Experiential Knowledge and Costs in the Internationalization Process

Abstract

Using a behavioral approach, this study identifies and delineates components of experiential knowledge in the internationalization process. Three hypotheses are developed and tested. They center around the lack of knowledge in the areas of foreign business, foreign institutions and firm internationalization, as well as the effect that this lack of knowledge has on the managers´ perceived cost in the internationalization process. With the help of a LISREL-based structural model, the three hypotheses are tested on a sample of 362 service firms. The analysis shows that lack of internationalization knowledge has a strong impact on the lack of both business and institutional knowledge which, in turn, influence the perceived cost in internationalization. But there is no direct effect of lack of internationalization knowledge on perceived cost in internationalization.