The influence of management team heterogeneity on dimensions of internationalization : a case study on Dutch SMEs

The influence of management team heterogeneity

on dimensions of internationalization –

a case study on Dutch SMEs

Name:

Marthijn Duel – 11221879

First supervisor:

Dr. Lori DiVito

Second supervisor:

Dr. Michelle Westermann-Behaylo

Program:

Business Administration MSc.

Course:

Master thesis - International Management

Academic year:

2016 / 2017

Acknowledgements

Firstly, I would sincerely like to thank Dr. Lori DiVito. Her feedback and expertise have been highly valuable during the whole process of writing my thesis. Her comments and suggestions really pushed me to deliver a higher level, for which I am thankful. Secondly, I would like to thank the eleven respondents, who I have interviewed, for their valuable contributions. Their transparency and enthusiasm have been helpful and motivating. Finally, I would like to thank some fellow students for their feedback and useful discussions along the way.

Statement of originality

This document is written by Marthijn Duel who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

Table of Contents

2.2 INTERNATIONALIZATION DIMENSIONS: PACE, SCOPE, AND PATTERN ... 7

2.3 MANAGEMENT TEAM CHARACTERISTICS ... 10

2.4 RESEARCH GAP & RESEARCH QUESTION ... 14

3. THEORETICAL FRAMEWORK ... 15 3.1 CONCEPTUAL MODEL ... 15 3.2 MANAGEMENT TEAM HETEROGENEITY ... 15 3.3 PACE OF INTERNATIONALIZATION ... 16 3.4 SCOPE OF INTERNATIONALIZATION ... 17 3.5 PATTERN OF INTERNATIONALIZATION ... 18 4. METHODOLOGY ... 19 4.1 RESEARCH DESIGN ... 19 4.2 RESEARCH CONTEXT ... 20

4.2.1 Sampling & Case selection ... 21

4.3 DATA COLLECTION ... 24 4.4 DATA ANALYSIS ... 25 5. RESULTS ... 26 5.1 MANAGEMENT TEAM COMPETENCIES ... 26 5.2 PACE OF INTERNATIONALIZATION ... 28 5.3 SCOPE OF INTERNATIONALIZATION ... 29 5.4 PATTERN OF INTERNATIONALIZATION ... 30 5.5 CROSS-THEME FINDINGS ... 32 6. DISCUSSION ... 34 6.1 SCIENTIFIC RELEVANCE AND MANAGERIAL IMPLICATIONS ... 36 6.2 LIMITATIONS OF THE RESEARCH ... 37 6.3 SUGGESTIONS FOR FUTURE RESEARCH ... 38 7. CONCLUSION ... 39 8. BIBLIOGRAPHY ... 41

APPENDIX A: INTERVIEW PROTOCOL ... 47

APPENDIX B: ADDITIONAL SUPPORTIVE QUOTES ... 49

APPENDIX C: DESCRIPTIVE SUMMARY - FIRM A ... 50

APPENDIX D: DESCRIPTIVE SUMMARY - FIRM B ... 51

APPENDIX E: DESCRIPTIVE SUMMARY - FIRM C ... 52

APPENDIX F: DESCRIPTIVE SUMMARY - FIRM D ... 53

Abstract

This study investigates the impact of management team diversity on the internationalization process of a firm. By doing so, this research contributes to the inconclusive International Entrepreneurship literature, in which little evidence is found for the influence of top management teams on different dimensions of firm internationalization. The findings rely on data gathered from five Dutch SMEs that are all active in the logistics sector. A multiple case study was used in combination with eleven semi-structured interviews in order to collect and analyse the data. The analysis revealed that diversity in risk perception, entrepreneurial behaviour, and functional background are the most relevant management team determinants for pace, scope, and pattern of internationalization. On the other hand, homogeneity in age and tenure leads to a shorter timeframe for decision-making. The main argument of this study is that the majority of risk-taking managers and entrepreneurs have different internationalization outcomes in comparison with risk-averse management teams. This study reinforces the relevance of investigating management team compositions in international decision-making.

1. Introduction

For many years globalization has been a popular topic for discussion. The continuing process of international integration has effects on political, economic, and socio-cultural environments. Not only do governments have to deal with a shift from national to international developments and regulations, but so do firms. Firms have to respond to the opening markets, especially when their domestic markets’ resources and demand are limited.

Small- and medium-sized enterprises (SMEs) in the Netherlands face the foreign competitive challenges that come along with globalization. These open market circumstances could also create opportunities for SMEs in foreign markets. In the Netherlands, SMEs account for 61% of the gross domestic product, and are therefore a prominent type of business (CBS Statistics Netherlands, 2015). Furthermore, Dutch SMEs account for 62% of total exports and 60% of total imports of the Netherlands. The most interesting fact is that the number of SMEs is growing faster in the Netherlands compared to other European countries, especially in the service and industrial sectors (CBS Statistics Netherlands, 2015).

The globalization developments and the opportunities that come along with it have been widely studied in the International Business (IB) research. Due to this, internationalization of firms has become a well-known and common research topic. According to Ruzzier et al. (2006), internationalization is “the geographical expansion of economic activities over a national

country’s border”. The internationalization theories focusing on SMEs started with stage

models. These stage models looked at internationalization as a stepwise involvement and learning process. Due to globalization and enhanced information flows, the research trend moved from stage models towards more sporadic processes, such as the network-based model and the knowledge-based model.

These process models overlook the involvement of individuals on strategic decision-making, which is more of an entrepreneurial point of view. Keupp and Gassmann (2009) argue that the development of an intersection between IB and entrepreneurship seems problematic because there is a gap in the literature that combines IB research and entrepreneurship research.

The International Entrepreneurship (IE) research was therefore introduced to bridge the gap between IB and entrepreneurship research. IE refers to “the discovery, enactment, evaluation,

and exploitation of opportunities – across national borders – to create future goods and services” (Oviatt & McDougall, 2005). From the entrepreneurial point of view, it is argued that

there is still little empirical evidence about how managerial competencies influence and determine the internationalization of SMEs (Anzengruber, 2015). In addition, Dimitratos et al. (2016) highlight that IB research overlooked the international mode dimensions and international market presence. Instead, IB research has mainly focussed on the first step towards internationalization.

In order to contribute to the current literature, this study will combine an entrepreneurial perspective with an IB perspective. To do so, the following internationalization dimensions will be analysed: pace, scope, and pattern of internationalization. The pace of internationalization refers to the number of foreign expansions in a certain period of time (Vermeulen and Barkema, 2002). The scope of internationalization refers to the number of markets in which a company is operating. The pattern of internationalization refers to the choice of market and the choice of entry mode. An entrepreneurial perspective will then be incorporated in the discussion by analysing different managerial characteristics. These elements will be aggregated and referred to as diversity of management team characteristics.

In general, this study will focus on the influence of different managerial competencies of a management team in relation to the three dimensions of internationalization, as there is a need to investigate smaller parts of IE. The research question is stated as follows:

How does diversity of management team characteristics influence the internationalization pace, scope, and pattern of Dutch small- and medium-sized enterprises?

An exploratory qualitative case study on Dutch SMEs in the logistics sector will be executed to investigate the research question. The objective of the study is to get a better understanding of the relationship between management team compositions and internationalization decisions of firms.

1.1 Outline of the thesis

The next section of the thesis is the literature review, followed by the theoretical framework. The literature review examines what scientific research has already been conducted and highlights the research/knowledge gap, which is the starting point of this research. The theoretical framework presents a conceptual model, which provides the theoretical base for answering the research question. Afterward, a section follows that outlines the research design and explains the methodology. Subsequently, the results section provides an overview of the findings that are related to the different propositions. After that, the discussion section discusses the value of the findings, managerial implications, and the literary relevance. Finally, the conclusion will summarize the key results.

2. Literature Review

In this section, the theoretical background will be highlighted and analysed. Firstly, the overall definition and trends of SME internationalization will be provided. Secondly, the discussion will turn towards the pace, scope, and pattern of firm internationalization; what does it mean, and how can it be measured. Thirdly, management team characteristics will be investigated; what do they consist of, and how can they be measured. Finally, the relation between management team characteristics and internationalization pace, scope, and pattern will be addressed, concluding with the research gap and research question.

2.1 SME internationalization

In the last decades, internationalization has been researched intensively (Ruzzier, Hisrich, & Antoncic, 2006; Schulz, Borghoff, & Kraus, 2009). Internationalization is considered to be the most complex strategy that organizations can undertake because of all the differences and difficulties that come along with foreign cultures and institutions (Fernandez & Nieto, 2005). The internationalization process of SMEs is significantly different from that of established Multinational Enterprises (MNEs) because of their limited resources and market power (Musteen, Francis, & Datta, 2010). SMEs are therefore not just small MNEs.

Internationalization theories focussing on SMEs started in the 1970s with the Uppsala model of internationalization (Johanson & Vahlne, 1977). In this model, the internationalization of a firm is seen as a process of international involvement and learning. The authors of the study proposed that experiential market knowledge and resource commitment affected business decisions and commitment decisions. However, other have argued that this general stage model of international activities may not be able to fully understand the international activities of small firms (Andersson, Gabrielsson, & Wictor, 2004).

Another way of looking at internationalization is the network approach, which is based on the Uppsala model. The network approach highlights the fact that a firm is embedded in an enabling and time constraining business network (Johanson & Vahlne, 2009). The knowledge and capabilities that an SME has developed in its domestic market are often not suited to operate

in other markets (Lu & Beamish, 2001). It is therefore important for small firms to generate new knowledge and capabilities via its network to enter new markets successfully. Mejri and Umemoto (2010) add that the relevance of network knowledge increases even more when firms get more heavily involved in complex foreign markets.

In their 2010 paper, Mejri and Umemoto claim that a knowledge perspective on internationalization offers a more integrative explanation than previous models have given. To demonstrate this perspective, they present a knowledge-based model. This model, which is an extension of the resource-based view, includes knowledge-related factors, such as market knowledge, network knowledge, cultural knowledge, and entrepreneurial knowledge. Their model was a step built on previous steps, which they used to provide significant explanations of SME internationalization.

The stage models described above overlook the possibility of individuals or management teams making strategic decisions. Therefore, these approaches are less appropriate for understanding radical strategic changes made by entrepreneurs and top managers of SMEs. This is especially important for analysing the internationalization of SMEs. Schulz et al. (2009) also mention that the stage models cannot cover the complete range of the phenomena. There are, for example, less traditional SMEs for which the stage models do not apply. One alternative are the born globals, which are firms that start operating internationally from the earliest days of existence, such as International New Ventures (INVs). Additionally, there are the reborn

globals, or firms that become international when there is a change in owner or CEO to one who

is internationally oriented (Kyvik, Saris, Bonet, & Felicio, 2013). Another alternative are the so-called born regionals, which are firms that gain their strength from local embedding and never move beyond their export activities.

IE research summarizes and creates an interface between the different approaches from IB research and entrepreneurship research (Keupp & Gassmann, 2009). This new emerging field looks at the internationalization of SMEs from an entrepreneurial perspective. Within this field, personal factors and relationships have an evident position in the strategic decision-making of internationalization (Ruzzier, Hisrich, & Antoncic, 2006).

Keupp and Gassmann (2009) argue, however, that the development of the intersections between IB and entrepreneurship literature seems problematic, because researchers have abandoned the focus on small and young ventures and instead conceive small firms as a more general phenomenon. In their 2009 paper, Ireland and Webb argue that there is a lack of literature in which both IB and entrepreneurship theories are incorporated. IB is an established field of research whilst entrepreneurship research, as a relatively young field, is still dispersed and loosely connected (Ireland & Webb, 2009).

2.2 Internationalization dimensions: pace, scope, and pattern

Within IB research, the main focus is on how and why firms move internationally. Analysis of literature on pace, scope, and pattern is relevant to the topic of internationalization because the capacity of a firm to expand and absorb is limited (Vermeulen & Barkema, 2002). This limitation can be explained by the diseconomies of time compression, which means that a firm cannot endlessly learn how to operate in a variety of foreign markets within a specific time period (Vermeulen & Barkema, 2002). Although firms can benefit from new expansions, the amount of knowledge and experience that is gained is compressed in time. In their article, Vermeulen and Barkema (2002) argue that a firm’s profitability not only depends on the strategic posture, but also on how their strategy is built. Therefore, building a suitable IB strategy is related to a balance between pace, scope, and pattern.

The pace of internationalization refers to the time taken between the inception of the firm and its entry into international markets (Taylor & Jack, 2011). Tayler and Jack argue that the ability to identify and act on opportunities is vital in this stage. According to Musteen et al. (2010), early internationalization results in benefits from learning advantages of newness, by which they mean faster adaptation and development of flexible organizational routines. Vermeulen and Barkema (2002) have a different viewpoint on pace. They argue that pace refers to the number of expansions of foreign subsidiaries in a certain period of time, not necessarily measured from the inception. They note that a faster foreign expansion pace has a negative impact on firm profitability, which is often related to the diseconomies of time compression.

Despite this negative impact, the existence of SMEs that successfully perform a rapid internationalization into unknown markets is growing, which suggests the existence of a yet unidentified mechanism that explains this phenomenon (Kalinic & Forza, 2012). Vermeulen and Barkema (2002) also add the concept of rhythm to this discussion. For them, rhythm refers to the regularity of the process by which new subsidiaries are established. They argue that a stable rhythm increases the ability to benefit from the expansion.

The scope of internationalization refers to the extent of a firm’s international operations, studied from two viewpoints: the amount of turnover derived from international markets, and the number of markets a firm enters (Taylor & Jack, 2011). According to Johanson and Vahlne (1977), the number of markets in which a firm operates can be related to the age and the size of the firm. Vermeulen and Barkema (2002) argue that operating in a high number of markets negatively moderates a firm’s performance because of the difficulty of absorbing the unique features of individual countries. George, Wiklund, and Zahra (2005) add that a higher CEO or top management team ownership has a negative influence on the scope, whilst a larger scope has higher complexity and risks.

The pattern of internationalization refers to the choice of international markets and the choice of entry mode (Taylor & Jack, 2011). The choice of entry mode is mainly determined by human and organizational characteristics, according to Taylor and Jack (2011). However, Schulz et al. (2009) highlight that entry mode choice is mainly determined by industry influences, such as: coincidence, the main competitor, supplier contacts, and identification of future markets. In their 2008 paper, Canabal and White shed light on the discussion from a different angle. They note that the Transaction Cost Theory (i.e. transaction cost economics (TCE)) is the most commonly used theory within the entry mode research. The basic reasoning behind TCE is that firms aim to create a governance structure in which the focus is on minimizing costs and inefficiencies associated with entering and operating in a foreign market (Canabal & White, 2008). A critical factor to note is that the relationship between managerial characteristics and foreign entry mode decisions has been underexplored. Nielsen and Nielsen (2011) confirm this

by stating that entry mode research has considered factors such as country, industry, and firm level, but has largely ignored the influence of the management team in making such decisions.

Different insights and conclusions can be retrieved from different researchers in the literature on pace, scope, and pattern. Vermeulen and Barkema (2002) conclude that a high speed, a large dispersion of the expansion process into different countries, and irregularity of the process all negatively influence the benefits that a firm receives from its international operations. However, within their article, the different aspects were analysed separately and the focus was only on MNEs. Vermeulen and Barkema (2002) do mention that the different aspects should be in balance, so, if the firm increases its internationalization pace, it should restrict the complexity in other dimensions.

Bell et al. (2004) contribute to the discussion by investigating traditional SMEs and knowledge-intensive firms in regards to the pace, scope, and pattern. They argue that ownership structure influences the pace and pattern of firm internationalization. Family ownership, for example, is linked to a more cautious and reluctant approach. The same is true for traditional firms, who have a cautious and incremental approach towards both the domestic and internal market. Acedo and Jones (2007) contribute further by making a distinction between INVs, exporters, and domestic firms. They argue that most empirical work on mind-set in the IE literature has tended to be at the level of the firm, instead of focussing on the entrepreneur and his or her mental models.

In contrast to the previous literature, Tayler and Jack (2011) focussed on the interconnections between the pace, scope, and pattern of internationalization. They conclude that the pace of firm internationalization can be accelerated by the drive of the entrepreneurial manager together with the size and maturity of the firm’s domestic market. The pace affects the scope of internationalization, so the earlier a firm internationalizes, the higher the geographical scale. In addition, both the pace and scope have an influence on the pattern of internationalization.

In this section, different conclusions and methods have been investigated including different factors that influence the pace, scope, and pattern of internationalization.

Understanding the reasons why some entrepreneurs, rather than others, can recognize and exploit opportunities in foreign markets has been an important research question that has not been addressed in the IE literature (Acedo & Jones, 2007). In the next section, different managerial characteristics that influence the pace, scope, and pattern of internationalization will be analysed.

2.3 Management team characteristics

The entrepreneur and the management team are the key variables in SMEs’ internationalization decision-making (Ruzzier, Antoncic , Hisrich, & Konecnik, 2007; Andersson, Gabrielsson, & Wictor, 2004). Ruzzier et al. (2007) argue that the individual competencies of the top managers are especially crucial because internationalization hinges on their knowledge, experience and network of relationships. This is confirmed by the upper echelons theory, which has as its core premise that executives’ experiences, values, and personalities influence the interpretations of the situations they face and the decisions they make (Hambrick, 2007). Javalgi and Todd (2011) confirm this statement, noting that the top management team plays an important role in shaping the organization’s orientation and values. So, in order to understand why organizations act as they do, it is important to understand the biases of the top managers, which are linked to bounded rationality.

Managerial characteristics consist of different dimensions that are each related to internationalization of a firm. The first dimension is the international experience of the management team. International experience is an inimitable and irreplaceable resource for the firm (Ruzzier et al., 2007). This dimension could include international business skills and an international orientation. The former refers to tacit knowledge of foreign markets and the involvement in international organizations. The latter refers to the exposure to foreign cultures through travelling, working, or living abroad, which should increase the international orientation (Ruzzier et al., 2007). Acedo and Jones (2007) add that international orientation is related to higher proactivity and a lower perception of risk. Nielsen and Nielsen (2011) further contribute to this discussion, highlighting that internationally oriented management teams are better at

coping with cultural, institutional, and competitive environments, and therefore they make decisions that result in superior performance. Nielsen and Nielsen (2011) also conclude that international experience could reduce the uncertainty associated with international expansion, which has an impact on the pattern of internationalization.

The second dimension is risk perception. Since the entrepreneur or the management team are the key variable in the decision-making, their level of risk tolerance is of high relevance to the internationalization decision. Kraus et al. (2015) argue that for top managers, psychic distance and differences in market development are the main perceptions of risk when it comes to internationalization and location decisions. Lower economic and political development in the target country is associated with greater perceived risk of internationalization. Lin (2012) contributes to the discussion, noting that ownership structures influence the risk perception as well. Family-owned SMEs, for example, tend to control the risk stemming from the connection of family wealth to a single firm.

In their 2007 article, Acedo and Jones uses risk perception as the main determinant for assessing the pace of internationalization. Risk perception has two perspectives. Firstly, one might argue that operating internationally automatically entails risk, due to the complexities associated with it (Ruzzier et al., 2007). Secondly, operating internationally could also lower the risk of being dependent on a single domestic market (Kraus et al., 2015).

The third dimension is the functional background. This dimension can be defined as a person’s domain of professional expertise, but it may also include elements of personality, style, and values (Hambrick, Seung Cho, & Chen, 1996). Firms with diverse management knowledge might be able to introduce better resource practices, undertake more promising competitive strategies and identify more promising opportunities (Ruzzier et al., 2007). Another important element of functional background is related to market knowledge and the management of knowledge, which could influence the entering of or expanding to foreign markets (Oviatt & McDougall, 2005). It would appear that the ability to learn about a new host country and the ability to transfer knowledge has a positive influence on the pace, scope, and pattern of

internationalization. Javalgi and Todd (2011) contribute to this discussion by addressing, noting that industry-specific experience is a major determinant for SMEs growth.

The fourth dimension refers to the educational background of the management team. According to Tihanyi et al. (2000), managers with a competent educational background are more aware of international issues and thereby tend to view international opportunities favourably. Chen et al. (2010) confirm these findings by highlighting that higher education levels relate to greater cognitive ability and to the ability to generate rich and complex ideas for problem solving. They also note that a higher level of education in a management team is related to less conservative capital structures.

The fifth dimension refers to social capital. Social capital is “the sum of the actual and

potential resources embedded within, available through, and derived from network relationships possessed by an individual or social unit” (Musteen et al. (2010)). In comparison to MNEs,

SMEs more regularly face the challenges of having scarce resources, such as foreign market knowledge and financial resources (Lindstrand, Melen, & Nordman, 2011). Social capital can be divided into three dimensions: structural, relational, and cognitive. The structural dimension refers to the network configuration and the type of knowledge that could be obtained through the structure (Lindstrand, Melen, & Nordman, 2011). The relational dimension considers the connections and relationships that individuals develop through interconnections, and examines issues such as emotional closeness and personal trusts. The cognitive dimension includes values, language, and goals that members share with each other. Some scholars argue that a common language with the international ties is positively associated with pace of internationalization (Musteen, Francis, & Datta, 2010). However, Musteen et al. (2010) disagree with this position and instead argue that research to date has failed to provide clear guidance on how specific network relationships influence internationalization outcomes. Kalinic & Forza (2012) contribute to this discussion by pointing out that international networks help management teams to spot opportunities and to establish relationships that make it possible to access information. They also highlight that the main obstacle is no longer the ‘liability of foreignness’, but the ‘liability of outsidership’, which means not being part of a network.

The sixth dimension is time related and refers to a manager’s tenure and age. The average tenure of a manager could have an influence on the person’s willingness to take high-risk actions (Chen, Hsu, & Huang, 2010). Chen et al. (2010) argue that managers with less company tenure lack legitimacy in comparison to other managers and are therefore more likely to prove themselves by taking riskier actions. Conversely, managers with a longer tenure may feel less pressure to prove themselves and are therefore tend to be more risk-averse. Chen et al. (2010) also highlight that managers with a longer tenure tend to emphasize stability compared to shorter tenured managers, but could also rely on their experience to recognize high leverage risks. Hambrick et al. (1996) confirm these findings, stating that longer tenured managers are associated with strategic persistence or absence of change. Tihanyi et al. (2000) add that homogeneity in a management team’s tenure could result in dysfunctional decision making.

With regards to age, Andersson et al. (2004) argue that younger managers are more able to expand and grow the firm internationally, because they see the world as their marketplace and push more heavily for increased international activities. Chen et al. (2010) confirm these findings and mention three reasons for this: the first is that young managers are more able to integrate information and to learn; the second is that their education is more recent; and the third is that financial and career security are less of an issue at early career stages.

What all six dimensions have in common is the theme of creating superior value. Creating superior value is exactly what competency is all about, namely developing sets of knowledge, abilities, and attitudes that lead to superior performance (Anzengruber, 2015). By putting these six dimensions in context, Ruzzier et al. (2007) conclude that international orientation and risk perception have the most predictive value in regards to SMEs’ internationalization. They also conclude that functional background and international business skills have no causal relationship to internationalization. However, Ruzzier et al. only focussed on the step towards internationalization and did not focus on the influence of managerial characteristics on the different dimensions of internationalization.

In contrast to previous literature on entrepreneurial and managerial competencies, Anzengruber (2015) comes up with some relevant contributions and contradictions.

Anzengruber focusses on individual and organization competence gaps before and during the internationalization process. In her paper, the main conclusion states that personal competencies are most important in the pre-internationalization phase, whilst organizational competencies are important during the internationalization phase. Anzengruber’s 2015 study also highlights that there is still little empirical evidence about how competencies influence and determine the internationalization of SMEs and how lacking competencies commonly hinder the process. Dimitratos et al. (2016) complement this future research recommendation by concluding that the IB research has largely overlooked the international mode dimensions (i.e. pattern) and international market presence (i.e. scope).

2.4 Research gap & research question

As outlined above, there is a knowledge gap in the literature that combines IB research and entrepreneurship research. It seems difficult to determine the influence of the entrepreneur or management team on the internationalization decision-making, especially regarding pace, scope, and pattern of internationalization. This applies to the top management team as a whole, rather than only the highest manager.

In order to address the knowledge gap, this study will look at the pace, scope, and pattern of internationalization. Entrepreneurial perspectives will then be incorporated by looking at diversity of managerial competencies, since there is still little empirical evidence about how competencies influence the internationalization dimensions of SMEs (Anzengruber, 2015; Keupp & Gassmann, 2009; Peiris, Akoorie, & Sinha, 2012). Based on this research gap, the following research question will be investigated:

How does diversity of management team characteristics influence the internationalization pace, scope, and pattern of Dutch small- and medium-sized enterprises?

3. Theoretical framework

The theoretical framework builds upon the findings of available literature on internationalization dimensions and management team characteristics. The study presents three working propositions that are based on the literature and the need for further elaboration on this research topic.

3.1 Conceptual model

Within the conceptual model, the diversity of management team characteristics of Dutch SMEs can be seen as the antecedents. Different dimensions have been selected from the literature that will be analysed; these are the elements of the conceptual model. The outcomes of the model are represented by the pace, scope, and pattern of internationalization. An overview of the different elements can be seen in Figure 1.

Figure 1: Conceptual model

3.2 Management team heterogeneity

As was explained in the literature review, there are multiple factors, such as: education, industry experience, functional background, etc., that can be used to differentiate managers from each other. It is expected that within each management team composition, some of these factors are diverse and some are very similar.

Within the current literature, there are contrasting findings with regards to management team heterogeneity in comparison to homogeneity, each with their own advantages and disadvantages. Hambrick et al. (1996), for example, states that heterogeneous teams are good at creating new ideas but tend to be slow in their decision-making. Lohrke, Franklin, & Kothari (2003) confirm this statement, noting that firms operating in highly variable environments, such as international markets, benefit from having a heterogeneous management team because of their creative and complex decision-making. On the other hand, they also claim that increasing heterogeneity could increase conflicts and decrease solid communication within the management team, which results in poorer performance. To solve this, a certain degree of homogeneity could improve the relational fabric between members and therefore reduce the time required for making decisions (Knockaert, Ucbasaran, Wright, & Clarysse, 2011).

It may therefore be concluded that top management team literature is inconclusive regarding whether team heterogeneity or homogeneity results in success or higher performance. An important factor for having these contradictions is the industry in which the companies are operating (Knockaert et al., 2011). Javalgi & Todd (2011) contribute further by highlighting that literature fails to examine a causal link between managerial competencies and the composition of a management team on the one hand, and firm internationalization on the other hand.

3.3 Pace of internationalization

Within the literature, there are two ways of measuring the pace of internationalization. Tayler and Jack note in their 2011 article that pace is measured from the inception of a company to its first entry into an international market. Vermeulen and Barkema (2002), on the other hand, argue that pace should be measured by the number of foreign expansions in a certain period of time. Within this study, the two viewpoints will be combined in order to generate a broader picture of pace of internationalization because, as it will be argued, the time between inception and entry into foreign markets does not tell the whole story. The rhythm will then be added to this discussion to complement the picture of pace even further, since a stable or instable rhythm has an effect on successful internationalization as well.

It is argued in the literature that the pace of internationalization refers to a management team’s initiative or a management team’s reaction to market fluctuations (Tayler and Jack, 2011). In either case, a homogeneous management team would act faster and respond more quickly to competitors’ initiatives (Hambrick, Seung Cho, & Chen, 1996). This is based on the fact that common ground between team members stimulates speed of decision making. According to the literatue, a management team’s initive would be related to team heterogeneity. However, it is unclear which characteristics of the management team are preferred to be homogeneous or heterogeneous. Therefore, the first proposition is stated as follows:

Proposition 1: Diversity of the management team characteristics is expected to influence the pace of internationalization.

3.4 Scope of internationalization

Based on the current literature, there are two ways of measuring the scope of internationalization. The first measurement tool of scope, also known as the international market presence or geographical dispersion, is the amount of turnover derived from international markets (Taylor & Jack, 2011). Since this study uses qualitative data instead of quantitative data, this first measurement tool will be based on a percentage indicated by management team members, whilst actual data might not be published publicly. The second measurement refers to the number of countries or markets in which the company is operating.

It can be argued that a broader scope is related to higher complexity because each country has its own unique features (Lin, 2012). Lin (2012) also mentions that a large variety of managerial capabilities is required to deal with unique national settings and different organizational systems that the company should adapt to. Whilst homogeneous teams generally focus on stability and security, thereby limiting the scope, heterogeneous teams strive for actions with substantial magnitude (Hambrick et al. (1996). It is therefore expected that heterogeneous teams are associated with greater diversification, which is stated in the second proposition:

Proposition 2: Diversity of the management team characteristics is expected to positively influence the scope of internationalization.

3.5 Pattern of internationalization

Based on the literature, the pattern of internationalization is related to the choice of entry mode. This dimension of internationalization will be analysed by the commonly used hierarchical model of market entry modes of Pan and Tse (2000). This conceptual model is hierarchical because it starts with the most dramatic difference on top, namely the choice between equity or non-equity modes. Equity modes are thereafter divided into Wholly Owned Subsidiary (WOS) and Equity Joint Ventures whilst non-equity modes are divided into Contractual Agreements and Exports (Pan & Tse, 2000). Critical aspects of entry mode decisions are related to the amount of resources to invest, the control level, and the risk that is implied (Kraus et al., 2015).

Figure 2: Choice of entry mode by Pan & Tse (2000)

Due to the fact that there are huge differences between equity modes and non-equity modes in terms of risk perception and level of control, it can be expected that the management team composition will have an influence on the entry mode decision. For example, Hamrick et al. (2007) highlight that a greater proportion of top management team members with finance backgrounds is linked to more company acquisitions (i.e. equity mode). However, based on the literature, it is unclear which other management team characteristics are preferred to be homogeneous or heterogeneous. Therefore the final proposition is stated as follows:

Proposition 3: Diversity of the management team characteristics is expected to influence the pattern of internationalization.

4. Methodology

This section consists of the research methods and research design of the study. The research design clarifies how data is obtained and how data is analysed. A multiple case study on Dutch SMEs is applied, and the strengths and limitations of a case study approach are discussed.

4.1 Research design

There are two types of reasoning approaches for conducting research, namely inductive and deductive approaches. Based on the study’s objective, an inductive approach is most appropriate. Induction refers to a bottom up approach in which the reasoning moves from specific observation to broader generalizations and theories (Saunders & Lewis, 2012, p. 109). This can be seen as a theory-building approach.

The research strategy should be in line with the inductive reasoning approach. For this research, a case study is used as the research strategy. A case study is a strategy that involves the investigation of a particular topic within its real-life context, whereby multiple sources of evidence should be used (Saunders & Lewis, 2012, p. 116). Yin (2009) complements this definition, stating that a case study retains the holistic and meaningful characteristics of events, such as organizational and managerial processes. The case study will be exploratory by nature, which means that the aim is to discover general information about a specific topic that is not clearly understood by the researcher. The general advantage is that this research strategy allows for the collection of much more detailed information compared to other quantitative data collection methods, which often isolates variables. This is because people are considered to be ‘knowledgeable agents’, meaning that people in organizations know what they are trying to accomplish and are able to explain their actions, intentions, and thoughts (Gioia, Corley, & Hamilton, 2012).

The case study approach also has limitations. Whenever the case study consists of only one or a small number of cases, the results will be less precise or rigor in comparison to quantitative research because they provide only a small basis for scientific generalization. The lack of rigor of case studies often comes from the sloppiness of the researcher, such as biased

views on the findings or not following systematic procedures resulting in low internal validity (Yin, 2009). A multiple case design is therefore used in this study because it enables to understand the similarities and dissimilarities between cases from different environments. To improve the external validity, a case study relies on analytical generalization in which a researcher strives to generalize the results in a broader theory (Yin, 2009). Whilst this study used a multiple case study, the external validity has been improved by using the replication logic within the multiple cases. Due to the small number of cases, the study focusses on one industry, thereby increasing the ability to generalize the results. Multiple cases also create a more robust theory because it is more deeply grounded in empirical evidence (Eisenhardt & Graebner, 2007).

4.2 Research context

The European Commission created a European SME definition to make sure that support measures are only granted to the enterprises that truly need them (European Commision, 2015). Within this frame, the number of employees, the annual turnover and the annual balance sheet total determine the category of a firm. Small-sized enterprises employ less than 50 people and should have an annual balance sheet and annual turnover of less than €10 million. A medium-sized enterprise employs less than 250 people, should not have an annual turnover of more than €50 million and should not have an annual balance sheet total of more than €43 million (European Commision, 2015).

This study investigates multiple cases from the same industry, in this case the Dutch logistics sector. This sector consists of organizations that are active in logistical services like road, rail, and water transport, supply chain activities, and warehousing and distribution (SRA, 2016). Within the EU, the Netherlands is an important player when it comes to these logistical activities because of the presence of logistical hubs like Amsterdam Schiphol Airport and the Port of Rotterdam.

Because of the liberalization of the EU, Dutch organizations are currently facing strong competitive pressure in the international (SRA, 2016). In 2010, the Dutch government therefore selected the logistics sector as one of nine sectors of the so-called ‘top sectors’ (Delta LLoyd,

2014). With this governmental program, the general aim is to improve the top sectors even more by focussing on efficiency and innovation. At this point in time, 4% of all Dutch SMEs operate within the logistics sector, for a total of 16.875 organizations (Kamer van Koophandel , 2014). The sector is incredibly sensitive to the global economy and strongly dependent on world trade levels, and therefore had to deal with strong pressures during the economic recession. Despite these challenges, different sources mention that the sector’s current turnover has finally returned to levels equivalent to the turnover before the economic recession (Delta LLoyd, 2014; SRA, 2016). This positive outlook, combined with the incentives from the Dutch government, makes the Dutch logistics sector a relevant and well-suited industry for collecting data for this study.

The Dutch logistics sector as a whole is too large to select cases from. Based on the definition of Fenex, the Dutch branch organization for expedition and logistics, the industry can be divided into four subgroups: air cargo logistics, seaport logistics, customs logistics, and storage and distribution logistics. This study focusses on the subgroup storage and distribution logistics. The Dutch Chamber of Commerce was consulted in order to define the scope of organizations operating in this sector. This list was complemented by the top 100 biggest logistics service providers (www.consultancy.nl, 2015) and an additional list of the top 100 logistics service providers (www.logistiek.nl, 2015), both of which include the number of employees and general size measures. These overlapping lists have been used for selecting cases.

4.2.1 Sampling & Case selection

The purpose of the study is to develop theory instead of testing hypotheses, and therefore theoretical sampling is the most appropriate approach. Theoretical sampling means that cases are selected because they are suitable for illustrating relationships (Eisenhardt & Graebner, 2007). In this instance, the cases should not be considered as representative of the population, but as examples of types of possible contributions.

Four selection criteria have been assigned for this multiple case study approach. The first criterion refers to the European Commission’s definition of SMEs: the organization

employs less than 250 employees, reports an annual balance sheet total of less than €43 million or an annual turnover of less than €50 million. The second criterion refers to the international presence of the organizations. This means that the company should have at least one location abroad so that it is possible to investigate the different dimensions of internationalization. The third criterion refers to the selected industry, which has been described above. The fourth criterion refers to the company’s country of origin, which should be The Netherlands. This criterion might seem obvious but it is an important consideration. The final criterion of the study was that the management team must have participated in at least one internationalization process together.

The researcher’s personal network was utilized in combination with judgemental selection to come up with relevant companies that are players in the logistics sector. Within this process, cases were added until the moment theoretical saturation was reached. Theoretical saturation is the point at which a researcher’s learning becomes incremental because the observing phenomena have been seen before (Eisenhardt, 1989). Three of the cases were planned in advance, and two cases were added in order to reach theoretical saturation, therefore five cases were analysed in total. Table 1 provides an overview of the different firms and highlights the rationale behind their selection.

Table 1: Company characteristics of selected cases

Firm A Firm B Firm C Firm D Firm E Founding year 1880 1925 1899 1870 1958 Ownership structure Investor-owned firm Family-owned firm Family / investor-owned firm Family-owned firm Family-owned firm

Main Business Logistics service provider, specialized in transport of liquid foods Packaging, transport, horticulture, warehousing, safety equipment, and recycling Transport, tank storage, warehousing, and handling of liquid foods Production, warehousing and transport of steel and plastic packages Transport of liquid foods, cleaning stations and a small tank storage facility Years of internationalizat ion 2006, 2007 2005, 2007 1988, 2006, 2015, 2016 2007, 2015, 2017 1998, 2013 Foreign locations Belgium, Germany, Austria, and Czech Republic Belgium, Romania Belgium, Poland France Russia, Belgium Foreign entry modes Greenfield, WOS Greenfield, WOS Greenfield, JV, WOS JV Greenfield, WOS Annual turnover (from foreign location*) €35.000.000 (15%*) €40.000.000 (20%*) €46.000.000 (17%*) €35.000.000 (35%*) €18.000.000 (20%*) Number of employees (foreign*) 230 (90*) 120 (25*) 240 (60*) 150 (25*) 130 (30*) Interviewee roles

CEO & CFO CEO & CFO CEO, CFO & CCO

CEO & CCO CEO & COO

Verifying sources – online publications Company website & EVO, an association for Dutch logistics entrepreneurs Company website & VNO-NCW, association for business developments Company website & logistiek.nl & internal documents Company website & NVC, a Dutch association for packaging Company website & ABN AMRO lease, Dutch investment bank

4.3 Data collection

Multiple information sources were used to collect data, a process called triangulation. The term triangulation refers to the use of two or more sources of data within one study in order to minimize misinterpretation (Saunders & Lewis, 2012, p. 122). Triangulation of different data was designed to improve the measure reliability and construct validity (Kalinic & Forza, 2012). Construct validity refers to identifying correct operational measures for the concepts that are studied (Yin, 2009). In this study both primary and secondary data have been used.

Primary data was gathered via eleven semi-structured interviews with management team members who are key players in their firm’s decision-making process of internationalization. Multiple interviews have been conducted at each firm to gather data from different angles. This has created a more complete perspective for each case, which improves the trustworthiness of the data. All interviews lasted from between 30 and 55 minutes each, and took place at the firm’s premises. The interviews were both in-depth and semi-structured, aided by the use of an interview protocol as a guide for structuring the conversations. The interview protocol can be found in Appendix A. Advantages of in-depth interviews is that it creates the ability to collect detailed information, the ability to see the topic from the perspective of the interviewee, and the ability to understand how they come to have this perspective (Cassel & Symon, 2004, p.11).

In addition to the advantages, in-depth interviews also have limitations. Conducting interviews is a time consuming task, which includes conducting the interview, transcribing it, and coding the results. Secondly, the huge volume of data generates the feeling of data overload, which makes the analysis more difficult. Another limitation is the tendency for biases to be present because interviewees might not be knowledgeable in a particular area, or they may give inappropriate answers due to various personal reasons.

Secondary data was collected to triangulate the data from the interviews and therefore reduce the limitations of the semi-structured interviews. The secondary data consisted of internal documentation provided by the companies. Company websites and online publications were also used to verify the factual primary data.

4.4 Data analysis

Analysing data from case studies is the most difficult and least codified part of the research (Eisenhardt, 1989). The analysis consists of: data reduction, data display, and conclusion drawing (Miles & Huberman, 1984). The data analysis is designed to find evidence for the propositions that have been derived from the theoretical framework. Within IE research, the levels of analysis primarily occur at organizational level or the individual level (Coviello & Jones, 2004). This study focussed on a group level of analysis, specifically top managers. The attributes of the whole group are therefore of interest in this study.

The F5 transcription progam was used to transform all recorded interviews into transcripts. Since the interviews were conducted in Dutch, the transcripts are in Dutch as well. Thematic coding was then used in order to find relevant information. Thematic coding refers to identifying and investigating themes and sub-themes in order to find patterns in the data, which creates an understanding of a certain pehonomon (Ryan & Bernard, 2003). According to Hsieh & Shannon (2005), the success of content analysis greatly depends on the coding process. Based on the conceptual model, the following a priori themes have therefore been used: international experience, risk perception, functional background, educational background, social capital, tenure and age, pace of internationalization, scope of internationalization, and pattern of internationalization. These themes, which have been divided into smaller sub-themes, have been used to give structure to the large amount of information.

A within-case analysis and a cross-case analysis were conducted. The within-case analysis gives insight in the unique patterns of each case and gives a view on each case as a stand-alone entity (Eisenhardt, 1989). The within-case analysis also helps the researcher in the early stages to cope with the enormous volume of data (Gersick, 1988). This process then helps accelerate the cross-case analysis in which similarities and dissimilariteis between the different cases come to light. An important advantage of a cross-case analyis is the ability to look at data in many different ways, which reduces the potential for human error and issues with processing data, and thereby improve the accuracy and reliability (Eisenhardt, 1989).

5. Results

The analysis started with a within-case analysis of which the extensive descriptive data can be found in appendices C through G. The different sections of this chapter present an overlap between a within-case analysis and a cross-case analysis, ending with a cross-theme analysis.

5.1 Management team competencies

Based on the six different constructs, it can be concluded that each team has a certain degree of homogeneity and heterogeneity when looking at the top managers’ individual competencies. A construct is classified as heterogeneous when at least one manager shows a different behaviour or background, which influenced the decision-making process. Each individual team is analysed; this is shown in Table 2, which provides an overview of the homogeneous and heterogeneous elements. Subsequently, the similarities and dissimilarities between the teams are presented.

Table 2: Degree of homogeneity / heterogeneity per case

Firm A’s top management team has three members, represented by the CEO, CFO, and CCO. This team is heterogeneous on four of the six measured constructs, which makes it a relatively heterogeneous team. Especially, the diversity in management expertise, risk-taking behaviour, and entrepreneurial behaviour turned out to be the most relevant differences among the managers in regards to their international decision-making.

Firm B’s top management team was designed from the start to be complementary and diverse. The team consists of a CEO, CCO, and CFO who turned out to be heterogeneous on five of the six constructs, making it a rather heterogeneous management team. The difference in their functional backgrounds, opportunistic behaviour, and risk perception contribute to thorough and complex problem solving, which is crucial for the firm’s future business, according to the CEO.

Risk-perception Functional background Social-capital International experience Educational background Tenure & age Homogeneous composition D C, D B, C, D A, D A, E Heterogeneous composition A, B, C, E A, B, C, D, E A, B, E A, E B, C, E B, C, D

With four out of six heterogeneous elements, it can be concluded that firm C’s management team is relatively heterogeneous. This three-headed team consists of a CEO, CFO, and CCO whereby the CCO and CFO differ strongly in their business views. The CEO commented on this, saying: “Even though our team members are rather diverse, we all posses an entrepreneurial mind-set, which creates both complex analysis and the urge to move forward”.

Firm D’s top management team is relatively homogeneous with only two of the six elements being heterogeneous. The team consists of a CEO, CCO, CFO, and a sales manager who are all shareholders of the family-owned firm. The most important constructs that influenced their international decision-making are the risk perception, which is homogeneous, and the different functional backgrounds of the team members.

Firm E’s top management team consists of a CEO, CFO, CCO, and COO. This team can be classified as heterogeneous because five of the six constructs show heterogeneity. Even though risk perception is classified as heterogeneous, the majority of the team is rather risk-averse which has influenced the speed of international decision-making. The international experience of the CEO and CCO are considered to be relevant as well.

So what all teams have in common is that they are composed of different personality characters and functional backgrounds, which is important for generating thorough and complex problem solving. Another important heterogeneous element is the diversity in risk perception, in which the CFO is usually the most conservative. Also important is the fact that all teams rely heavily on their business network to discover opportunities, even though this construct is not required to be heterogeneous among the members. Furthermore, age and tenure are preferred to be homogeneous because this increases the speed of decision-making.

Dissimilarity among the cases comes from firm D’s homogeneity in risk perception, in which it is an outlier. An outlier is an observation that does not conform with the rest of the data (Miller & Myers, 2001). Another important dissimilarity comes from firms D and E, who both have a majority of members being conservative, whilst firms A, B, and C have a majority of opportunistic and entrepreneurial members within the team. The influence of these similarities and dissimilarities is analysed in the next three sections.

5.2 Pace of internationalization

The influence of the different management teams on pace of internationalization has been classified by either a direct or indirect influence. The influence is classified as direct when the diversity or similarity of the management team has directly influenced fast internationalization steps, by means of a certain strategic focus for example, without other interferences. It is classified as indirect when other external factors initiated or influenced the pace of internationalization, such as client or partner’s requests. In addition, the pace of internationalization is classified by the number of foreign entries in a certain period, in this case

high (once a year), medium (every 2 years), or low (every 5+ years). Table 3 presents an

overview of the management team’s influence on pace of internationalization and provides selected supporting quotes from management team members. Additional supporting quotes can be found in Appendix B, which shows the triangulation of the quotes per case.

Table 3: Influence on pace of internationalization

What the firms A, B, and C have in common is that their management teams have a majority of opportunistic and entrepreneurial managers. These managers, who mainly have the positions of CEO and CCO, continuously see opportunities within their network, which is crucial for moving forward. The high and medium pace of firms A, B, and C is a result of that perspective. The CCO of firm C stated, “If the CEO and I would make a decision, we would go through the process very fast, but probably face deal breaking issues in the final stage which will

Pace Influence Selected supporting quotes

Firm A High Direct

“If the former conservative MT was still active, the acquisitions in 2007 would not have happened because the firm was still struggling with synergy from the previous steps”(CEO)

Firm B Medium Direct

“The company has been stable for a long period until a person or team takes over control with huge ambitions, that is what happened since 2006”(CEO)

Firm C High Direct

“We would not have done the acquisitions in ’15 and ’16 if we did not have the diverse expertise, complex decision making, and overall entrepreneurial mind-set” (CEO)

Firm D Medium Indirect “We are all somewhat conservative. Receiving the opportunity to partner up with a strong MNE gave us a safe feeling” (CCO)

Firm E Low Direct “We were passively looking for opportunities, but when the Belgium firm was for sale, we decided to buy it” (CEO)

delay the whole process. Getting insights from diverse angles creates comfort and a holistic view from the beginning, which therefore results in an overall faster decision-making process”. In contrast, the majority of the managers from firm D and E are risk-averse, which generally equates to a passive way of looking for opportunities. Firm D’s partnering company, for example, mainly initiated and determined their pace of internationalization, and therefore firm D’s conservative management team only had an indirect influence of pace of internationalization. A side-note is that the economic recession has paused the pace of all firms.

It can be concluded that diversity of a management team is not a decisive factor in itself, but it helps to create a holistic view and strategic focus from the start, which increases the speed of decision-making. The most determining factor for pace of internationalization is the degree of entrepreneurial and opportunistic managers within a team, even though a risk-averse manager should counterweight it whilst keeping in mind the diseconomies of time compression that becomes relevant when too many steps are taken in a short period of time.

5.3 Scope of internationalization

The influence of the different management teams on scope of internationalization was also classified by either a direct or indirect influence, just as the pace of internationalization was above. The scope of internationalization was categorized by narrow (one foreign country), intermediate (two foreign countries), and wide (three or more foreign countries). Table 4 presents the results of the cases, accompanied by selected supporting quotes.

Table 4: Influence on scope of internationalization Scope Influence Selected supporting quotes

Firm A Wide Indirect “We established our Belgium and German locations based on client’s request to be closely located” (CFO)

Firm B Intermed

iate Direct

“Diversity in our team results in creative solutions, therefore we also look outside our current framework for opportunities” (CEO)

Firm C Intermed

iate Direct

“Our strategy is to be physically active along the West coast. Our next step is therefore to expand to Hamburg, Germany”(CCO)

Firm D Narrow Indirect “We have just expanded to an additional French location together with our JV partner, who is already located in that area” (CEO)

Firm E Narrow Indirect

“By adding diverse members to the team, our decision-making became slower but also more thorough. We are now less impulsive and would not simply jump in Russia again” (CEO)

The percentage of turnover derived from foreign countries has not been included in the results section since each firm has slightly different operations, which makes them inappropriate to compare when it comes to scope of internationalization.

What all firms have in common is the notion that international experience and international ambition are perceived to be the antecedents for an international outlook and broad scope. As noted by the CCO of firm C, “from an international orientation comes an international network which creates comfort to expand to a different country with different cultures”.

From the perspective of the influence of management team diversity on scope of internationalization, it can be concluded that this influence could result in two different paths. Having heterogeneity in combination with a majority of entrepreneurial and opportunistic managers results in a wider scope, as shown by firms A, B, and C, as well as by firm B’s current investigation into Canada and firm C’s current investigation into Germany. On the other hand, Firm D and E indicate that a majority of risk-averse managers results in a narrower scope of internationalization. Dealing with one foreign country, which is also located nearby, results in less complexity and risks. For example, firm E’s Belgium location is associated with less complexity in comparison to firm B’s Romanian location when it comes to cultural and institutional differences. Even though scope of internationalization is, to a certain degree, influenced by management team diversity, client or partner requests turned out to be relevant determinants as well, especially for a logistics service provider that is dependent on client’s locations. This explains why firm A, D, and E’s management teams’ influence is indirect.

5.4 Pattern of internationalization

The influence of the different management teams on the pattern of internationalization was also classified by either a direct or indirect influence, just as with the pace and scope of internationalization. In this case, an indirect influence refers to firm and country level factors that mainly determine an entry decision. For example, the financial position of a firm is a strong determinant for an entry mode decision. Table 5 provides an overview of the influence of management team heterogeneity on entry modes.