Corps de l’article

Early Internationalising Firms (EIFs) are an increasingly relevant subject as their number has sharply grown over the last 30 years (Cavusgil and Knight, 2015). Today, they represent around 12% of new firms, and they clearly represent a new challenge for small countries in a globalised economy (Eurofound, 2016). Nevertheless, despite numerous studies about the entrepreneur’s role (McDougall, Oviatt and Shrader, 2003; Javalgi and Todd, 2011) and the inception stage (Rialp, Rialp and Knight, 2005; Aspelund, Madsen and Moen, 2007), some challenges remain in fully understanding the international high-growth trajectory of these firms (Romanello and Chiarvesio, 2019).

Indeed, it remains difficult to understand the dynamics at play in these companies since their growth seems to follow a dynamic and discontinuous path (Hilmersson and Johanson, 2020). When we look at the theory, one approach can help us to clarify the dynamics at work: dynamic capabilities. Dynamic capabilities have been found to enhance organisational agility (Teece, Peteraf and Leih, 2016) and support firms in reconfiguring their bundle of resources (Easterby-Smith, Lyles and Peteraf, 2009; Prange and Verdier, 2011; Schilke, Hu and Helfat, 2018). Nevertheless, despite numerous studies, it remains unclear what is behind these dynamic capabilities (Peteraf, Di Stefano and Verona, 2013). Therefore, Teece (2007) recommends a more micro-level study of their foundations (Coleman, 1990), as this would offer a more comprehensive framework to explain these meta-capabilities. Using this microfoundations view (MFV), we aim to capture and build a more integrative view of the overall process of dynamic capabilities, in particular throughout the EIF international high-growth trajectory.

As of now, no studies have linked the microfoundations of dynamic capabilities with the international growth of EIFs. Therefore, throughout this article, we strive to explore the links that might exist between these two concepts. Our main objective is to build a framework that represents the key factors explaining the international growth of EIFs. From a managerial perspective, understanding the main drivers that enhance firms’ sustainable international growth can help managers to identify core capabilities and help governments to propose more appropriate policies to support Early Internationalising Firms and thus reduce their failure rate. Our research question is thus: What are the microfoundations of dynamic capabilities that determine the international growth of EIFs?

Throughout this paper we provide a new perspective on the factors (capabilities and mechanisms) influencing EIF post-entry growth. To this end, we analysed 8 EIFs located in the Brittany region in France. We explored the possible links between the microfoundations of dynamic capabilities and the EIFs’ international growth. First, at the individual level, we identify the existence of several enablers that help those firms to overcome market constraints and capture new opportunities. Then our study reveals the existence of 9 microfoundations within sensing, seizing and transforming capabilities and thus sheds light on the internationalisation processes of EIFs.

Our paper is structured as follows. First, we review the theoretical background of the early internationalisation pattern. We then present our methodology. Third, we introduce our main findings and discuss the role of key microfoundations on EIF internationalisation growth. Finally, we describe the limitations of this work that could lead to new research avenues. In particular, continuing in this direction, we encourage to find how these microfoundations are interrelated. This article thus makes theoretical contributions to international entrepreneurship through the still unexplored question of the evolutionary dynamics of EIFs as well as to strategic management since we draw upon the microfoundations of the dynamic capacities analysed in the specific context of EIFs.

Early internationalising firms: what do we know so far?

In this section, our purpose is to present the main concept behind our reasoning. The first part aims to bring insight into what international growth of EIFs means, the state of the literature and gaps in the theory. The second part is dedicated to the microfoundations of dynamic capabilities and how they could explain the international trajectory taken by those firms after their first entry.

International Growth of EIFs

Early Internationalising Firms (EIF) is a term introduced in the late ’90s (Madsen and Servais, 1997). Traditionally, EIFs have been defined as “firms which become international, through export or any other entry modes, in their first three years of life” (Zucchella, Palamara and Denicolai, 2007, p. 268). These firms and the way they rapidly internationalise have disrupted the traditional international expansion path initially described in the international business literature (Knight and Liesch, 2016; Rennie, 1993; Madsen, Rasmussen and Servais, 2000; Bell, MacNaughton, Young and Crick, 2003; McDougall, Oviatt and Shrader, 2003). Those firms do not follow the stage model described by Johanson and Vahlne (1977). They tend to both experience a quicker international expansion and generate better performance compared to traditional exporters (Romanello and Chiarveso, 2019).

Scholars have taken a particular interest in studying the international growth trajectory of EIFs (Prashantham, Kumar, Bhagavatula, Sarasvathy, 2019). This strong international growth has been mainly explained through the notion of internationalisation speed (Prashantham and Young, 2011). Many definitions have been suggested. However, researchers now tend to present internationalisation speed as a multidimensional concept (Oviatt and McDougall, 2005; Casillas and Acedo, 2013; Chetty, Johanson and Martin, 2014). Thus, internationalisation speed is broken down into three criteria: (1) The speed of internationalisation growth, which corresponds to the proportion of company sales growth generated by its international branches during a specific period, (2) The speed of change in the commitment of foreign resources, which corresponds to the company’s assets deployed aboard during a period of time, and (3) The speed of the increase in breadth of international markets, which corresponds to the increase, over time, of countries (including variety and distance) where a company is active. Recently, Hilmersson and Johanson (2016) operationalised this concept, showing the relevance of these criteria.

Furthermore, within this literature, we can build on research explaining EIF post-entry growth. These articles emphasise the growth pattern of these companies and how they generate their long-term growth (Romanello and Chiarvesio, 2019). Indeed, it seems their post-entry success is linked with the firms’ capability development (Romanello and Chiarvesio, 2019). Prange and Verdier (2011) build a model that argues that the firm’s international performance is influenced by both exploitative and explorative capabilities. In fact, absorptive capabilities, social capital and knowledge accumulation seem to sharply influence the firm’s internationalisation path (Prashantham and Young, 2011). Hagen and Zucchella (2014) go further and emphasise that entrepreneurial openness and effective organisational learning are the key drivers of long-term growth. In the same way, Romanello and Chiarvesio (2017) argue that there is a turning point during which entrepreneurs transform individual capabilities into a collective knowledge base. They show that these companies experiencing growth cycles lead through innovation.

However, despite these attempts to explain EIFs’ progress, there is still no clear explanation for the international growth of EIFs. Thus, scholars recommend building an integrative framework that may make it possible to describe the success factors of these firms a few years after their first entry (Romanello and Chiarvesio, 2019). Indeed, after using the resources-based view in the early stages of this research stream, researchers now encourage the use of the dynamic capabilities approach to understand EIF post-entry growth (Prange and Verdier, 2011; Prashantham and Young, 2011; Hagen and Zucchella, 2014). Meanwhile, the microfoundations approach has been used in research in other areas to explain trajectories through the dynamic capabilities’ framework. Thus, we are encouraged to look forward in order to gain relevant insight into EIFs post-entry growth.

The microfoundations of dynamic capabilities for analysing EIFs’ international growth

Given that EIFs often operate in an uncertain and dynamic environment, the dynamic capabilities approach may provide relevant insight in explaining these firms’ international trajectories (Hagen and Zucchella, 2014; Romanello and Chiarvesio, 2019). In fact, dynamic capabilities lead to routines that help companies adjust to a dynamic and uncertain environment (Teece, Pisano and Shuen, 1997). In this process, dynamic capabilities increase firms’ agility (Teece et al., 2016) by developing and reconfiguring their resources and capabilities (Easterby-Smith et al., 2009; Prange and Verdier, 2011; Schilke et al., 2018).

Nonetheless, this concept of dynamic capabilities is not easy to capture, as these capabilities are tacit and developed along the firm’s trajectory (Versailles and Foss, 2019); there are thus several methodological gaps in capturing dynamic capabilities (Peteraf, Di Stefano and Verona, 2013). In response to those gaps, Teece (2007) offers a new model that details the nature of dynamic capabilities and how they can be broken down into elements: microfoundations. Therefore, recent literature has encouraged the use of the microfoundations view (MFV) to deepen our understanding of the EIF growth trajectory (Nguyen and Mort, 2020; Liu, Collison, Cooper, Baglieri, 2021; Faroque, Morrish, Kuivalainen, Sundqvist and Torkkeli, 2021).

Microfoundations find their roots at the individual level (Abell, Felin and Foss, 2008): Microfoundations are the “underlying actions on individual and group levels that shape strategy and organisation, as well as dynamic capabilities, leading to the emergence of superior organisation-level performance” (Bojesson and Fundin, 2021, p. 5). In fact, the MFV aims to explain collective constructs, such as routines and capabilities, through interactions between individuals (Felin, Foss, Heimeriks and Madsen 2012; Barney and Felin, 2013). The MFV thus seems suitable in linking individual-level interactions with the firm’s evolution within its environment. It therefore explains how organisations reach “evolutionary fitness” over time (Teece, 2007), and allows a better representation of the firms’ “drivetrain” (Di Stefano, Peteraf and Verona, 2014). In the context of dynamic capabilities, the MFV makes it possible to capture and build a more integrative view by linking the individual and organisational levels (Abell et al., 2008). This approach seems particularly relevant because it makes it possible to understand more precisely how firms renew their knowledge and generate a specific competitive advantage (Abell et al.,2008).

In fact, using a multi-level analysis may highlight the factors supporting EIFs’ international trajectories and thus improve our understanding of EIFs’ international growth. Our intuition is supported by the fact that recent studies on different subjects than ours, for example in the areas of spin-off generation (Laviolette, 2019), digitisation (Warner and Wäger, 2019) and the circular economy (Khan, Daddi and Iraldo, 2020), have developed a more grounded theory on the MFV. Our research thus applies the MFV in order to better capture the microfoundations underlying the dynamic capabilities concept. Moreover, these studies make relevant research contributions as they clarify the first model presented by Teece (2007), which had not been empirically tested. Thus, today we can benefit from this interesting methodological work to highlight which microfoundations of dynamic capabilities are present along the path to international growth. Thus, these studies have led us to our research question: What are the microfoundations of dynamic capabilities that determine the international growth of EIFs?

Methodology

To respond to our research question, we apply an inductive research approach supported by multiple case studies in order to make generalisable findings (Eisenhardt, 1989). Indeed, the multiple case study is the most recommended approach for identifying dynamic capabilities as they are embedded in a firm’s routines and processes (Khan et al., 2020). Thus, we first analysed each case in order to understand how the microfoundations of dynamic capabilities materialised. We then compared the cases to identify the common points and differences between those cases. Finally, we analysed our findings to know how they might contribute to further theoretical development (Glaser & Strauss, 1967).

Data collection

Our analysis is based on semi-structured interviews carried out with 8 companies located in the Brittany region of France. These companies were selected from clusters focused on the ITC sectors and the marine industry. These industries have been located in this area and belonged to the economic landscape of the region for a long time. The firms’ age ranged from 3 to 30 years, with different industries represented. Most of the firms are software and digital companies, but some of them are industrial or part of the food and beverage industry. They all sell knowledge-intensive products. The characteristics of the sample can be seen in Table 1.

As recommended by Romanello and Chiarvesio (2019), we chose these firms using the definition given by Zucchella et al., (2007): SMEs that have internationalised three years after inception and have quickly generated revenue abroad (almost all of them are present in markets outside the European Union). In order to observe the dynamics around their strong international growth, we selected companies that recently generated high growth rates. Thus, we follow the definition given by the OECD: “All enterprises with an average annualised growth greater than 20% per annum, over a three-year period should be considered as high-growth enterprises. Growth can be measured by the number of employees or by turnover” (Petersen and Ahmad, 2007, p. 3). Thus, we ended up with an interesting sample of companies that can be analysed through the previously discussed criteria of international speed trajectory: The speed of internationalisation growth, the speed of change in the commitment of foreign resources and the speed of the increase in breadth of international markets (Hilmersson and Johansson, 2016). From this point, we isolated a 3-year period in order to look at the international post-entry growth of the EIFs. All of this information is in Table 2.

Data collection lasted 7 months (November 2020 to March 2021) and included data collection preparation, field interviews, direct observations, secondary data collection and transcription activities. We collected multiple sources of data (articles, websites, interviews, official records, etc.) and interviewed another employee, when possible, in order to triangulate our results (Denzin and Lincoln, 2011). We also had conversations with support organisations like BPI France (Banque Publique d’Investissement) and Bretagne Commerce International (Brittany International Commerce) in order to complete the data collection. We summarise this data collection in Appendix 1.

As it is standard for inductive research (Eisenhardt, 1989), our study is mainly supported by semi-structured interviews. We aimed to interview the founders and one of their employees. In total, our sample consisted of 15 semi-structured interviews (8 founders and 7 employees). The basic model for each interview was to interview one person with a business/administration background and another person with a more technical background. Each interview ranged from 30 to 90 minutes. All interviews were recorded (580 minutes; 149 pages of transcription). Our semi-structured questionnaire was structured into 3 main parts: The first part concerns the entrepreneur, the firm’s entrepreneurial journey and the current market conditions. The second part includes questions about the firms’ sensing, seizing, and transforming capabilities as presented in Teece (2007). The third part concerns the processes and routines applied to capture the microfoundations.

We focused our interviews on making sense of the microfoundations of dynamic capabilities in the case of EIF international growth (Gioia, Corley and Hamilton, 2013). First, we used secondary sources (websites, interviews of founders available on the internet, etc.) to create a timeline for each firm, tracing major events and achievements over the time. Second, during the interviews with the founders or managers, and after having first discussed the firms’ entrepreneurial journey and the current market conditions, we discussed the events of interest in the secondary sources. Thus, we clarified how they built their strategy over the previous 3-year period (Gioia et al., 2013). Third, the second interview (with a key employee), focused on changes that the company faced over the last few years. We also tried to obtain as many concrete examples of their internationalisation practices as possible, the initiatives they took or the problems they faced, in order to better capture how these dynamic capabilities were reflected in the firms’ routines or processes. This part was particularly interesting when done with the engineers or people with a technical background. Indeed, most of the time they gave us clearer visions of processes and routines than did those with a business or administration background. During that part we gathered a lot of information about how the firm behaved.

Table 1

Characteristics of the Sample

Characteristics of the Sample

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Table 2

International growth characteristics[1][2][3][4][5][6][7][8][9]

International growth characteristics123456789

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Data analysis

The data collected through interviews, documents and direct observations were analysed using a qualitative and inductive approach (Gioia et al., 2013) and manual coding process. We used Atlas.ti-9 software to classify the main conceptual patterns across our primary and secondary sources of data. We began by organising the data related to the environment; the companies’ characteristics; and the sensing, seizing and transforming capabilities into fragments (Miles and Huberman, 1994). All this represents the first-order category. As it was coded, we realised the first analysis of the EIFs’ microfoundations. During this part we distinguished elements relating to how the firms react to their environment, for example, experiential learning, use of lean start-up methodology or continuous improvement. Some of these elements show clear process links with the lean start-up methodology. Therefore, we carried out a data reduction by gathering the similarities and differences found among our cases. Thus, the data related to the first-order concept were reorganised into broader categories (Miles and Huberman, 1994). We then reread and recoded the data according to the evolution of our understanding (Denzin & Lincoln, 2011). Finally, based on this data reduction, we carried out a cross-case analysis to look at the similarities and differences among the cases (Eisenhardt and Graebner, 2007).

To summarise, through this method, we aimed to aggregate first-order concepts into second-order themes related to the dynamic capabilities’ framework (Gioia et al., 2013). In total, the data was recoded three times, resulting in 26 codes. During this process we moved from the data to the literature in order to better understand the microfoundations of the firms’ dynamic capabilities. This process resulted in the constitution of nine second-order themes. This dimension represents the key microfoundations of the dynamic capabilities that influence the EIFs’ international growth. In Figure 1 below, we present the data structure (with the first-order concepts, the second-order themes and the aggregate dimensions):

From data structure to an integrative model

Thanks to our analyses and the data structure, we have created an inverted pyramidal model that shows the interrelationship between the microfoundations identified in international post-entry growth and thus explains the interplays that favour international growth in the EIFs. In fact, the data in Figure 1 emphasise the various theoretical components, but do not show how they are related. This is the aim of the Figure 2.

Figure 1

Data structure

Data structure

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Figure 2

Pyramidal model of EIF international post-entry growth

Pyramidal model of EIF international post-entry growth

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Findings

In this part, we provide further insight and illustrate our integrative model to respond to our research question: What are the microfoundations of dynamic capabilities that determine the international growth of EIFs? First, we present the individual factors that support capability building. We then detail the microfoundations of international sensing, seizing and transforming capabilities and finally, we show how they are linked to the international growth of EIFs. Further verbatim quotations that support our findings are presented in Appendix 2 and are related to the following code (ex: “IM1”); Appendix 3 offers an inter-case comparison of the presence of microfoundations.

Individual capabilities: the breeding ground for the emergence of dynamic capabilities

Dynamic capabilities are supported by individual factors that represent individual levels and allow EIFs to reach evolutionary fitness over time. These individual factors are: (1) the innovative mindset and (2) the collaborative mindset.

The innovation mindset

The innovative mindset plays a key role in the emergence and enhancement of dynamic capabilities. Indeed, EIFs build an innovation-oriented culture (IM1). These organisations always strive to generate better products or disrupt the market, not only for themselves, but also for their clients. An innovation culture is an essential condition in internationalisation due to the complexity of the dynamic environment. Indeed, according to Cavusgil and Knight (2015: 10) “A strongly innovative nature seems to support these businesses in forming particular types of knowledge, which drives the development of organizational capabilities that support early internationalization and superior performance in diverse international markets”. Thus, in our cases, every employee understands the notions of agility, iteration, and continuous improvement, which help create new knowledge and new organizational capabilities, which will in turn support the firm’s international growth. This understanding comes mainly from the founders, whose backgrounds often include R&D experience and who consider innovation to be the main part of their work (IM2).

The collaborative mindset

The second factor that enhances dynamic capabilities microfoundations at the individual level is the collaborative mindset (CM1). Indeed, many EIFs in our sample encourage a collaborative mindset, as they consider decision-making to be a collective action (CM2). Thus, seizing opportunities is encouraged throughout the organisation, and many of the founders consider every employee a fully-fledged “entrepreneur” (CM3). In fact, they consider their expertise to be limited and feel that they do not have a complete vision of the problems faced by the firm. Therefore, they trust all their employees, who are assumed to be experts in their domain, to lead projects and make the right decisions. Individual responsibility is thus a key value in the group. In this process, communication is important, as it enables long-term goals to be set and creates objectives for the whole team. This notion of collaborative mindset is present throughout the EIF literature. Indeed, in a recent article, Weerawardena, Mort and Liesch, (2019) show that employees of EIFs generate collective sense making in order to operationalise the firm’s strategic choices and thus succeed abroad.

We will now move from the individual level to the examination of the microfoundations of dynamic capabilities related to international sensing, seizing and transforming.

International sensing capabilities in the EIFs’ international growth

Sensing capabilities can be defined as the recognition of a new opportunity that can lead to a firm’s reconfiguration (Teece, 2012). Our results show the relevance of international sensing capabilities, which are divided into three subcategories: (1) international opportunity scouting, (2) experiential learning and (3) international mindset crafting.

International opportunity scouting

The first element involves international opportunity scouting. EIFs, due to their international statures, seem to consider the international context more as a source of opportunities than a threat. In fact, due to their activities, they consider scouting opportunities on the global stage as a unique choice. As their markets are global by nature, there is little interest for them to only focus on the French market to keep up with the trends. However, because opportunity scouting involves a great deal of work, as EIFs are evolving within an “uncertain and dynamic environment” (Teece et al., 1997) due to market diversity and consumer trends. (IOS1). Therefore, these firms consider opportunity scouting to be a practice that must be collectively constructed and realised (IOS2). Most of the CEOs encourage deliberate scouting among their teams: scouting cannot be dictated from above but needs to be done naturally out of curiosity, without external incentives (IOS3). Through these actions, EIFs gain resilience and can quickly react to their market’s opportunities.

Experiential learning

Our second element of international sensing capabilities is experiential learning. Experiential learning can be defined as the firms’ interactions with external actors during their market research to improve their products through feedback from clients, partners, suppliers or institutions (Khan et al., 2020). Most of the firms interviewed try to generate knowledge and enhance innovation through close partners or with a special relationship with clients (EL1). Indeed, being close to their partners or clients allows them to offer better products and respond to market demand. Experiential learning is important for innovation: Most of the time, incremental innovation in the firm’s market positioning comes from interactions with customers. Radical innovation (e.g., for strategic positioning) occurs when EIFs get involved in research programs with partners or institutions (EL2). Quite frequently, international opportunity scouting and experiential learning are linked (EL3).

International mindset crafting

As EIFs evolve within an international environment, we obviously find an important characteristic already discussed in the literature: their mindset (Hagen and Zucchella, 2014). But beyond the entrepreneurial mindset, our results point to the notion of mindset crafting. Indeed, continuously building an international culture among the teams turns out to have an important role as it allows EIFs to correctly capture information. This mindset needs to be “crafted” because, as has been described in the literature (Romanello and Chiarvesio, 2019), the culture starts from entrepreneurial ambition and needs to be shared with employees (IMC1). Thus, building a strong international culture is a long process that evolves along the EIFs’ international trajectory.

International seizing capabilities during the EIFs’ international growth

Seizing capabilities refer to how quickly organisations can respond to opportunities and threats (Teece, 2012). Our analysis shows that international seizing capabilities are broken down into (1) rapid prototyping, (2) international scenario planning, and (3) international strategic agility.

Rapid prototyping

As already explained, most of our firms are in high-tech sectors or sell knowledge-intensive products. During the interviews, a large majority of the CEOs explained that marketing those types of products was not easy because they needed to fully take advantage of the product knowledge base in order to make the firm’s initial investment in R&D profitable. Thus, these EIFs tried to capitalise on this knowledge base by making their initial products and capabilities shift according to the market they were targeted to. They offered a range of the initial product, often in very specific variations, to adapt to customer needs and any cultural differences (RP1). To that end, they seem to have developed internal mechanisms, built upon the lean start-up methodology, that helped them to quickly prototype (Minimum Viable Products) and test these products on the markets. Thus, they could have quick feedback and save time and money.

International strategic agility

To support these processes, firms seem to develop great flexibility to respond to international demand. In fact, the international development of one firm is composed of many interruptions and setbacks, as market conditions are never the same and the situation is uncertain. Thus, these EIFs seem to develop mechanisms to overcome their market constraints. For example, they can intuitively switch their resources from one project to another or accept redirections and changes, etc (ISA1). This way of behaving leads them to seize new opportunities or react quickly to serious threats by testing new resource combinations and quickly adapting to the international clients’ demand (ISA2). Thus, international strategic agility appears as essential not only for internationalisation but also for a high-growth dynamic, as this agility helps the firm to follow market trends.

International scenario planning

At the same time, these firms developed plans for their internationalisation which may seem paradoxical. Indeed, the founders often express their views and ambitions about internationalisation. They consider internationalisation a “long-term” goal that needs to be planned and thought out (ISP1). Indeed, some of them told us that internationalisation is the most complex operation to lead. Even though these companies are “agile”, they also know how to make plans and set long-term goals for their internationalisation. This planning mainly concerned links to business activities. They need to anticipate what countries to target when, what human resources they need to allocate and the strategic information they need to obtain (ISP2). By setting this information within a timeframe, EIFs set goals to reach and thus enhance their international activities.

International transforming capabilities during the EIFs’ international growth

Transforming capabilities can be defined as the continual renewal of the firms’ activities (Teece et al., 2016). Our results revealed three microfoundations that formed their international transforming capabilities: (1) navigating international ecosystems, (2) improving international maturity and (3) organisational restructuring.

Navigating international ecosystems

Throughout our interviews, and in line with the literature, we noticed that EIFs were developing their international activities with the help of partners (consultants, governmental organisations, MNEs, foreign universities). In fact, using a strong international network allows EIFs to reduce cultural and institutional distance. Through these international partners, the firms gain access to knowledge about their target countries like regulations, market conditions, events, etc (NIE1). More specifically, thanks to their networks, EIFs are able to meet the right contacts at the right time and thus get the right information about a specific opportunity (NIE2). This is crucial and allows them to stay ahead of the game and generate a competitive advantage. To conclude, all of the firms consider the development of a strong network over time to be a cornerstone of their internationalisation process as it leads to fast market entry as well as high growth enhancement.

Improving international maturity

Our results show that EIFs all have the objective to add new international capabilities over time. Adding international competencies may allow employees to better follow EIFs’ international operations (IIM1). Indeed, the “high international growth” dynamic strongly impacts the firm’s routines and process, and quickly concerns all of the firms’ operational and technical activities. For example, as the activity of the EIF grows, employees have to deal with more foreign emails, respond to international customers’ complaints, plan many international shipments, etc. Thus, if people are not aware of the specifics of international business, or cannot communicate properly with their clients, partners or suppliers, it will handicap the whole organisation and slow down the firm’s international activities. One of the main gaps mentioned was language. To bridge this gap, the firms try to draw on people who speak foreign languages and/or have previous international experience in order to not only speak with customers but also include cultural codes. Meanwhile, some of them are directly building cross-cultural teams to address several markets internally and not be hindered by cultural distance. Therefore, improving international maturity seems to be crucial for sustaining the EIFs’ expansion. Here is a counterexample to show that EIFs understand that improving international maturity is important to capture and keep market share and that mistakes can be disastrous (IIM2).

Organisational restructuring

Organisational restructuring seems to be the key point of the dynamic EIFs engage in. In fact, as they move into a dynamic and uncertain environment due to their internationalisation, these firms need to adapt their structure to market constraints (OR1). To respond to these constraints, they must change their processes or even create new entities to coordinate their activities around the world (e.g., for new subsidiaries, offices or even start-ups) (OR2). That restructuring requires great flexibility in the teams. Without this continuous organisational restructuring, these firms would not be aligned with their new strategic positioning and global strategy, and thus they would not be able to sustain their international expansion (OR3).

Discussion

EIFs’ international growth is a complex phenomenon that can be clarified through the microfoundations of dynamic capabilities. We find that the microfoundations approach reveals the key factors that allow EIFs to set themselves on a sustainable international trajectory. Our results complement those of Romanello & Chiarvesio (2017) on the post-entry stage and go one step further in “entering” into the dynamics at play.

Indeed, EIFs can handle their reconfiguration over time thanks to strong factors related to the individual levels (Felin et al., 2012). These individual-level factors allow the firm to reach evolutionary fitness over time and enhance certain kinds of routines and processes (Abell et al., 2008). Our results reveal the routines and processes that have been observed within the international sensing, seizing and transforming capabilities that enable the firm to reach better market penetration and generate revenue in the targeted countries.

By identifying nine different microfoundations (international opportunity scouting, experiential learning, international mindset crafting, rapid prototyping, international strategic agility, international scenario planning, navigating international ecosystems, improving international maturity and organisational restructuring), this study provides a better understanding of the kind of dynamic capabilities EIFs use in their international growth and challenges conventional ways of studying EIFs’ internationalisation. Below, we discuss 3 main contributions.

Individual levels as enactment factors of post-entry growth

The first point we want to discuss is the role played by individual elements as enactment factors of post entry growth. Indeed, two individual-level factors turn out to be the cornerstones of the overall process: the innovative mindset and the collaborative mindset. Thus, we argue that most of the microfoundations of dynamic capabilities are intangible by nature and are based on employee interactions within the EIF’s routines and processes (Nelson and Winter, 2002). These employee interactions are the pillar of the whole dynamic as they allow the firms to implement suitable strategies to react to their environmental threats or opportunities. In that sense, we apply the vision of the “organisational drive train” developed by Di Stefano, Peteraf and Verona, (2014) to the field of international entrepreneurship. In fact, the creation or birth of a mindset that is initially developed at the individual level will appear as the foundation or receptacle of routines and processes (Felin et al., 2012). Moreover, we go one step further because our results emphasise the collective aspect of these mindsets, which evolve and become the business of an entire team and not just that of the leader. Thus, in this article, we aimed to open this black box and showed that EIFs develop a strong company culture with an innovation mindset, and that the collaboration mindset will then support the firms’ capability development and organisational restructuring over time. Building on Romanello and Chiarvesio’s (2017) results, we show that employees seem to follow the entrepreneur’s path and vision, but we also find that entrepreneurs transform individual capabilities into a collective knowledge base. Therefore, we provide a first explanation about how these companies capitalise on individual capabilities to create a fertile ground for first developing dynamic capabilities (international sensing capabilities) and then managing post-entry growth.

Rapid prototyping and experiential learning as factors of the EIFs’ international growth

The second point of discussion is based on the development of both exploitative and explorative capabilities through organised processes (Prange and Verdier, 2011). Thanks to the innovative and collaborative mindsets discussed above that create a company culture or philosophy, EIFs seem to develop exploitative and explorative capabilities simultaneously.

The development of exploitative capabilities takes the shape of rapid prototyping here: this explains how the firms exploit their knowledge base. Since the EIFs are knowledge-intensive companies (Knight and Liesch, 2016), they need to capitalise on the knowledge generated during the inception stage. However, once products are created, they do not always correspond to the market constraints as cultures vary and customers in different geographical areas continuously change their behaviours. Therefore, it seems those EIFs use methods relatively similar to the lean start-up methodology: They create minimum viable products, continuously try prototypes with their customers to get feedback, and then adapt and improve their products and thus their business models. From that practice, they are able to seize a larger number of opportunities and therefore achieve better performance over time.

The development of explorative capabilities seems here to be mainly enhanced through experiential learning (Khan et al, 2020), and the relationships EIFs maintain with external partners. This notion of experiential learning seems to complement international opportunity scouting because it generates iterations through the innovation process. Thus, thanks to interactions with external partners, experiential learning reinforces opportunity scouting and create a kind of virtuous circle that enhances these two microfoundations. Indeed, EIFs are often supported by bigger organisations like research centres, government or MNEs, which generates disruptive technologies. In fact, since EIFs are resource constrained (Knight and Liesch, 2016), they need to find external support, in particular financial aid through government funds, for example. This funding helps them to maintain a high level of R&D activities and stay current with research trends. Therefore, we argue that this notion of experiential learning could be closely linked to Hagen and Zucchella’s (2014) results, which emphasise the influence of networks on international development. Our results thus build on their contributions by showing that EIFs, thanks to external partners, move in international growth spirals led by innovation. Therefore, experiential learning proves to be one of the key elements of this “growth spiral”, as it can generate a rebound effect and maintain the firm’s competitive advantage over time.

The simultaneous presence of these two capabilities (exploitation and exploration), which is quite common in innovative companies, is rarely discussed in studies related to EIFs’ international growth (Romanello and Chiarvesio, 2019).

Improving international maturity as a key factor for ensuring EIFs’ internationalisation

The last point we want to discuss is the difficult necessity for EIFs to develop their knowledge and adapt their operational processes to their rapid internationalisation growth. So far, the literature on EIFs does not explain the issues related to this “international knowledge” over time, or how it follows and sustains the growth cycle (Hagen and Zucchella, 2014). Indeed, this knowledge needs to increase as EIFs grow in terms of commercial intensity, structure, and increase in more distant markets (Hillmersson and Johanson, 2016). For EIFs, this knowledge takes the shape of international business practices like mastering foreign languages and practices related to international business operations, cultural differences, institutional regulations, etc. Thus, human resources seem to play an important role when it comes to integrating new knowledge related to international operations (Prashantham and Young, 2011). Hence, our results show that this resource integration needs to be managed by company leaders, who need to make their EIFs increase quantitatively (in the number of staff members) and qualitatively (hiring employees with the appropriate skills). These entrepreneurs, if they want to sustain growth, need to hire not just new people, but employees with specific skills that can respond to the growing and changing demand. At this point, we reach the turning point described by Romanello and Chiarvesio (2017), when entrepreneurs must turn individual capabilities into their firms’ knowledge base that will ensure the EIFs’ international maturity. This international maturity will be reached only if the founder can not only decentralise to integrate new people but also identify employees who will fit the EIF mindset, culture, routines and processes. Through those processes, we also want to emphasise the role of organisational restructuring, which seems to have a critical aspect. Indeed, organisational restructuring seems to enable knowledge development in this kind of firm as it adapts the structure to help firms reach “evolutionary fitness over time” (Teece, 2007).

Conclusion

This research explores the concept of international growth through the microfoundations approach to dynamic capabilities. We set up an inductive research method to better understand which microfoundations of dynamic capabilities are present along the EIF’s internationalisation trajectory. We outline the existence of factors at the individual level that are the basis for sustained international development, but also the existence of components in international sensing capabilities, international seizing capabilities and international transforming capabilities at the organisational level. Through this research, we can make relevant contributions to the international entrepreneurship literature and more specifically for EIFs.

The first contribution is related to the vision of entrepreneurs and extends the results of Romanello and Chiarvesio (2017). Indeed, our results show the importance of the innovative mindset and collaborative mindset as a solid foundation at the individual level. For the innovative mindset, managers create the conditions for their teams to develop willingness to take risks, continuously improve solutions and find new market opportunities. Regarding the collaborative mindset, along the EIF’s trajectory, opinions are shared, initiatives are freely taken and decisions are made collectively.

The second contribution sheds light on development capabilities (Prange and Verdier, 2011) and the microfoundations behind them. Thus, our findings reveal that development capabilities are built through nine microfoundations at the organisational level, two of which are particularly important: rapid prototyping and experiential learning. Rapid prototyping is useful to react to market specifics and quickly exploit the firm’s knowledge base, whereas experiential learning serves to enhance the rebound effect described by Hagen and Zucchella (2014).

Our third contribution expands on this rebound effect. One microfoundation helps set up this rebound effect and supports the growth cycle at the international level: improving international maturity. This means that EIFs recognise the need to continuously improve some capabilities of their teams (e.g., the foreign language skills among teams) and learn from cross-cultural differences. Moreover, EIFs develop an effective “international knowledge base” and structure their skills progression in order to support operational capabilities during their high-growth trajectory.

Managerial implications

This research also offers relevant managerial implications. The first one concerns anticipation. Indeed, international growth of EIFs involves a high-growth dynamic. Thus, anticipating the firms’ capability development is the cornerstone of the whole process. We encourage managers to build a decentralised organisational structure from the beginning, continuously integrate new talent (even if they do not match the expected skills), support intrapreneurship and implement Lean Start-up or Agile methods. The second managerial implication concerns the network role for improving the EIF’s international maturity. In fact, through their network, EIFs seem to gain access to new international capabilities, which helps them to internationalise quickly. This can involve knowledge regarding specific countries’ regulations, market trends, language, etc. Thus, we encourage managers to navigate their international ecosystem to build a strong network, not only to access information but also to gain in learning and then maturity. Calling upon specific international organisations, consultants or embassies can help them to build a strong international knowledge base and therefore strengthen their international growth.

Limitation and avenue for future research

This research is not without limitations. First, this paper does not directly consider the influence of the entrepreneur. As we know, entrepreneurs play an important role in the internationalisation process as they arbitrate the firm’s choices, especially at the beginning (Weerawardena et al., 2019). Their role is also important during the internationalisation process, even if the team, and thus the organisational level, then takes over (Romanello and Chiarvesio, 2017). Moreover, recent literature has looked to the entrepreneur’s role in the internationalisation path through the MFV (Kunisch, Menz and Cannella, 2019; Chittoor, Aulakh and Ray, 2019). We think it could be an interesting subject of study to look deeper into how their personality traits or background influence the microfoundations of dynamic capabilities at the organisational level. Second, this exploratory study only focuses on firms from one region; this is both a strength (homogenous sample) and a weakness. Indeed, we have little knowledge about how the common institutional and local environments of firms can support their international high-growth dynamics. Therefore, further studies are encouraged to reproduce our methodology in different contexts, across a wider sample, to ensure external validity. A cross-regional or cross-country study may also be particularly interesting to capture possible differences. Also, as our sample consists of firms from different industries that took different levels of risk, we encourage further studies to carry out similar studies within specific industries, which will give a better representation of this phenomenon. Finally, we identify the presence of several microfoundations that may influence the international growth of EIFs, and this opens new research avenues. Thus, for example, there is a need to learn more about the relationship between these microfoundations and to eventually shed light on the creation of synergic effects that could generate international high growth rates. We also think that further studies may be made more specifically about the effect of organisational restructuring, which seems to be a critical factor. Finally, it would be interesting to address questions about how these microfoundations are compounded, whether they are all of equal weight and how they influence firms’ performance.