Toward A Theory Of International.pdf - TOWARDA THEORY OF...

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TOWARDA THEORYOF INTERNATIONALNEW VENTURES Benjamin M. Oviatt* GeorgiaState University Patricia Phillips McDougall** GeorgiaInstituteof Technology Abstract. The formation of organizations that are international from inception-international new ventures-is an increasingly important phenomenon that is incongruent with traditionally expected characteristics of multinational enterprises. A frame- work is presented that explains the phenomenon by integrating international business, entrepreneurship, and strategic manage- ment theory. That framework describes four necessary and suf- ficient elements for the existence of international new ventures: (1) organizational formation through internalization of some transactions, (2) strong reliance on alternative governance structures to access resources, (3) establishment of foreign location advantages, and (4) control over unique resources. INTRODUCTION The study of the multinational enterprise (MNE) has focused on large, maturecorporations.Historically,many MNEs developed from large, mature, domestic firms [Chandler 1986], and they commanded attention because they wielded significant economic power, especially after World War II [Buckley & Casson 1976; Dunning 1981; Hennart 1982]. However, recent technological innovation and the presence of increasing numbers of people with internationalbusiness experience have established new foundations for *BenjaminM.Oviattis AssistantProfessorof Management atGeorgiaStateUniversity. HereceivedhisPh.D.instrategicmanagement fromtheUniversityof SouthCarolina. His researchfocuses on strategicmanagement,organizationalturnaround,and internationalnew ventures. **PatriciaPhillipsMcDougallis AssociateProfessorof StrategicManagementat GeorgiaInstituteof Technology.She receivedherPh.D. in strategicmanagement fromthe Universityof SouthCarolina.Herresearchfocusesprimarilyon new and youngfirms,with a specialemphasison strategiesandinternationalization. Thisarticlewas awardedfirstprizein the 1993Competition for theBestPaperon Entrepreneurship andInnovationsponsoredby New YorkUniversity'sCenterforEntrepreneurial Studies.Theauthors gratefullyacknowledgefinancialsupportforthisresearchfromtheBernardB. & EugeniaA. Ramsey Chairof PrivateEnterpriseatGeorgiaStateUniversityandfromtheSocietyof InternationalBusiness Fellows,basedin Atlanta,Georgia. Received:-June1992;Revised:December1992,April& August1993;Accepted:August1993. 45 Palgrave Macmillan Journals is collaborating with JSTOR to digitize, preserve, and extend access to Journal of International Business Studies ®
46 JOURNALOF INTERNATIONALBUSINESS STUDIES, FIRST QUARTER 1994 MNEs. An internationally experienced person who can attracta moderate amount of capital can conduct business anywhere in the time it takes to press the buttons of a telephone, and, when required, he or she can travel virtually anywhere on the globe in no more than a day. Such facile use of low-cost communicationtechnology and transportationmeans thatthe ability to discover and take advantageof business opportunitiesin multiple countries is not the preserve of large, maturecorporations.New ventures with limited

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