Knowledge and network development for service firm entry into emerging Asian markets

Abstract

Accessing pertinent knowledge before entry into Asian markets is essential for any firm seeking international expansion, particularly where psychic distance renders existing business assumptions inappropriate. This article examines the knowledge and relational activities of Australian service firms seeking to enter new Asian markets. The region is well known for the relational dynamics embedded in social and business interactions. We present a new perspective of the international entry of service firms in Asia, drawing on social capital theory and knowledge-based view of the firm. Results reveal an unexpected paradox – Australian service firms initially seek knowledge situated in the home operational context to leverage their entrance into their target Asian markets. Results are contrary to existing research and extend current knowledge, as Australian services firms clearly place a higher priority on enhancing operational rather than market-focused knowledge before entry. Evidence suggests that where psychic distance is high there is greater importance in accessing organizational situated knowledge over international market knowledge for leveraging foreign entrants in new Asian markets. Managerial implications suggest that entry into Asian markets requires managing multiple levels of relational interactions, and that leverage from the home market is essential to the process.