Exploring the unknown requires leveraging uncertainty: Two Essays on A Real Options Perspective on the Pattern and Decision-Making of Entrepreneurial Internationalization

Uncertainty is at the center of both entrepreneurship and international business research. One of the fundamental underlying assumptions of entrepreneurship and internationalization theories is that entrepreneurial organizations and entrepreneurs constantly operate in uncertain environments. Even more so in a cross-border context, increasing levels of host country uncertainty can drastically reshape firms’ entrepreneurial internationalization patterns and outcomes as well as entrepreneurs’ internationalization decision making process. Yet, the field of entrepreneurship and international business still lack theoretical explanations for the role of uncertainty in entrepreneurial internationalization. In this two essay dissertation, I applied real options theory, a theoretical perspective that emphasizes decision making at high levels of uncertainty as well as taking advantage of changing levels of uncertainty over time to achieve better organizational outcomes, to re-conceptualize the role of uncertainty in entrepreneurial firms’ internationalization process and entrepreneurs’ internationalization decision making. In Essay one, I compare Transaction Cost Economics (TCE) view with Real Options Theory (ROT) in predicting entrepreneurial firms’ internationalization patterns and outcomes. In particular, by merging several international trade and FDI databases, I empirically tested the impact of host country institutional and economic uncertainty on entrepreneurial firms’ choice of real options entry as well as the effect of real options entry on firms’ entry time, entry location, market exits, and post entry performance. In Essay two, I investigate the uncertainty conditions under which individual entrepreneurs apply real options reasoning in their internationalization decision making process. I theorize the uncertainty leveraging perspective by applying real option reasoning to entrepreneurs’ internationalization decision making. Empirically, I employed a 2 by 2 randomized between and within-subjects mixed design experiment on a representative sample of U.S. international entrepreneurs. Toking together, the two essays examine the role of uncertainty in entrepreneurial internationalization process and decision making. The dissertation contributes to both the entrepreneurship and internationalization literature by offering a real options perspective of uncertainty leveraging and by empirically testing the effects of both perceived and actual host country uncertainty in entrepreneurial firms’ internationalization process and entrepreneurs’ internationalization decision making.