1. ¹Department of Management, University of Nebraska-Lincoln, Lincoln, USA
2. ²Department of Applied Economics and Management, Cornell University, Ithaca, USA

Correspondence: Professor S Nadkarni, Department of Management, University of Nebraska-Lincoln, Lincoln, CBA 258 NE 68588-0491, USA. Tel: +1 402 472 8399; Fax: +1 402 472 5855; E-mail: snadkarn@unlnotes.unl.edu

Received 5 September 2003; Revised 19 February 2006; Accepted 24 February 2006; Published online 18 January 2007.

Abstract

Our study investigates why some firms engage in low international commitments such as exports in the early phases of internationalization, whereas others leapfrog the internationalization process and start with high international commitments in the form of foreign direct investment (FDI). Process models of internationalization propose that firms start with low commitment activities and gradually increase their commitments to international markets. However, recent empirical evidence has shown that many firms make high international commitments from the start. Our findings suggest that domestic resources and competitive action propensity affect early international commitments indirectly through domestic mindsets. A domestic mindset refers to the knowledge structures of the top management team prior to starting international activities, based on their managerial experience and learning in domestic markets. Our results suggest that knowledge and learning gained in domestic markets through diverse resource and competitive activities may be crucial in early international commitments.