The power and perils of cognition: differential role of heuristics and biases in initial and post-entry internationalization

Given the fact that we know only little about how owner-managers actually make internationalization decisions, we must consider the biases and dispositions of SMEs’ most powerful actors - their top executives especially to know how the biases and heuristics change from the initial to the later stages of internationalization. The early internationalization perspective in IE has largely focused on the initial export activities of firms and has subsequently overlooked to address what happens to these firms after this initial phase from the perspective of cognitive heuristics and biases. In response to this, in this article we present a framework for the influence of managerial heuristics and biases in initial and later stages of internationalization. We include one key variable in early internationalization, i.e. owner-managers’ prior international experience and how different biases originate from this source and impact initial internationalization. Later on, we show that experiential learning during and after initial internationalization gives rise to some specific heuristics and biases that impact subsequent internationalization. We also find that the power of heuristics and biases in initial stage may turn into perils in the subsequent internationalization.