Journal of International Marketing

Volume 17, Number 2, 2009

Contents
Executive Summaries iii

Global Consumer Innovativeness: Cross-Country Differences and Demographic Commonalities Gerard J. Tellis, Eden Yin, and Simon Bell

Order-of-Entry Effects for Service Firms in Developing Markets: An Examination of Multinational Advertising Agencies Peter Magnusson, Stanford A. Westjohn, and David J. Boggs

23

Product Development Strategy, Product Innovation Performance, and the Mediating Role of Knowledge Utilization: Evidence from Subsidiaries in China Junfeng Zhang, C. Anthony Di Benedetto, and Scott Hoenig

42

In Search of Platforms to Increase Market Responsiveness: Evidence from Foreign Subsidiaries Ruby P . Lee, Qimei Chen, and Xiongwen Lu

59

Challenging the Conceptualization and Measurement of Distance and International Experience in Entry Mode Choice Research Douglas Dow and Jorma Larimo

74

Copyright 2009, American Marketing Association. Journal of International Marketing (ISSN 1069-031X) is published quarterly (Spring, Summer, Fall, Winter). Subscriptions are $115 for individuals and $220 for institutions in the United States and Canada. Subscriptions outside Continental U.S. add $30. Subscriptions for AMA members are $55. Canadian residents add 5% GST (GST registration #12747852). Prepayment is required in U.S. dollars or the equivalent. Published by the Publications Group of the American Marketing Association, 311 S. Wacker Drive, Chicago, IL 60606-2266. POSTMASTER: Send address changes to Journal of International Marketing, 311 S. Wacker Dr., Ste. 5800, Chicago, IL 60606-2266, USA. Advertisers and Advertising Agencies assume liability for all content (including text, representations, and illustrations) of advertisements published and also assume responsibility for any claims arising therefrom made against the publisher. The right is reserved to reject any advertisement.

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Journal of International Marketing

Volume 17, Number 2, 2009

Editorial Board
Editor in Chief David A. Griffith Michigan State University Assistant to the Editor Nicki Augustyn E-mail: jim@ama.org AMA Vice President of Publications Richard J. Lutz University of Florida Former Editors S. Tamer Cavusgil (19932000) Georgia State University Bodo B. Schlegelmilch (20002003) WU Wien Daniel C. Bello (20032007) Georgia State University

Dana Alden University of Hawaii Kwaku Atuahene-Gima CEIBS Simon Bell University of Melbourne Rajeev Batra University of Michigan Daniel C. Bello Georgia State University Ruth N. Bolton Arizona State University Roger J. Calantone Michigan State Univesity S. Tamer Cavusgil Georgia State Univesity Nicole Coviello Wilfrid Laurier University Samuel Craig New York University Michael R. Czinkota Georgetown University Adamantios Diamantopoulus University of Vienna Susan P. Douglas New York University Esra Genctuck Koc University Kate Gillespie University of Texas at Austin David Gilliand Colorado State University Zeynep Gurhan-Canli Koc University

Naresh K. Malhotra Georgia Institute of Technology Bruce Money Brigham Young University Neil A. Morgan Indiana University Janet Y. Murray University of Missouri at St. Louis Matthew B. Myers University of Tennessee Cheryl Nakata University of Illinois at Chicago Alex Rialp-Criado Universitat Aut` onoma de Barcelona Aric Rindfleisch University of Wisconsin Saeed Samiee University of Tulsa Bodo B. Schlegelmilch WU Wien Steven H. Seggie Ozyegin University Aviv Shoham University of Haifa Carl Solberg Norweigian School of Management Carlos M.P. Sousa University College Dublin Chris Styles University of Sydney Gerard J. Tellis University of Southern California Frenkel ter Hofstede University of Texas at Austin David K. Tse Hong Kong University Ana Valenzuela Baruch College Jeryl Whitelock Bradford University Nancy Wong University of WisconsinMadison Goksel Yalcinkaya University of New Hampshire Eden Yin Cambridge University Shaoming Zou University of Missouri at Columbia

American Marketing Association Dennis Dunlap Chief Executive Officer Francesca Van Gorp Cooley Managing Editor Marilyn Stone Technical Editor Sarah Burkhart Graphics Editor JIM Web site: www.marketingpower.com/JIM JIM submissions: http://mc.manuscriptcentral.com/ama_jim

Kelly Hewett Bank of America Harmut Holzmuller TU Dortmund University Michael Y. Hu Kent State University John Hulland University of Pittsburg Subhash Jain University of Connecticut Constantine S. Katsikeas Leeds Business School Gary Knight Florida State University V. Kumar Georgia State University Luis Filipe Lages Universidade Nova de Lisboa

EXECUTIVE SUMMARIES

Global Consumer Innovativeness: Cross-Country Differences and Demographic Commonalities

Gerard J. Tellis, Eden Yin, and Simon Bell

espite extensive research on consumer innovativeness, the literature does not contain a parsimonious construct that has been validated for use across countries, demographics, and product categories. Tellis, Yin, and Bell attempt to fill this gap by studying consumer innovativeness across 15 major world economies. Prior literature and their own observations suggest ten distinct measures of consumer innovativeness. The authors test which of these metrics are relevant for measuring consumer innovativeness and whether consumer demographics are significant predictors of consumer innovativeness.

Tellis, Yin, and Bell collected data from 5569 consumers across 15 major countries, including the leading world economies, such as the United States, Japan, the United Kingdom, France, Germany, China, India, and Brazil. The study produced three significant results. First, four negatively valenced items constitute a good construct of innovativeness that seems reasonably applicable across most countries. Second, although countries differ on this innovativeness construct, common demographic antecedents emerge across countries. A global innovator can be identified as wealthy, young, mobile, educated, and male. Third, within these commonalities, consumer innovativeness shows some distinct category demographics and category country differences.

The implications of the study are threefold. First, researchers need to be cautious when collecting information on consumers innovativeness and adoption of new products. The often-used positively valenced measures for innovativeness may suffer from social desirability bias. Second, despite the pressures of globalization and shortened product life cycles, managers should opt for a waterfall strategy of introducing new products (one country at a time), rather than a sprinkler strategy (introducing simultaneously into all countries), given that countries differ systematically in innovativeness in general, as well as in specific categories. Finally, the finding that five key demographics consistently predict innovativeness across countries can provide guidance for marketers segmentation efforts. Consumers eagerness for new products varies substantially by product category and demographics. In particular, women are more eager to buy home appliances, cosmetics, and food and grocery products, while men are more eager to buy automobiles and sporting goods. Younger consumers (those between 20 and 29 years) are more eager to buy automobiles than other age groups. Highly educated consumers are more eager to buy financial services. Finally, consumers whose income exceeds US$20,000 and those without children are more eager to buy sporting goods and financial services than those in other income groups.

Journal of International Marketing 2009, American Marketing Association Vol. 17, No. 2, 2009, p. iii ISSN 1069-0031X (print) 1547-7215 (electronic)

Executive Summaries iii

EXECUTIVE SUMMARIES

Order-of-Entry Effects for Service Firms in Developing Markets: An Examination of Multinational Advertising Agencies
Peter Magnusson, Stanford A. Westjohn, and David J. Boggs

he internationalization process of service firms has gained increased attention in recent years; yet the question whether timing of entry affects firm performance for service firms in developing markets has remained unanswered. Prior research, primarily of manufacturing firms in developed markets, has shown that market pioneers often enjoy first-mover advantages (FMAs), which include experience curve effects, economies of scale, and the development of buyer switching costs. As a result, early entrants often enjoy market share advantages and superior financial performance. This study aims to examine whether FMAs also exist for service firms entering developing markets. Previous research has shown that managers perceive FMAs to be less attainable for service firms, but there seems to be no empirical evidence to substantiate this perception. In contrast, Magnusson, Westjohn, and Boggs posit that FMAs do extend to service firms. Their conceptual arguments are grounded in a resource-advantage theory perspective. They suggest that for professional service firms, the ability to generate a sustainable competitive advantage through human capital is particularly relevant. In addition, they delineate the role of financial, physical, organizational, informational, and relational capital in the development of FMAs and as moderators of the relationship between entry order and firm performance. Specifically, the authors examine the moder-

ating effect of firm size, international experience, and ownership structure as indicators of these resources. The empirical analysis is based on 379 advertising subsidiaries spanning 43 different developing markets in Eastern Europe, Asia, the Middle East, Africa, and Latin America. As hypothesized, the authors find a significant relationship between entry order and firm performance, in which early entry leads to a sustainable competitive advantage. This refutes previously held perceptions among service firm managers. Furthermore, the authors find that the entry orderperformance relationship is moderated by ownership structure, international experience, and the developing markets rate of development. This suggests that firms that apply knowledge and experience acquired from prior international ventures or from a local partner can shorten the learning curve when entering a new foreign market, which helps the late entrant quickly gain market share and reduce the negative effects of late market entry. In summary, this study refutes a commonly held but previously unexamined assumption about the relationship between entry order and firm performance for service firms. The findings provide a guideline to aid firms decision of when to enter a new developing market as well as guidance as to how they can alleviate late-mover disadvantages.

Journal of International Marketing 2009, American Marketing Association Vol. 17, No. 2, 2009, p. iv ISSN 1069-0031X (print) 1547-7215 (electronic)

iv Executive Summaries

EXECUTIVE SUMMARIES

Product Development Strategy, Product Innovation Performance, and the Mediating Role of Knowledge Utilization: Evidence from Subsidiaries in China
Junfeng Zhang, C. Anthony Di Benedetto, and Scott Hoenig

ecent decades have witnessed the increasingly prominent role of subsidiaries in multinational companies innovation activities as well as in their knowledge networks. However, only limited research has explored knowledge assimilation and innovation activities in subsidiaries. In this limited research stream, subsidiary new product development is largely overlooked, and the impact of a subsidiarys strategic initiatives as well as their interplay with knowledge utilization is still underresearched, particularly in the emerging market contexts. Zhang, Di Benedetto, and Hoenig provide some insights by examining the interplay of product development strategy, knowledge utilization, and product innovation performance in the context of Chinese subsidiaries of multinational companies. The study involved a survey of 103 subsidiaries that took on new product development responsibilities. The findings show that a subsidiarys resource allocation decisions in connection with its three product development strategic focuses differentially affect its subsequent product innovation performance (i.e., market rewards of new products). When firms strived to develop highly innovative products (breakthrough focus), the amount of resources allocated had a U-shaped relationship to subsequent product inno-

vation performance. When the aim of product development activity was to reinforce and maintain moderately innovative products (platform focus), increased resource allocation showed a positive relationship to product innovation performance. However, the amount of resources allocated to minor revisions (incremental focus) showed no significant relationship to product innovation performance. In addition, knowledge utilization was an important predictor of the benefits of developing highly and moderately innovative products. More important, it helps mitigate the drawbacks of a breakthrough focus and strengthens the positive impact of a platform focus. The findings of this study confirm the importance of knowledge utilization. Furthermore, this study reveals the potential role of knowledge utilization as an underlying mechanism that transforms the impact of some resource allocation decisions (i.e., strategic focus decisions) into market rewards from new products in the context of subsidiary product innovation in China. Zhang, Di Benedetto, and Hoenig suggest that management take advantage of knowledge from its network sources and strategically deploy resources among projects with different levels of innovativeness to obtain better rewards from new products in this specific context.

Journal of International Marketing 2009, American Marketing Association Vol. 17, No. 2, 2009, p. v ISSN 1069-0031X (print) 1547-7215 (electronic)

Executive Summaries v

EXECUTIVE SUMMARIES

In Search of Platforms to Increase Market Responsiveness: Evidence from Foreign Subsidiaries

Ruby P . Lee, Qimei Chen, and Xiongwen Lu

lthough market responsiveness has been studied extensively in the marketing strategy literature, understanding of how it is formed in an international business context remains limited. Increasingly, a foreign subsidiarys success relies on the use of related knowledge acquired from its headquarters to improve its responsiveness to the marketplace. Furthermore, despite a growing interest in knowledge management and information technology, recent research reveals that empirical studies that combine both these avenues in international businesses are inadequate. To address this emerging trend and fill the research gap, Lee, Chen, and Lu examine how multinational firms operations in China can enhance their market responsiveness through understanding the different roles of information system integration and knowledge codification in connection with related market knowledge that resides in their headquarters. The authors draw on the dynamic capabilities perspective and its extension and integrate it with the information technology literature to develop a conceptual model. Their findings, which are based on survey data collected from 140 foreign subsidiaries in China, show that market responsiveness is the direct and indirect

consequence of information system integration and knowledge codification, both of which benefit from knowledge relatedness. Specifically, the authors find that knowledge codification leads to market responsiveness. However, they also find that information system integration is not associated directly with market responsiveness. Rather, their results indicate that information system integration must work through knowledge codification to influence market responsiveness. The results further illustrate that increased knowledge relatedness encourages the subsidiary not only to increase information system integration but also to engage more in knowledge codification. In conclusion, previous empirical evidence seems to agree that the liability of foreignness makes overseas subsidiaries more vulnerable in their host-country markets. Nevertheless, the authors find that information system integration and knowledge codification are critical platforms to sequentially link knowledge relatedness to market responsiveness. Despite the effort of this study, challenges for these foreign subsidiaries remain. The authors urge managers and researchers to pay more attention to identify different mechanisms and paths that can amplify their responsiveness to local markets.

Journal of International Marketing 2009, American Marketing Association Vol. 17, No. 2, 2009, p. vi ISSN 1069-0031X (print) 1547-7215 (electronic)

vi Executive Summaries

EXECUTIVE SUMMARIES

Challenging the Conceptualization and Measurement of Distance and International Experience in Entry Mode Choice Research
Douglas Dow and Jorma Larimo

lthough international entry mode choice has been extensively studied, the empirical results regarding two key antecedentsvarious forms of distance and international experiencehave been equivocal. Dow and Larimo argue that the conceptualization and measurement of these variables may be contributing to these ambiguous results. Dow and Larimo use a sample of 1502 outward foreign direct investments by Nordic firms between 1993 and 1999 to examine how changes to the conceptualization and measurement of the distance and experience constructs may improve their ability to explain entry mode choice. Using the scales measuring national-level differences in language, religion, industrial development, education, and political systems, the authors demonstrate that this broader conceptualization of the underlying factors driving the distance construct substantially increases the ability to predict entry mode. The explained variance attributable to these distance factors is four times greater than the variance explained by the classic distance scale, Kogut and Singhs national cultural distance. The weak and equivocal empirical results regarding the relationship between entry mode choice

and distance that have been reported in several recently published meta-analyses may be simply the result of defining the distance construct too narrowly. Dow and Larimo also use a refined interpretation of international experience, separately measuring prior international experience in countries that are culturally similar to the target market and those that are culturally dissimilar to the target market. This enables them to discriminate between culture-specific experience (e.g., learning the specific languages, customs, and culture of a foreign market) and experience in general internationalization processes (e.g., learning how to effectively monitor and control an agents activities in a foreign market). The empirical results show that only experience in similar countries has a statistically significant impact on entry mode selection. Experience in dissimilar countries seems to have no predictive power. Again, the weak and equivocal results regarding the relationship between international experience and entry mode choice may be simply the result of how the construct has been defined and measured. These results indicate a need for a radical change in how distance and experience should be operationalized in further entry mode research.

Journal of International Marketing 2009, American Marketing Association Vol. 17, No. 2, 2009, p. vii ISSN 1069-0031X (print) 1547-7215 (electronic)

Executive Summaries vii

Journal of International Marketing

Published quarterly by the American Marketing Association

Journal of International Marketing ( JIM) is an international, quarterly journal that is dedicated to advancing international marketing practice, research, and theory through the publication of scholarly and managerially relevant articles. The journal's prime objective is to bridge the gap between theory and practice in international marketing. Submissions. All manuscripts are subject to a rigorous double-blind review process. The editorial board is committed to providing authors with timely, constructive reviews without preference to philosophical assumptions or methodological predilections. Synthesis, replication with advancement, systematic extension, and work that disproves assumptions are all welcome for consideration. Turnaround time for manuscripts is approximately six weeks, and the annual acceptance rate is 15%. Domain. JIM focuses on marketing topics within an international context. In JIM, international marketing is conceptualized within two general domains: (1) international (i.e., when marketing activities occur across national boundaries) and (2) cross-cultural (i.e., when comparisons regarding marketing-related issues are made across national boundaries). JIM responds less positively to studies outside these general domains (e.g., a study of Chinese consumer perceptions of Chinese brands). If a study takes an approach outside these domains, it is incumbent on the authors to clearly demonstrate the importance of the work to the field of international marketing. Audience. JIM engages educators and students of international marketing, marketers involved in international business activities, and those who formulate public policy for international marketing activity. The breakdown of JIMs global readership is as follows: United States, 73%; Europe, 10%; Asia, 7%; and rest of world, 7%. Of the subscribers, 60% are individuals, and 40% are institutions. Of the individuals, 70% are marketers, and 30% are academics.

Focus. JIM focuses on firm strategy and practice, publishing articles about various business enterprises engaged in international marketing. Equal attention is given to small and large companies as well as to all modes of international business entry (e.g., exporting, contractual arrangements, direct investment). Discussion of newer forms of cross-border business activity, such as global sourcing, is also encouraged. JIM also aims to advance the exploration of issues that include the implications of customer orientation in multinational business, cross-cultural market segmentation, and market research. Approach. In practice, marketing functions are intertwined with other business activities, such as corporate strategy, procurement, human resource management, research and development, manufacturing, and so forth. Therefore, JIM especially encourages articles that provide holistic, interdisciplinary views of international marketing phenomena and those that explore interrelationships between marketing and other business functions. Article Formats. JIM publishes works in a variety of formats. First, traditional empirical articles on important international marketing issues are welcome. Second, strong conceptual articles on international marketing topics are encouraged. Third, JIM seeks in-depth case studies of individual companies or industries. Fourth, integrative research reviews, including narratives or meta-analyses that lead to new theories or models, are also of interest. Fifth, JIM encourages Executive Insightspieces that report and express opinions on important and timely issues in international marketing practice. Writing Style. Although published articles must meet rigorous methodological criteria, the JIM Editorial Board strives to publish works that are written in an interesting, nontechnical style. Articles should be clear, concise, and logical. The text should avoid the use of methodological/technical jargon whenever possible. Technical details should be allocated to an appendix rather than the body of the article.