Organizational routines' nature and impact on domestic operations and international expansion. A perspective on ambidexterity and mirroring back.

Abstract

Companies trying to exploit and enhance their competitive advantage expand internationally to tap the opportunities offered by an increasingly open and integrated market. International expansion is usually pursued by replicating the business model through the mix of organizational routines composing it, in which knowledge and related competences are embedded. As they provide stability, they contribute to control the process and reduce the uncertainty of operating abroad. The inertia that is usually attributed to those processes however does not fit with the today's turbolent environment and inhibit the capacity to adapt operations to local conditions as more market knowledge is acquired. Building on the concept of routines as generative systems (Feldman & Pentland, 2003; Pentland & Feldman, 2005), there are able to reconcile the trade-off between the need for stability and efficiency and the need for variety and innovativeness. The dynamic dialectical between their theoretical representation and actual manifestation represents a source for knowledge exploitation (enactment of the idea), knowledge exploration (deviation from the idea) and generation (modification of the idea); their ambidextrous potential is the basis for organizational ambidexterity. When transferred abroad, routines may generate new knowledge, pushed by new environmental cues, and storing it in their theoretical representation for being transferred. Subsidiaries adapt the business formula to their situation, developing specific advantages. Routines can favor the backward flow of the new generated knowledge to the parent company, where the deriving new business model features can be integrated into the previous formula; a mirror back effect (Vescovi & Pontiggia, 2014) may occur when subsidiary initiatives are integrated and modifying the prior business model for further replication. Replication is an intra-organizational bidirectional process of knowledge transfer and generation, taking place within a broader circular process of knowledge creation, forward transfer, variation and backward transfer. An Italian firm operating internationally in the footwear market is then analyzed, with a focus on its international expansion strategy; an example of mirror back effect emerges, as well as corporate function for developing core capabilities and for flexibly replicating them internationally through organizational routines.