaranteeing a relatively stable future without employing competitive

analyses.

(4) Lemonade – An effectuator treats uncertainty as an opportunity to evolve

resources and construct new goals with contingent information.

(5) Pilot-in-the-Plan – An effectuator sees the future as cocreated events rather

than inevitable trends; thus, he or she decides to intervene in the problems and

experiment for favourable outcomes.

As illustrated in Figure 2.1, the abovementioned principles previously

observed in static studies of effectuation were taken into a dynamic situation. These

principles were enacted along the effectual process through two concurrent cycles

(Sarasvathy et al., 2014). Firstly, entrepreneurs will increase their means through the

expansion of networks. Secondly, an entrepreneur will simultaneously converge

his/her goal towards stakeholders and commitments that are mutually made.

Previous attempts to develop and validate the causation and effectuation

constructs have resulted in both reflective and formative constructs (Chandler et al.,

2007; Wiltbank et al., 2009; Chandler et al., 2011). Chandler et al. (2011) propose that

effectuation should be considered a formative construct. In this study, we adopted the

validated effectuation measure refined and operationalised by Chandler et al. (2011)

into four subconstructs, namely, experimentation, affordable loss, flexibility and pre-

commitment. Although this measure was argued to be incomplete as it does not

incorporate other elements of effectuation (e.g., bird-in-hand principle) or the

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outcome of effectuation (Perry et al. 2012), the four sub-dimensions of effectuation

seem to cover the overall characteristics of effectual behaviours.

Note. Adapted from Sarasvathy et al. (2014)

Figure 2.1 Effectual Process

2.2.1 Causation and effectuation in internationalisation context

Uncertainty has become a central role in the internationalisation

problem space because of a lack of market knowledge (Johanson & Valhne, 1977).

However, previous studies, rooted in the management and economic literature, seek

risk reduction and avoid uncertainty in foreign markets (Chetty, Ojala, & Leppaaho,

2015). This can be seen in the model of internationalisation which consists of

sequential steps starting from selecting a target market, setting goals, selecting the

entry mode, tactical and operational planning for market entry until the firm finally

operates on foreign ground (e.g. Root, 1994). This sequential process, also known as

business planning, relies on competitive analysis to help a decision maker in making

rational choices resulting in maximising profit and controlling the future through a

backup plan. Indeed, this process is consistent with the segmentation, targeting and

positioning process which is characterised as the causation approach by Sarasvathy

(2001).

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However, the studies of how entrepreneurs actually plan, make

decisions and implement their internationalisation strategies under uncertainty have

not gained much attention (Chetty, Ojala, & Leppaaho, 2015). Sarasvathy et al.’s

(2014) study reveals that there are at least three characteristics of operating businesses

across an international market that call for entrepreneurship theories or, particularly,

effectuation: (1) cross-border uncertainty, (2) limited resources and (3) network

dynamics. The study also explains how the five principles of effectuation fit with

these three characteristics (ibid.). Likewise, Johanson and Vahlne (2009) see the

Uppsala internationalisation model has many similarities compared with the concept

of effectuation, including environmental characteristics, the limited number of

available options, incremental development and an emphasis on cooperative

strategies.

Despite the lack of information about target markets, international

experience, a business plan and, subsequently, a precise goal and how to

internationalise, the investments of firms in foreign countries might still be effective

(Kalinic & Forza, 2012). This phenomenon can also be called unplanned

internationalisation (for a comprehensive review, see Chandra, Styles, & Wilkinson

2009). Kalinic, Sarasvathy and Forza (2014) argue that unplanned internationalisation

does not necessarily involve non-logical decisions but rather follows effectual logic

instead of causal logic. They also argue that the decision making of an entrepreneur

fluctuates between causal and effectual logic depending on the level of uncertainty

and propensity to rely on affordable loss as opposed to maximising profit (ibid.). As a

result, switching from causal to effectual logic allows firms to rapidly increase the

level of commitment in the foreign market, thus overcoming the liability of

outsidership (Johanson & Vahlne, 2009; Kalinic et al., 2014).

As decision-makers learn and gain knowledge about markets over

time, there is a tendency to transform from effectual reasoning to causal or at least

quasi-causal reasoning in the latter stages of internationalisation (Sarasvathy, 2001;

Chandra, 2007). Kalinic et al.’s (2013) study also supports this hypothesis, as in the

subsequent expansion abroad, the decision-makers applied a systematic approach to

their decision-making process, hence, moving from effectuation to causation logic.

Nonetheless, Harms and Schiele’s (2012) study reveals that the two logics may not be

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diametrically opposed. Many studies support this view. For instance, the higher the

uncertainty in the internationalisation process (foreign market selection and foreign

market entry, originally) the more likely that the interweaving of both causal and

effectual logics will be used than either of these two logics as distinct entities (Chetty

et al., 2015). The more dynamic an international market is perceived to be, the more

likely effectuation will be employed by the decision-maker, though supported by a

systematic information search (Harms & Schiele, 2012). Nonetheless, Schweiser’s

(2015) study suggests that the previous understanding of the transformation of logic

over time seems too simplistic. He explains the decision-maker can make decisions

with both causal and effectual logic simultaneously at any stage of expansion abroad

(ibid.).

2.3 Hypotheses

Figure 2.2 Impact of Causation & Effectuation on Internationalisation Process

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2.3.1 Causation & effectuation and internationalisation

2.3.1.1 Causation & effectuation and market dimension

Although Chetty et al.’s (2015) study shows that firms

usually follow causation logic in their foreign market selection process, there is

evidence that Finnish firms using the causation approach select and enter foreign

markets in more diverse fashions (Chetty et al., 2015). This is because a firm has a

clear idea or reason of why it should be expanding into particular foreign market(s).

The clear idea and reason is the main input of a goal construction where business

planning and investment calculation subsequently come after and result in the

systematic approach of foreign market selection. Some elements of causation can be

seen in the systematic approach such as making decisions with competitive analysis

and making decisions based on return on investment.

However, the problem of where a firm should be expanding

to may be problematic when a firm has no goal or vague ideas or relied on partners’

decisions. The partners’ decisions may result in a psychically close market because

the greater-distance market is also more challenging for network extension (Johanson

& Vahlne, 2009; Ojala, 2009). Thus, the comprehensive analyses of the range of

possible country markets may be skipped or cannot function properly. This

information-reducing behaviour can also be seen in Kalinic et al.'s (2014) study as

‘the entrepreneurs chose the first country that satisfied the main goal (e.g. lower

production costs) and where the other factors were not disturbing ones’ (p. 640),

which somewhat is backed by the logic of affordable loss. In addition, there is also

evidence revealing how effectuation-based firms or SMEs expand in incremental

patterns through near-psychic distant country markets (Pangarkar, 2008; Chetty et al.,

2015), which can also be seen as entering concentrated region(s) of foreign markets.

These characteristics reflect some elements of effectuation, such as relying on pre-

commitment with partners (and their decision) instead of competitive analysis,

expanding incrementally may reflect affordable loss and flexibility, and emphasising

certain dimensions, then neglecting the importance of some factors also reflects

affordable loss.

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H1a: The causation approach relates positively to the market dimension of

internationalisation.

H1b: The effectuation approach relates negatively to the market dimension of

internationalisation.

2.3.1.2 Causation and effectuation and operation dimension

A previous study (Harms & Schiele, 2012) reveals that a

causation-based firm tends to set up its operations abroad with less equity types and

more export entry modes. We suggest that this is because a causation-based firm is

more well-informed, and thus has less necessity to learn or acquire more knowledge

of a particular foreign market. The reason is that the higher the intensity of the firm’s

involvement in the new market, the more the opportunities for learning can be

exploited (Zahra, Ireland, & Hitt, 2000). In other words, a firm that has less necessity

to learn more may also have less necessity to operate in a high-intensity involvement;

hence, a causation-based firm may employ less equity type modes and more export

entry modes.

Although the evidence of how an effectuation-based firm set

up its operation is not statistically supported in previous studies (Harms & Schiele,

2012), the cases in Kalinic et al.’s (2014) research may indicate that effectuation-

based firms enter foreign markets with a high commitment to relied-on partners in the

foreign market. We believe that these firms select high-commitment modes because

of the better opportunities to acquire experiential knowledge provided by higher

intensity involvement. In addition, when a firm lacks market knowledge and

resources, it is inclined towards a means-driven approach (Chetty et al., 2015).

Therefore, we believe that an effectuation-based firm ignores or biases the fact that

the relationship between FDI indicators and ROE may not be positive (type-II error).

Moreover, we believe that they see benefits from gaining more knowledge in a short

period of time as outweighing the return on investment. This seems to be consistent

with a previous study (Zahra, Ireland, & Hitt, 2000) that the breadth, depth and speed

of technological learning would increase along with the closeness of a firm towards

its market and its customer(s) resulting from employing high-control entry modes.

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Consequently, some elements of effectuation can be observed

in this process. First, relying on the potential of a partner to make an FDI decision

reflects pre-commitment. Second, neglecting the investment calculation to gain

knowledge and adjusting its operation along the internationalisation process also

reflect affordable loss and experimentation.

H2a: The causation approach relates negatively to the operational dimension of

internationalisation.

H2b: The effectuation approach relates positively to the market dimension of

internationalisation.

2.3.1.3 Causation and effectuation and product dimension

The effectuation-based firms in Kalinic et al.’s (2014) and

Chetty et al.’s (2015) studies follow their partners into a foreign market; moreover,

they still offer the same, existing product to their partners or customers in early

internationalising phases. We believe that this is because an effectuator experiments

with what can be done with existing resources or products instead of what ought to be

done, which is the causal approach. In addition, effectuation-based firms rely on their

partners to gain insights into product attributes, helping firms meet local market

expectations (Sarasvathy & Wiltbank, 2010). Effectuation-based firms also keep their

resources flexible because they avoid courses of action which may restrict their

flexibility and adaptability (Chandler, DeTienne, McKelvie, & Mumford, 2011). As a

consequence, we believe that when an effectuation-based firm decides to adapt their

product attributes for each particular market, they will do so in incremental fashion.

This reflects some elements of effectuation: (1) flexibility, (2) affordable loss, (3) pre-

commitment and (4) experimentation. On the other hand, there is evidence in previous

studies (Cavusgil & Zou, 1994; Cooper & Kleinschmidt, 1985; Kirpalani &

MacIntosh, 1980) supporting that adapting products for sale in different foreign

markets typically results in better international performance; hence, we suspect that

causation-based firms, being highly influenced by performance or expected return, are

likely to adapt their product attributes for foreign markets.

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H3a: The causation approach relates positively to the product dimension of

internationalisation.

H3b: The effectuation approach relates negatively to the product dimension of

internationalisation.

2.3.1.4 Causation and effectuation and time dimension

Originally, the effectuation theory was used to understand

how entrepreneurs create new ventures (Sarasvathy, 2001). This concept has been

further explored and used to understand the behaviour of rapidly internationalising

firms in their early stages which incorporate the concepts of international

entrepreneurship (McDougall & Oviatt, 2000). The opportunity-seeking behaviour

observed in the early stages of rapidly internationalising firms has some element of

effectuation, such as actively seeking networks and an innovation orientation which

reflects pre-commitment and experimentation (Oviatt & McDougall, 1994, cited in

Ojala, 2009). Moreover, Johanson and Kalinic (2016) also suggest that a firm’s

internationalisation process is likely to accelerate when it recognises and exploits

international opportunities. Fisher (2012) also posits that decision-makers who

identify opportunities based on their controllable resources will be readier to capture

the identified opportunities compared with decision-makers who identify

opportunities based on a competitive analysis of the external market. At this point, the

element of effectuation, flexibility, can also be seen. Drawing on Kalinic’s (2014)

assumption: ‘In conditions of high uncertainty, the switch from causal to effectual

logic allows rapidly increasing the level of commitment in the foreign market’. We

believe that using effectual logic during the early stages (both before starting to

internationalise and the beginning of internationalisation) will help a firm increase its

international involvement faster.

H4a: The causation approach relates positively to the time dimension of

internationalisation.

H4b: The effectuation approach relates negatively to the market dimension of

internationalisation.

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H5a: The causation approach relates positively to the time dimension of

internationalisation.

H5b: The effectuation approach relates negatively to the market dimension of

internationalisation.

2.3.1.5 Causation and effectuation and performance dimension

Although Saravasthy (2001) suggests that effectuation and

causation do not directly lead to better performance, some scholars introduce different

conjectures. According to the meta-analysis in Read et al.’s (2009) study, the

relationships between most sub-dimensions of effectuation and venture performance

seem to be positive and significant. However, the relationship between affordable loss

and venture performance appears to be contradictory. Even so, some studies find

positive relationships among causation/effectuation and growth/performance, while

the others do not (Kraaijenbrink et al., 2011; Smolka et al., 2013).

Following the preceding hypotheses on the incremental

internationalisation of effectuation-based firms in various dimensions, we suspect that

the international performance of effectuation-based firms would concurrently increase

in an incremental fashion as well. On the other hand, causation which focuses on

return on investment may result in greater international performance. This seems to be

plausible, as findings in previous studies, in general e.g. Smolka et al. (2013), show

that the use of causation positively influences venture performance; specifically, the

use of formalised export planning positively relates to export performance (Lukas et

al., 2007; cited in Harm & Schiele, 2011).

H6a: The causation approach relates positively to the performance dimension of

internationalisation.

H6b: The effectuation approach relates negatively to the performance dimension

of internationalisation.

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2.3.2 The moderating effect of effectuation on the relationship of

causation and internationalisation

Many scholars (Wiltbank et al., 2006; Harm & Schiele, 2011; Perry

et al., 2012) agree that causation and the effectuation construct are not diametrically

opposed but, rather, orthogonal. Despite the potentiality of combining two logics in

the decision-making process, very few studies examine these logics in a combined

fashion (Johansson et al., 2015). The co-existence of causation and effectuation can

be addressed in three different patterns: (1) the near-simultaneous use of logic, (2) the

sequential use of logic and (3) situational dependence (ibid.). This finding seems to be

consistent with the earlier discussed work of Schweiser (2015) which claims a

decision-maker can switch from causal to effectual logic, or likewise, from effectual

to causal logic. Similarly, Sarasvathy et al. (2014) also advance the point that a firm

may decide whether it will internationalise with causal logic but simultaneously

decide how it will expand its presence into foreign market countries with effectual

logic. In addition, Kraaijenbrink et al. (2011) argue that causation and effectuation

can be successfully combined in the business planning process. Interestingly, some

scholars have introduced the mixed use of both logics as quasi-causation reasoning.

Through analysing the evidence in previous studies, we suspect that the so-called

quasi-causation reasoning may either fall into the first type of pattern, the near-

simultaneous use of logic, or the second type of pattern, the sequential use of logic, or

both. Here, we see quasi-causation as the product of the interaction or joint influence

of effectuation and causation (Smolka et al., 2013). In other words, we address quasi-

causation as the moderating effect of effectuation on the relationship of causation and

other constructs or, specifically, the internationalisation construct in this study. Thus,

the following assumptions can be made:

2.3.2.1 The moderating effect of effectuation on the relationship

of causation and market dimension

Previously, we hypothesised that the causation-based firm

would expand into foreign markets in more diverse regions. Adding the elements of

effectuation to an internationalisation decision-making problem, a firm would

consider their options and behave differently. At first, the firm may or may not decide

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to operate in diverse regions; however, making decisions with effectual affordable

loss logic would force the firm to utilise only available resource(s), possibly lowering

the investment level. This potentially limits the range of foreign country markets and

inevitably encourages firms that employ the effectuation approach to enter or

participate in fewer regions. Based on the study of Koberg et al. (2003), Chandler et

al. (2011) adapt the measures previously developed to reflect the experimentation in a

corporate entrepreneurial context into a new venture creation scenario. Being able to

experiment means that an entrepreneur or manager is capable of proactively pursuing

and recognising opportunities early (Brown & Eisenhardt, 1998). Furthermore, an

entrepreneur or manager should also acquire the necessary information to foresee

unexpected opportunities and respond quickly to the market (Koberg et al., 2003). As

such, we believe that simultaneously employing effectual experimentation and

causation will lead to experimentation with business within a limited number or at

least concentrated regions to try different approaches and gain sufficient experiential

knowledge towards selected foreign country market(s). Operating across many

foreign country markets possibly leads to higher operating costs (e.g. logistic cost and

system integration cost). To avoid courses which may limit future alterations, an

entrepreneur who decides to enter/operate in many regions based on a causal approach

may decide to invest less resources and thus enter or operate in foreign markets in

fewer region(s). As discussed earlier, extending a business network seems more

challenging when the targeted foreign market has greater distance. We believe that

after taking a business network or relationship into consideration, an entrepreneur will

operate in fewer foreign market regions to lessen the risk of entering the foreign

market. Thus, we hypothesise that:

H7: The effectuation approach will moderate the relationship causation and

market dimension of internationalisation.

2.3.2.2 The moderating effect of effectuation on the relationship

of causation and operation dimension

Previously, we hypothesised that employing the causation

approach during the process of selecting an operation mode would result in the lower

commitment mode of the operation, e.g. exporting. Being moderated by the affordable

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loss dimension of effectuation, the entrepreneur may be able to bear risk at an

affordably lost amount of resources. Thus, an entrepreneur may come up with a

higher commitment or riskier mode easier than wholly employing causation logic.

When an entrepreneur recognises opportunities early, we believe that he/she may

decide to expand on an opportunistic basis. As such, entrepreneurs who employ

effectual experimentation may experiment with different operation modes which

possibly moderate the relationship between the causal approach and low commitment

operation mode. By employing the flexibility dimension of effectuation, the

entrepreneur or decision-maker will avoid investing in the high commitment mode, as

it restricts the flexibility and adaptability of their firms. Moreover, we believe the

entrepreneur who does competitive analysis or investment calculations and

simultaneously keeps his/her firm flexible will enter into foreign markets with the

operation mode at the level of resources the firm has. The evidence in Schweiser’s

(2015) study shows that, by employing the pre-commitment dimension of

effectuation, the firm previously employing a causal approach to make decisions

regarding their operation mode will switch from doing a competitive analysis on the

market to doing analysis on their partners. Thus, we develop hypotheses regarding the

moderation effect of elements of effectuation as follows:

H8: The effectuation approach will moderate the relationship causation and

operation dimension of internationalisation.

2.3.2.3 The moderating effect of effectuation on the relationship

of causation and product dimension

As discussed earlier, we believe that causation-based

decision-making will lead to a higher degree of market-product adaptation. By

employing the experimentation dimension of effectuation, an entrepreneur can

experiment with different products at varying levels of market adaptation and

repeatedly try a number of different value propositions within foreign markets.

Moreover, we see the entrepreneur who experiments with his/her product as being

able to proactively pursue early opportunities in foreign markets. This may potentially

lead to the early launch of a customised product in a foreign market. Thus, the

originally conceptualised product may not be completely customised for a particular

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foreign market. As such, it may be later adjusted through trials. The more customised

the product, the more likely that it will need more resources, for instance, production

and marketing costs. Thus, employing the affordable loss dimension of the

effectuation approach simultaneously with the causation approach may result in a

careful assessment so many resources will not be committed compared to wholly

employing the causation approach. To maintain the flexibility and adaptability of the

firm, the entrepreneur will likely adapt his/her newly launched product to the existing

resources which possibly lower the degree of customisation/adaptation of a particular

product. Moreover, an entrepreneur may take advantage of future opportunities and

adapt his/her product to events arising in a particular country’s mar et. By employing

the pre-commitment dimension of effectuation, the highly customised product which

is influenced by the causation approach may be moderated as the insights into product

attributes were based on partners’ information rather than truly conducting research

for market or consumer insights. As such, the following hypotheses were developed

as follows:

H9: The effectuation approach will moderate the relationship causation and

product dimension of internationalisation.

2.3.2.4 The moderating effect of effectuation on the relationship

of causation and time dimension

A firm in Schweizer’s (2015) study reported to employ quasi-

causation logic seemed to delay its decision to go abroad. As previously discussed,

employing the causation approach may result in a considerable amount of time to

prepare and reach a certain degree of internationalisation. However, we suspect that

by employing some elements of effectuation logic along with causal logic the

influence of causation on the time dimension of internationalisation will weaken.

First, the opportunity-seeking behaviour which reflects the experimentation

dimension may motivate entrepreneurs to make decisions early to hurriedly capture

opportunities. Second, making decisions wholly based on an expected return may

need comprehensive review and analysis, as it may possibly consume considerable

resources; thus, integrating an affordable loss element into the decision-making

process may hasten the process, as it will probably employ fewer resources which an

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entrepreneur can afford to risk. Third, the causation-based decision which possibly

may take a long time may be concluded earlier, as a flexible element of effectuation

may influence an entrepreneur to make decisions only with existing resources, not all

possible resources, including loans for extra resources. This could shorten the time, as

the decision maker does not need to do analysis as rigorously as the solely causal

decision-making process. Finally, having pre-commitments with partners means that a

firm may need less time to make decisions. Thus, the relationship between causation

and the amount of time may be weakened. As a result, we can hypothesise the

propositions regarding the time dimension of internationalisation as follows:

H10: The effectuation approach will moderate the relationship causation and

time dimension of internationalisation.

2.3.2.5 The Moderating effect of effectuation on the relationship

of causation and performance dimension

Findings in Smol a et al.’s (2013) study show that employing

both causation and effectuation together leads to better performance. As both

causation and effectuation can be employed simultaneously, we believe that the

relationship between cognitive decision-making constructs and the

internationalisation construct will be moderated. First, we see that if entrepreneurs

proactively pursue opportunities, he/she will gather only necessary information in

response to the change of the uncertain environment (Koberg et al., 2005). However,

with limited information we suspect that the actual performance will deviate from the

expected result. Second, employing causal reasoning will lead to comprehensive

business planning which may encourage entrepreneurs to fully utilise all possible

resources, both acquired and existing resources. However, employing effectual

reasoning simultaneously may result in weighing the importance of existing resources

even more. As such, the decision maker may invest less and expect lower returns on

investment. Third, when entrepreneurs make decisions based on a causal approach,

he/she needs to be able to foresee future opportunities and threats. However, not every

event can be predicted, especially for SMEs which have less resources to gather

information. Accordingly, we believe that, by keeping a firm flexible, it allows the

business to evolve, as opportunities emerge that will at least increase the survivability

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of the firm. Finally, we previously hypothesised that doing a comprehensive market

analysis would bring the firm higher international performance. By integrating the

pre-commitment dimension of effectuation, we suspect that the firm will be able to

expand its resource pool and ta e partners’ competence into account. Similarly, Fisher

(2012) also sees that entrepreneurs who actively engage in networks of potential

customers may gain better performance once a product or service is launched

compared with entrepreneurs who do not engage a community of potential customers.

Even so, a firm may not gain higher international performance as it commits with its

stakeholder early without a full comprehensive review on the market or its

stakeholder. Thus, we hypothesise the moderation effect of the relationship between

causation and international performance as follows:

H11: The effectuation approach will moderate the relationship causation and

market dimension of internationalisation.

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CHAPTER 3

RESEARCH METHODOLOGY

3.1 Data collection

To test the hypotheses, data were collected through postal surveys

administered in Thailand. The executives and managers working in export-related

operations were chosen as the participants since they would be knowledgeable about

their company’s international operations. The manufacturing industry was selected

because its nature regarding internationalisation development can be easily assessed.

The survey method was chosen because: (1) it can be used to test a large sample size

to achieve the generalisability of the findings (Bryman, 2015); (2) it was used to

gather information about the causation and effectuation regarding the

internationalisation process (Harms & Schiele, 2012) and internationalisation

dimension (Ruzzier et al., 2007; (3) it offers anonymity (de Vaus, 2013); and (4) it

needs a lower budget to administer compared to other methods, such as experiments

(Bryman, 2015).

3.1.1 Population and sample

The number of exporting manufacturing firms registered in

Thailand was estimated to be 1,266 (Department of Business Development, 2017).

Firms in the sample were selected from Thailand’s Ministry of Commerce database.

According to Thai laws, the SME, by definition limited to the manufacturing industry,

is an enterprise corresponding to any of the following: with employees of up to 200 or

with assets of up to 200 million bahts (about EUR 5,400,000). Thus, large

corporations were filtered out according to the definition of Thai laws. As a result, the

final number of exporting manufacturing SMEs was 1,085; surveys were mailed to

these firms sequentially.

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3.1.2 Measures of key research variables in the survey instrument

The 71-item self-administered survey questionnaire was developed

to measure the elements of causation, effectuation and degree of internationalisation.

This questionnaire was developed based mainly on existing scales from both the

international business and entrepreneurship literatures. Most questions were adapted

to measure the international activities of a firm over the past three years.

Causation and Effectuation The scale developed by Chandler et al.

(2009) was used in this research. The respondents were asked to answer the items

regarding their usual decision-making process and business operations. Five-point

Likert-type scales were used to assess the degree to which respondents agreed with

the statement relating to the items.

Degree of Internationalisation The scale developed by Ruzzier et al.

(2007) was mainly used to assess the multi-dimensionality of internationalisation in

this research. The respondents were asked to answer the items regarding their

company’s international activities. Antonic and Hisrich (2001, cited in Ruzzier et al.,

2007) explain that the combination of various scales measuring different aspects

would help the validity of the overall construct become more established; moreover,

the scales may complement each other. However, as the respondents in this study are

exporting SMEs rather than multi-national enterprises, some items were modified to

make them more appropriate. The internationalisation dimensions are measured by

using various types of scales, including five-point Likert-type scales and binary

scales. The development of measures and the instrumentation of dimensions are

discussed as follows.

The operation dimension measure was newly developed to capture

the extent to which export firms increase their involvement in international activities.

As earlier mentioned, the respondents are export firms expected to employ exporting

as a main operation mode. Thus, for the sake of comprehensibility, we designed more

a flexible measurement of operating mode by adapting the concept behind the

escalation of operation modes: the increasing of commitment, risk and control of

international operations (Brousthers & Hennart 2007). Five-point Likert-type scales,

ranging from ‘1’ = 'strongly disagree’ to ‘5’ = 'strongly agree’, were used to indicate

the extent to which the firm engaged or considered engaging in various operation

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modes. Exporting is assumed to be used when firms want the least control, risk, and

commitment. In contrast, the wholly owned organisational structure is considered

when firms want maximum control, can bear maximum risk and agree to make

maximum commitment (Brousthers & Hennart 2007).

The market dimension measure includes two aspects, as proposed

by Ruzzier et al. (2007). The first aspect was adapted from the measure previously

used by Manolova et al. (2002): in how many foreign countries were their products or

services sold’? The second aspect was adapted from Reuber and Fischer (1997). This

measurement indicates whether the firm gained foreign sales from any of the

following regions: (1) South East Asia, (2) the rest of Asia, (3) Europe, (4) the

Americas and (5) the rest of the world. The classification of regions is based on a

study of the degree of internationalisation of SMEs in Singapore (see Pangarkar,

2008), which also adapted the concept of ‘psychic distance’ (Johnson & Vahlne,

1990). The items were dichotomous and aggregated into a single score ranging from 1

to 5.

The product dimension measure involves two aspects. The first one

measures the degree of standardisation/customisation for different countries’ mar ets

by using five-point Likert scales. This measure was adopted from Manolova et al.

(2002, cited in Ruzzier et al., 2007). The items include (1) product/services, (2)

marketing/advertising, (3) branding and (4) employee training. This measurement was

also assessed with a five-point Li ert scale ranging from ‘1’ = ‘strongly disagree’ to

'5' = 'strongly agree’.

The time dimension was measured by four items asking the time

after the firm’s startup until it operated internationally, time prepared before starting

to operate internationally and time used to reach different ratios of foreign sales. This

measure was adapted from Reuber and Fischer (1997, cited in Ruzzier et al., 2007).

As for the cut-off point determining the actual internationalisation at the early phrase

of the firm, three items were included: time from startup to initial international

activities and time reaching 5% and 10% of foreign sales, as opposed to total sales.

The cut-off points were adapted from previous thresholds used for measuring export

intensity, such as 5% (McDougall & Oviatt, 1996) and 10% (Dichtl, Koeglmayr, &

Mueller, 1990).

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The last dimension of the degree of internationalisation was the

performance dimension adapted from Ruzzier et al.’s (2007) study. The respondents

were as ed to answer three items regarding a company’s international performance.

The first and the second items measure export intensity through the percentage of

export sales to total sales and the percentage of foreign sales to total sales. The third

item is the percentage of foreign profit to net profit. This item helps determine the

extent to which a foreign operation contributes to the firm.

3.2 Data analysis

3.2.1 Data coding and missing values analysis

To investigate research questions 1 through 4, the survey data were

prepared, coded and edited using SPSS (Statistical Package for Social Science)

software. The data were analysed for the missing values. As a result, 18 cases were

excluded from the analysis, as more than 70% of the values of the important variable

used in this study were missing. Moreover, the time dimension of the

internationalisation construct was considered dropping off from this study, as 20% of

the responses went missing. After there were no other variables with more than 10%

missing values, we continued the analysis by following Hair et al.’s (2010) imputation

method and substituted the missing values with the variable means. Furthermore,

since most of the items in this study were grouped into designated constructs, the

deletion of the variables with missing data would lower the response rate, resulting in

a significant loss of the overall sample size (Tabachnick & Fidell, 2007).

3.2.2 Reliability analysis

The data were verified for internal consistency reliability based on

Cronbach’s alpha. he means, standard deviations and Cronbach’s alpha of important

variables were compiled and summarised in Table 3.1. According to Maholtra (2008),

the satisfactory level for the coefficient alpha should be no less than 0.60. In addition,

Pallant (2005) proposes that the ideal value of a coefficient alpha should be above

0.70. The items in this study were also verified at the subconstruct level by being

summed up into designated attributes refined in an earlier study. For instance, the

subconstructs of effectuation, namely, experimentation, affordable loss, flexibility and

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pre-commitment, were extracted and distributed into designated components based on

Chandler et al.’s (2009) study. Both overall constructs and designated attributes gain

satisfactory levels of internal consistency reliability.

Table 3.1 Summary of measurement items

Measurement Item Mean SD Cronbach’s

Alpha

Causation 28.1948 3.9170 0.863

Effectuation 49.8701 5.2055 0.778

Experimentation 10.7089 2.2255 0.570

Affordable loss 12.9873 1.6447 0.783

Flexibility 16.6795 2.0354 0.745

Pre-commitment 7.3846 1.6454 0.785

Internationalisation

Operation dimension 8.7692 3.2789 0.850

Market dimension (single item) 2.4675 1.4472 -

Product dimension 14.8571 2.9367 0.823

Performance dimension 29.3661 83.1830 0.899

3.2.3 Validity analysis

Malhotra (2008) defines validity as the extent to which items

theoretically reflect the concept(s) they intended to measure. To ensure the content

validity of the items, two strategies were implemented. First, the content in the survey

was reviewed by experts in international business field, and then the content was

refined and changed through comments and suggestions. Second, the questionnaire

was pilot-tested with a sub-population (business owners and managers) to ensure that

the content within the questionnaire was delivered to respondents without difficulty.

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3.2.4 Data analysis procedures

The relationships hypothesised in the conceptual framework shown

in Figure 2.2 were tested with linear regression and moderated regression using SPSS

software. In addition, all predictor and moderator variables which aggregated from

multiple items were standardised to prevent possible problems with multicollinearity.

Along with testing the regression models, the variables were also tested regarding

whether they met the assumptions of normality, linearity and homoscedasticity by

using normal probability plots, residual scatter plots and the variance inflation factor

(Hair et al., 2010).

The analyses started with the basic regression model, which

contains only first-order variables – causation and effectuation. Then, the interaction

terms of causation and effectuation were added into the models and tested with

moderated regression. The research findings were presented in comparative fashion,

with and without interaction terms, along various dimensions of internationalisation.

The basic regression model used in this study can be written as:

Y = 0 + 1 CAU + 2 EFF +

Where Y = dependent variable

CAU = Causation variable

EFF = Effectuation variable

The moderated regression model used in this study can be written as:

Y = 0 + 1 CAU + 2 EFF + 12 CAUxEFF +

Where Y = dependent variable

CAU = Causation variable

EFF = Effectuation variable

CAUxEFF = Interaction of causation and effectuation

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CHAPTER 4

DATA ANALYSES AND RESEARCH FINDINGS

4.1 Findings

In this study, 12 hypotheses were examined. In general, 9 hypotheses

were statistically supported. In specific, there were no moderating effects to be found.

Both main directional effects (H1a&b to H6a&b) and moderating effects (H7 to H11)

were reported within each section along various dimensions of internationalisation.

Table 4.1: Regression Analysis of Market Dimension

Market Dimension

Model 1.1 Model 1.2

B SE B B SE B

Constant 2.468 0.163 2.546 0.171

CAU 0.092 0.206 0.063 -0.021 0.220 -0.015

EFF -0.043 0.206 -0.030 -0.086 0.207 -0.059

CAUxEFF -0.130 0.093 -0.188

R2 0.003 0.028

Adj. R2 -0.024 -0.010

F 0.101 0.730

Note: B = Unstandardized Coefficients, = Standardized Coefficients,

SE B = Standard Error, * = Significant at p < 0.05

Hypothesis 1a, 1b and 7 investigated the relationship between causation,

effectuation and its interaction and market dimension of internationalisation. This

study proposed that decision-maker who make decision based on causal reasoning

will be more likely to operate and gain income from many regions; on the other hand,

the decision-maker who make decision based on effectual reasoning will be less likely

to operate and gain income from many regions. In addition, the study also claims that

effectuation has moderation effect against the relationship between causation and

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market dimension of internationalisation. Unfortunately, both models regarding

market dimension of internationalisation were not supported as they appeared to be

not statistically significant (N.S.).

Table 4.2: Regression Analysis of Operation Dimension

Operation Dimension

Model 1.1 Model 1.2

B SE B B SE B

Constant 1.021E-13

0.096 -0.038 0.101

CAU 0.065 0.121 0.065 0.120 0.130 0.119

EFF 0.499 0.121 0.496* 0.520 0.122 0.516*

CAUxEFF 0.064 0.055 0.132

R2 0.288 0.301

Adj. R2 0.269 0.273

F 15.365* 10.742*

Note: B = Unstandardized Coefficients, = Standardized Coefficients,

SE B = Standard Error, * = Significant at p < 0.05

Hypothesis 2a stated that causation negatively relates to the operation

dimension of internationalisation resulting in lower commitment, lower control and

less risky operation modes being employed. This hypothesis was not supported, as the

coefficient was not statistically significant ( = 0.054, N.S.).

Hypothesis 2b stated that effectuation positively relates to the operation

dimension of internationalisation, resulting in the higher commitment, higher control

and riskier operation modes being employed. This hypothesis was statistically

significant and supported ( = 0.496, p < 0.05).

Hypothesis 8 proposed that effectuation moderates the relationship

between the causation and operation dimensions of internationalisation. This

hypothesis was tested with moderated regression and found to be not supported, as the

coefficient was not statistically significant ( = 0.132, N.S.).

Additionally, the adjusted R squared of the first model, simple regression,

is 0.269, and the second model, moderated regression, is 0.301. This means that with

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the interaction effect of causation and effectuation, the model seems to be better in

terms of data prediction.

Table 4.3: Regression Analysis of Product Dimension

Product Dimension

Model 1.1 Model 1.2

B SE B B SE B

Constant 1.015E-13

0.085 0.023 0.090

CAU 0.447 0.107 0.447* 0.414 0.116 0.414*

EFF 0.285 0.107 0.285* 0.272 0.109 0.272*

CAUxEFF -0.039 0.049 -0.081

R2 0.432 0.417

Adj. R2 0.417 0.414

F 28.885* 19.372*

Note: B = Unstandardized Coefficients, = Standardized Coefficients,

SE B = Standard Error, * = Significant at p < 0.05

Hypothesis 3a suggested that the extent to which the decision-making

process was characterised as causation would positively relate to the product

dimension of internationalisation, the product-market adaptation. This hypothesis was

statistically significant and supported ( = 0.447, p < 0.05).

Hypothesis 3b suggested that the extent to which the decision-making

process was characterised as effectuation would negatively relate to the product

dimension of internationalisation, the product-market adaptation. This hypothesis was

statistically significant but not supported ( = 0.285, p < 0.05).

Hypothesis 9 suggested that effectuation moderates the relationship

between causation and the product dimension of internationalisation. This hypothesis

was tested with moderated regression and found to be not supported, as the coefficient

was not statistically significant ( = -0.081, N.S.).

Although the adjusted R squared of the moderated regression appeared to

be lower than simple regression, 0.417 and 0.432, respectively, the negative change

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was small. This means that adding the interaction effect of causation and effectuation

into the model does not increase the predictability of the overall model.

Table 4.4: Regression Analysis of Performance Dimension

Performance Dimension

Model 1.1 Model 1.2

B SE B B SE B

Constant 1.013E-13

0.106 -0.048 0.112

CAU -0.017 0.134 -0.017 0.051 0.144 0.052

EFF 0.303 0.134 0.307* 0.329 0.135 0.333*

CAUxEFF 0.079 0.060 0.167

R2 0.088 0.064

Adj. R2 0.109 0.073

F 3.671* 3.039*

Note: B = Unstandardized Coefficients, = Standardized Coefficients,

SE B = Standard Error, * = Significant at p < 0.05

Hypothesis 6a posited that causation logic relates to the performance

dimension of internationalisation. This hypothesis was not supported, as the

coefficient was not statistically significant ( = -0.017, N.S.).

Hypothesis 6b posited that effectuation logic relates to the performance

dimension of internationalisation. This hypothesis was statistically significant and

supported ( = 0.285, p < 0.05).

Hypothesis 11 posited that effectuation moderates the relationship

between causation and the product dimension of internationalisation. This hypothesis

was tested with moderated regression and found to be not supported, as the coefficient

was not statistically significant ( = -0.081, N.S.).

The adjusted R squared of the moderated regression seems to be lower

than simple regression, 0.088 and 0.064, respectively. This means that adding the

interaction effect of causation and effectuation into the model does not increase the

predictability of the overall model.

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Table 4.5: Correlation

MKT OPN PROD PERF CAU EFF CAUxEFF Age Size

MKT Correlation 1

N 77

OPN Correlation -0.001 1

N 76 78

PROD Correlation 0.048 .499** 1

N 75 76 77

PERF Correlation -0.147 .383** 0.017 1

N 73 74 73 75

CAU Correlation 0.047 .365** .619** 0.166 1

N 75 76 75 73 77

EFF Correlation 0.008 .548** .570** .302** .608** 1

N 75 76 75 73 75 77

CAUxEFF Correlation -0.163 -0.141 -.412** 0.006 -.514** -.410** 1

N 73 74 73 71 75 75 75

Age Correlation .304** -0.144 0.109 -0.178 0.149 0.005 -0.096 1

N 75 75 74 72 74 74 72 76

Size Correlation 0.077 0.023 0.037 0.074 0.087 -0.09 -0.068 0.172 1

N 70 70 69 68 69 69 67 71 71

Note: MKT = Market dimension, OPN = Operation dimension, PROD = Product dimension, PERF = Performance dimension,

CAU = Causation, EFF = Effectuation, CAUxEFF = Interaction between Causation and Effectuation,

Correlation = Pearson Correlation, ** = Correlation is significant at the 0.01 level (2-tailed)

39

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Chapter 5

Discussions and Conclusions

5.1 Discussion

The goal of this research is to examine the consequences of causation and

effectuation on the internationalisation process. Our first finding, the positive

correlation between causation and effectuation in Figure 4-5, confirms the previous

proposed statement that causation and effectuation is orthogonal (Harm & Schiele,

2011; Perry et al., 2012). Following the previous attempt to analyse the model with

causation and effectuation in Harm and Schiele’s (2011) study, we cannot simply

invert the data to test the relationship involving causation and effectuation. Rather, we

treat causation and effectuation as separate constructs. However, for the sake of

comprehensibility, we do not rename sub-hypotheses into individual hypotheses.

The first and second hypotheses stated that the causation decision-making

process will lead to the dispersion of regions in which a firm operates or gains

revenue; on the contrary, the effectuation decision-making process negatively relates

to the dispersion of regions. We suspect that this may be consistent with some

scholars’ views of the market selection process that the explanatory power of psychic

distance becomes more limited.

The third hypothesis seems to be different from the results of the previous

literature that the entrepreneur who employs causation reasoning tends to use fewer

equity types and more exporting as entry modes (Harm & Schiele, 2011). In this

study, the entrepreneur who uses causation does not predetermine the use of operation

modes with lower commitment, control and risk. In contrast, the result of the fourth

hypothesis shows that effectuation relates positively to the operation mode. In other

words, the higher the degree of causation, the more likely that the operation with

higher commitment, control and risk will be selected as the operation mode choice,

for instance, wholly owned subsidiaries. We believe that this is because effectuators

rely on their networks and pre-commitments to expand their operation in other

countries. Moreover, we conjecture that the effectuator may see the importance of

acquiring and gaining foreign market knowledge outweighing the importance of

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return on investment in a short-term scenario, thus, neglecting the use of investment

calculations and experimentation throughout the internationalisation process.

The product dimension of internationalisation includes the fifth and sixth

hypotheses. Here, the result suggests that causation relates positively to the extent to

which the product will be adapted/customised to a particular foreign market. This

means that the more the entrepreneur plans for the business or marketing plan to use

the STP approach, the more likely that the product will be adapted to a foreign

market. Unexpectedly, making decisions based on an effectual approach also

positively relates to the extent to which the product will be adapted and customised to

a particular foreign market, but with lower impact. We see that the result seems to be

reasonable, as an effectual approach is not diametrically opposed to the causation

approach. Thus, the direction of a coefficient can be in the same way, but more in an

incremental fashion compared to causation-based decision-making.

Surprisingly, the causation approach does not affect the performance

dimension of internationalisation. In other words, formalised export planning, also

seen as the causal approach, does not lead to higher international performance. This

seems to be inconsistent with previous research (Lukas et al., 2007; cited in Harm &

Schiele, 2011). Besides, the effectuation approach positively relates to the

performance dimension of internationalisation being consistent with previous studies

(Read et al., 2009; Samolka et al., 2013). This means that utilising entrepreneurial

expertise to do business positively drives the international performance of the firm. At

this point, we conjecture that decision makers who employ effectual reasoning are

plausible for taking action, understanding their customer more effectively and thus

running the business head on, resulting in the stream of income accordingly.

Previously, we also hypothesised that causation and effectuation

complement each other, but the result in this study seems to be otherwise, as there is

no relationship reported to have a moderating effect. As such, the interaction of

causation and effectuation logics, which we suspect to be quasi-causal reasoning, does

not affect the internationalisation process of the firm.

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Table 5.1: Summary of Hypotheses Testing

Hypo-

theses Description Result P-value

H1a The causation approach relates positively to the market

dimension of internationalisation, more diverse fashion

of operating foreign market regions.

CAU

MKT

Not

Supported > 0.05

H1b The effectuation approach relates negatively to the

market dimension of internationalisation, more

concentrated fashion of operating foreign market regions.

EFF

MKT

Not

Supported > 0.05

H2a The causation approach relates negatively to the

operation dimension of internationalisation, lower

commitment, control and risk operation modes.

CAU

OPN

Not

Supported > 0.05

H2b The effectuation approach relates positively to the market

dimension of internationalisation, higher commitment,

control and risk operation modes.

EFF

OPN Supported < 0.05

H3a The causation approach relates positively to the product

dimension of internationalisation, more customised

product to particular foreign markets.

CAU

PROD Supported < 0.05

H3b The effectuation approach relates negatively to the

product dimension of internationalisation, less

customised products for particular foreign markets.

EFF

PROD

Not

Supported* < 0.05

H6a The causation approach relates positively to the

performance dimension of internationalisation.

CAU

PERF

Not

Supported > 0.05

H6b The effectuation approach relates negatively to the

performance dimension of internationalisation.

EFF

PERF

Not

Supported* < 0.05

H7 The effectuation approach will moderate the relationship

causation and market dimension of internationalisation.

Not

Supported > 0.05

H8 The effectuation approach will moderate the relationship

causation and operation dimension of

internationalisation.

Not

Supported > 0.05

H9 The effectuation approach will moderate the relationship

causation and product dimension of internationalisation.

Not

Supported > 0.05

H10 The effectuation approach will moderate the relationship

causation and time dimension of internationalisation.

Not

Supported > 0.05

H11 The effectuation approach will moderate the relationship

causation and market dimension of internationalisation.

Not

Supported > 0.05

Note: * = Hypothesis is not supported, but statistically significant

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5.2 Contributions

As previously noted in Chapter 1, the results of this study have

implications at three levels: theoretical, managerial and policy making. The discussion

regarding each implication is presented in the following three sub-sections.

5.2.1 Theoretical Contributions

From a theoretical perspective, this study primarily contributes to

the growing body of international entrepreneurship literature. First, the study has

incorporated four dimensions of internationalisation, thus demonstrating the broader

application of causation and effectuation. The successful attempt to link various

dimensions of internationalisation have never been seen before in the international

entrepreneurship literature. The study validates the possibility that the

internationalisation process might be better understood through integrating the role of

the decision maker, especially the entrepreneur, with international entrepreneurship in

the direction proposed by Jones and Coviello (2005), the establishment chain and

selection of an international market, and even further through incorporating the

product and performance dimensions.

The contribution to the study of entrepreneurship is to confirm that

both causation and effectuation are found to be reliable and could be applied,

generally, in Thailand, and specifically, in the exporting manufacturing industry. The

previously proposed proposition (Perry et al., 2012) and findings (Harm & Schiele,

2011) regarding the independent entities of causation and effectuation are also

confirmed in this study. Moreover, this study also indicates that when it comes to the

internationalisation process, effectuation and causation do not complement each other,

as effectuation does not moderate the relationship between causation and

internationalisation. This raises the question whether effectuation has a moderating

effect against causation and other constructs, as well as other possible combinations

of causation and effectuation and their consequences (Read et al., 2009b).

In addition, this research also contributes to the international

business literature by confirming the fact that decision-making processes affect the

internationalisation process in some dimension, namely, operation, product and

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performance dimensions. First, the finding in this research shows that there is no

statistical significant relationship between causation and operation mode. On the

contrary, firms who use effectuation appear to consider higher commitment, control

and riskier operation mode e.g. wholly-own subsidiaries. This finding is relevant in

that entrepreneurs who employ effectuation logic may see that acquiring and gaining

foreign market knowledge from operating with high commitment, control and riskier

operation modes is important for their internationalisation process. These results seem

to be different from previous study (Harm and Schiele, 2011), thus requiring further

investigation. Second, the finding in this research shows that firms who use causation

tend to adapt/customise product to particular foreign market and also for effectuation;

furthermore, causation has higher influence on product-market adaptation more than

effectuation. Third, the finding also surprisingly shows that the use of effectuation

positively relates to international performance of the firm. This means that there is

evidence shows that entrepreneurs who are inclined to use effectuation will gain

international performance. Finally, this research also introduces the new instrument to

capture the operation modes employed in foreign country market.

5.2.2 Managerial Contributions

From managerial perspective, this research provides managers with

how effectuation and causation logics can improve the internationalisation process of

the firm. For operation dimension, effectuation can help the firm go easier whether to

go abroad with the higher commitment, control and riskier operation mode. For

instance, utilising network and making pre-commitment with foreign partners can

help firm successfully set its operation in foreign ground. For the product dimension,

managers may use formal business planning (causation logic) to better

adapt/customise product to particular foreign market compared to using

entrepreneurial approach (effectuation logic). Following this suggestion, managers

could, for example, gathering market information then formulate strategies with STP

model. Interestingly, managers can also improve their international performance or at

least create stream of income by employing effectuation logic. By way of illustration,

managers may start their business early and experiment their business/product along

the process of internationalisation; this way the business can create stream of income

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early. Moreover, firm may contract with partners within its network so that it can

secure the source of revenue before deciding to go abroad resulting in successful

milestone in term of performance dimension of internationalisation process.

5.2.3 Policy-making Contributions

Finally, from policy-making perspective, policy maker could focus

on how to provide favourable institutional environment to foster the

internationalisation program of firm. As entrepreneurship is believed to contribute to

both business and economic growth (Aidis, 2005), regulator can initiate activities and

policies which induce effectual behaviour. This can be done by understanding the

characteristics of causation and effectuation, especially sub-dimensions of

effectuation.

For example, the product can be adapted at greater extent when

causation is employed. Thus, policy-maker may introduce tuition or training session

regarding international marketing as to cultivate the competency to adapt product to

foreign market of the inexperienced firms. Or in term of operation modes, authorities

may host the session gathering entrepreneurs, business-owners, or managers from

both our country and other foreign countries as to expand international network of the

firms; this kind of activities are expected to strengthen the relationship of both sides

and also increase the possibilities to initiate cooperation between two sides.

In the case of Thailand, where most people are afraid of failure, the

regulators may launch campaign encouraging entrepreneurs to be more innovative and

experiment their businesses at the affordably lost level. Moreover, authorities may

also provide platform where effectuators can get together to create resource pool

regardless of whether the resources are financial resources, knowledge resources or

other kinds of resources. For example, department of international trade promotion

(DITP) could work with Thai embassy located in foreign countries to facilitate the

local firms and foreign firms to get together in business-matching session or other

kinds of training programs. The increases of networking activities could promote the

economic growth for the country as organisation can gain competitive advantages

through it. In addition, the finding in this study also shows that pre-commitment, one

of the elements of effectuation, positively relate to international performance of the

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firm; in other words, the increase in networking of these firms may contribute to the

higher export value of the country.

5.3 Limitation & future study

Despite the various findings and positive contributions, this study is also

bound to several limitations. And thus, the suggestions of future study will be

discussed along the section.

The population of this study is all exporting manufacturing firm

regardless of firm age. This may be questioned as the operationalisation of causation

and effectuation were initially developed to the setting of new venture creation.

Nevertheless, the finding from Schweiser’s (2015) study shows that causation and

effectuation concepts do not limit only to the early internationalisation process. Even

so, the future research may investigate the explanatory power of causation and

effectuation concepts in other context or larger sample size (Schweiser, 2015).

The number of firms used for the analysis is rather small though this is the

average response rate of Asian countries. As such, the future research should choose

population with much greater number of firms or conduct research in country market

where there is enough number of firm.

The internationalisation process of firm was measured ex post. This

possibly leads to post hoc rationalisations (Harm and Schiele, 2011). Although we

minimise the recalling error by asking respondents to answer the questions regarding

firm’s activities in the past 3 years; the effect may still be presented. Moreover, future

research may use longitudinal research design along with multiple cross-sections to

assess varying degrees of causation and effectuation over time (Harm and Schiele,

2011).

The “experimentation” sub-construct has rather low reliability. Thus,

taking the fact that current operationalisation of causation and effectuation was also

considered to be incomplete, the importance of developing the instrument to measure

the effectuation construct need to be highlighted (Harm and Schiele, 2011; Perry et

al., 2012). Moreover, the operationalisation of operation dimension of

internationalisation is developed as to capture the only intention or consideration of

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the firm not the actual operation mode selected by firms; thus, future studies may

further refine this instrument and validates it with firm employed operation modes.

The combination of causation and effectuation should also be further

explored; this includes its antecedents and consequences (Read et al., 2009b).

Moreover, the future research may investigate the moderating role of causation and

effectuation in other decision-making contexts. Similarly, future research should

investigate the role of quasi-causation in both internationalisation context and other

established constructs.

The background of decision-maker should also be explored, especially the

linkage between other entrepreneurial characteristic constructs and concept of

causation and effectuation (Perry et al., 2012). Moreover, the demographic

characteristics may also be further investigated; this might include age, education and

international experience (Laufs, 2015).

According to Zahra (2007), study needs to be contextualised, for example,

it need to be replicated in other industry or cultural contexts. Moreover, this research

was conducted within a single country and industry context, thus future research may

attempt to explore and re-validate the differences in the concepts of causation and

effectuation through comparative studies across countries or industries, especially

trading and service sectors.

Coincidently, this research was conducted during the period with high

uncertainty in Thailand. The setting of this study is the past 3 years which cover both

the series of protests in Bangkok in 2014, where the late prime minister was ousted by

the judicial system, and the military coup in 2015. Moreover, the economic recession

in most trading partner nations of Thailand which accounted for large number of share

in export value may lead to the lower international activities or investment as well as

international performance of the firms.

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APPENDICES

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APPENDIX A

SURVEY INSTRUMENT

Cover letter (English)

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Questionnaire (English)

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Cover letter (Thai)

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Questionnaire (Thai)

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BIOGRAPHY

Name Mr. Thaksakorn Lertboonsupa

Date of Birth August 11, 1994

Educational Attainment

2015: Bachelor of Business Administration

(Integrative Business Management) with First

Class Honours

Thammasat University

Work Position Executive Client Service, Consumer Research

The Nielsen Company (Thailand)