Lateral rigidity view

Luostarinen (1979) develops the concept of lateral rigidity. Lateral rigidity refers to the inflexibility that a firm poses on new alternatives due to a lack of adequate information about them. Within this approach, barriers are explained by the firm’s laterally rigid actions; it moves smoothly in a straight and forward direction.

However, learning proactively in a lateral direction like this is not favourable.

Stimuli from the external environment, such as an opportunity may bring change to the original plans of the firm. However, as different plans are synchronized with each other this affects the willingness of the firm to change its original plans.

Thus, the firm is seen to be more active in a forward direction, but rigid in a lat-eral one. This latlat-eral rigidity is influenced by the amount of knowledge the firm possesses, the lack of information about the stimuli, or perhaps due to the inade-quate ability of the management to deal with the external stimuli.

Luostarinen relates the impact of lateral rigidity on the decision-making model of the firm’s internationalisation. It assumes that the more knowledge the firm pos-sesses about the decision variables, the less lateral rigidity it faces from within itself and the greater resources it commits to internationalization.

Luostarinen (1979:35) puts it this way ‘in making the final decisions the company is usually willing to select those alternatives which are known to it and tries to avoid those alternatives which are unfamiliar’.

Lateral rigidity is assumed to be a typical feature at every stage of the learning process, and has four components which affect organizational learning: limited perception, selective search, restrictive reaction, and confined choice, as shown in Figure 7.

Figure 7. Behavioural barriers to organizational learning and knowledge crea-tion. (author’s own creation)

Limited perception

It is assumed that the global environment is full of growth impulses for firms.

However, a firm perceives only a small fraction of these problems or opportuni-ties in a global environment. The limited perception of these impulses is due to the following three factors:

– position of unfavourable impulse exposure – inactive search for impulses

– limited span of attention

The perception of external stimuli differs for each firm in the same industry, due to their lack of required resources, weak market position and reputation. The level of the firm’s search activity for external impulses also affects the number re-ceived. Luostarinen (1979:37) describes that in firms there is a tendency to set pre-planned goals, but a changing environment is perceived as a problem for the implementation of such goals. Thus, firms reject changing their goals in the face of a changing environment. Finally, limited attention to time relates to the fact that the firm has a lack of motivation, a lack of skills, insufficient knowledge or human resources to respond to these external impulses.

Selective search

Search here refers to the search for impulses; a search for different alternatives to solve a problem or utilizing an opportunity suggested by the impulse (Luostarinen 1979). Firms are very selective in looking for alternatives. Firms actively react to threats, rather than actively searching for alternative impulses. Such a search is

Confined

Choice Restrictive

Reaction Selective search Limited

Perception

stimulated by a problem and in finding a solution to that problem; firms develop new knowledge, which can later be used to respond to similar kinds of problems which may arise in the future. Thus, a search for impulses is usually selective in that it is related only to finding solutions only to given problems. This characteris-tic makes it biased in nature. The solutions to the problem are searched for among the current alternatives and the firm is inclined to find solutions that are presented from within its given resources and abilities (Aharoni 1966; Luostarinen 1979).

For this reason, such solutions are biased towards the previous opinions, attitudes, hopes and expectations of the management personnel.

Restrictive reaction

Sometimes firms show a restrictive reaction to external impulses and newly cre-ated knowledge. This is maybe due to an inability or unwillingness to react. A lack of financial, physical or human resources causes an inability within the firm to react, especially if the situation demands new resources. Sometimes firms pos-sess the required resources but there is very little time to respond to the exposed situation. The ‘unwillingness to react’ factor needs to be emphasized here. A pre-vailing satisfaction with the current situation is one issue that inhibits the firms from collecting more and new knowledge. In such cases, the management may face restriction from the personnel of the firm in adopting new knowledge. Lu-ostarinen (1979:39) refers to this as mental commitment.

Confined choice

As firms had previously developed knowledge about the alternatives in the selec-tive search, the choice is confined to these alternaselec-tives. Thus, search and choice are interdependent. However, the choice between different alternatives is influ-enced by two behavioural factors: uncertainty avoidance and risk escape. Here, Luostarinen (1979) relates uncertainty to the stock of knowledge affected by the flow of information and experience. In this case, firms possess little knowledge of the qualifications of the product, its alternative uses, market alternatives and the outcome of these alternatives. Only those alternatives which have proved to be positive due to the earlier experience of such firms are preferred and new experi-ences are avoided due to a lack of knowledge. Similarly, only the new alternatives which are similar to the previous alternatives used are accepted. Risk in the lateral rigidity concept is defined as the sum of the degree of uncertainty felt, the per-ceived level of the resource commitment and the subjective probability of the loss. Higher probability of loss is related to higher uncertainty and higher com-mitment of resources. Thus, the risk will be greater in such situations.

Export expansion rationale in the organizational learning perspective: Within the context of organizational learning, export expansion can be explained from two points of view: learning from previous experiences and action-based proac-tive learning. Learning from previous experience has been mentioned as ‘learning by doing or experiential learning’ (Johanson and Valhne 1977). The success of exports depends largely on the mechanisms that firms use to interpret and transfer previous experience into an acquisition of managerial competencies that are fur-ther used for organizational purposes. The Uppsala model and the lateral rigidity views explain the mechanisms of the underlying processes which pertain to the acquisition and utilization of the market knowledge. Uppsala model suggests that as a result of a cyclic process of resource commitment and an increase in the ex-periential knowledge, firms learn better how and where to commit further re-sources.

The Uppsala model, however, provides no insight into how and why firms would learn from their experiences (Forsgren 2002; Forsgren and Björkman 2000).

Similarly, explanations are lacking as to why and how firms learn by direct ex-perience and acquiring the knowledge of the foreign market through indirect means such as partnerships, and how direct learning may influence the rate of (speed) of export expansion. Even in the case where firms are not involved in direct learning, learning from their partners must be internalized. However, the Uppsala model lacks explanations for indirect learning and also learning mecha-nisms at the firm level. Only experiential knowledge i.e. learning by doing is pre-sented as a learning mechanism.

Lateral rigidity model, on the other hand, suggests the behavioural factors at firm level that hinder the commitment of resources at organizational as well as market levels. It focuses on a broad range of behavioural factors that inhibit the acquisi-tion and utilizaacquisi-tion of market knowledge. Firms are considered to show laterally rigid behaviour to accept new change and knowledge. Thus, lack of knowledge is considered as a barrier to decision making concerning the resource commitment.

However, no one such kind of knowledge is identified in this view. This view will be used to analyze factors at firm and market levels that facilitate and hinder the internalization of market knowledge competence.

Suitable theories for the purpose of the present study are considered to be the re-source- and knowledge-based views and the market orientation perspective. An overall summary of the central ideas and key studies concerning the above-mentioned theories in the context of export expansion is presented in Table 2.

Table 2. A description of intangible resources in export expansion theories

and processes Spender 1996; Grant 1996a and b; Nelson and Winter

market Learning Deshpande and Zaltman 1982; Kohli and Jaworski 1995; Toften 2005; Hunt and Morgan 1995 Hart and

After a review of theories to export expansion, the next section attempts to ana-lyze important theoretical concerns derived from these theories in the form of a theoretical framework. The research objectives of the study will guide the analy-sis of these theories. Therefore the theoretical framework is built around the fol-lowing concerns:

– Kinds of knowledge that may constitute market knowledge competence – The link between knowledge and export expansion capabilities

– To analyze factors at the firm and market levels those facilitate and hinder the internalization of market knowledge competence.

2.5 Analysis and discussion of the theoretical