The Influence of Managerial Experiences on Large Firm Internationalization

Abstract

This study investigates the relationship between top management team (TMT) experiences and the level of internationalization of 87 U.S. Fortune 500 firms in four industries. Hypotheses are developed which predict that more international experience, longer organization tenure, and heterogeneous functional backgrounds will be associated with greater levels of international activity. The results confirm the expectations for international experience and organization tenure, but no relationship was found for functional background heterogeneity. Our findings suggest that managerial experiences might indeed play critical roles in the formulation and implementation of internationalization. Introduction and Theoretical Background Internationalization, or the process of increasing involvement in international operations across borders (Welch & Luostarinen, 1988), is now considered an inevitable step in the quest for sustainable competitive advantage (Porter, 1990). Despite decades of research on internationalization (e.g., Doz & Prahalad, 1991; Dunning, 1980; Johanson & Vahlne, 1977; Vernon, 1966), the antecedents of the phenomenon are still unclear. This paper approaches internationalization from a strategic leadership perspective by examining the understudied relationship between top managers and internationalization. Very little attention has been paid to the role of the strategist (Bartlett & Ghoshal, 1991), notwithstanding vigorous growth of the process school of international management (Bartlett & Ghoshal, 1991; Doz & Prahalad, 1991) which focuses on managers and the decisions they make. Upper echelon theory (Hambrick & Mason, 1984), a key foundation in the strategic leadership literature, provides a framework within which the role of key executives can be interpreted. According to the model, the choices made by managers on behalf of organizations reflect to some extent the characteristics of these managers. Two managers facing identical environments and heading organizations with identical resource profiles can make different choices because of their personal characteristics and experiences. As a result, these organizations could undertake widely different courses of action. The efficacy of upper echelon theory and the demographic approach has been demonstrated in a large body of empirical research (e.g., Chaganti & Sambharya, 1987; Thomas, Litschert, & Ramaswamy, 1991) but few studies have investigated the role of managers in international organizations (e.g., Reuber & Fischer, 1997; Roth, 1995; Sambharya, 1996). In this article, we take the view that executive leadership skills are learned from experience (Spreitzer, McCall, & Mahoney, 1997), and propose that experience will be significantly related to the level of international involvement achieved by firms. Strategic Leadership and Internationalization While the recruitment and development of executives with international experience may be requirements for firms preparing to meet the challenges of a global economy, the linkage between managers and internationalization extends beyond this apparent relationship. Management decision making plays a key role in determining international scale and scope, direction of growth, and opportunities for growth of firms (Buckley, 1993). We propose that the competencies and backgrounds of top management groups, or the key decision makers in an organization, can facilitate or inhibit an organization's formulation and implementation of an internationalization strategy. While Reuber and Fischer (1997) and Sambharya (1996) have demonstrated the positive relationship between international experience and internationalization, we suggest that the organizational and functional experiences of top managers will also be related to the level of international activity. In addition, we add to Roth's (1995) findings by addressing the role of the top management group. …