DOTTORATO DI RICERCA IN ECONOMIA CICLO XXVII COORDINATORE Prof. Donato Romano Liabilities and business relationships in internationalization. Evidences from the opening of retail stores in the fashion industry. Settore Scientifico Disciplinare SECS-P/08 Dottorando Tutore Dott.ssa Milanesi Matilde Prof. Guercini Simone Anni 2012/2014 1 2 A Gianni A mamma Silvia A Tea e Leone! 3 “Il rispetto nasce dalla conoscenza, e la conoscenza richiede impegno, investimento, sforzo” Tiziano Terzani 4 Acknowledgements These three years have been a life experience, hard work, research, learning, and have represented a path of personal and professional growth for which I wish to acknowledge and thank everyone who has helped me to make and complete this interesting journey. I would like to start with my supervisor and mentor, Prof. Simone Guercini, whose guidance, advices, teachings and great human value, as well as academic, have been of great encouragement and inspiration. Thanks to Professors who have contributed to our training and professional growth, in particular the coordinator of the PhD in Economics Prof. Donato Romano and the coordinator of the Local Development program Prof. Luciana Lazzeretti. I thank all the doctoral fellows, especially Niccolò Innocenti and Paolo Bricco, with whom we have shared joys and pains, satisfactions and effort. A special thanks to Dr. Silvia Ranfagni, whose support and constant presence, ever since the master degree and throughout the years of doctorate, have been of great support and comfort even in times of trouble; to Dr. Andrea Runfola, for his valuable suggestions and for conveying to me such confidence and a positive spirit. The period of visiting at the Uppsala University in Sweden has certainly been a time of great learning and growth. Fear before departure was much, satisfaction after the return even more. A special word of thanks to the Swedish collegues, especially Prof. Alexandra Waluszewski for the courage and determination that has been able to give me. On a personal level, people who in recent years have always been there for me are many. I am most grateful to Francesca Giannotti, a collegue, friend and sister, and Antonio Petrella, colleague, friend and companion of projects and presentations! My friends, who are my second family, and Constanza, who has always been there and always will be. And finally, my family, the true meaning of my life. My mom: we have been through a lot in recent years, but we have always raised and we are stronger than before, ready to face the future. Tea and Leo, inseparable and loyal companions in life. And finally my Gianni, with whom I shared every moment of the last nine years and this is just the beginning of a life together. 5 Ringraziamenti I tre anni di dottorato sono stati un’esperienza di vita, lavoro intenso, ricerca, apprendimento, e hanno rappresentato un percorso di crescita professionale e personale per il quale sono doverosi alcuni ringraziamenti. In primo luogo il mio relatore, ma soprattutto maestro, Prof. Simone Guercini, la cui guida, consigli, insegnamenti e grande valore umano, oltre che accademico, sono stati di grande incoraggiamento e fonte di ispirazione. Un ringraziamento ai Professori che in questi anni hanno contribuito alla nostra formazione e crescita professionale, in particolare il coordinatore del Dottorato in Economia Prof. Donato Romano e la coordinatrice dell’indirizzo in Sviluppo Locale Prof.ssa Luciana Lazzeretti. Hanno contribuito allo sviluppo di questo lavoro la Dott.ssa Silvia Ranfagni, il cui supporto e presenza costante, già dai tempi della laurea magistrale e lungo tutto il dottorato, sono stati di grande supporto e conforto anche nei momenti di difficoltà; il Dott. Andrea Runfola, per i suoi suggerimenti preziosi e per avermi trasmesso tanta sicurezza e uno spirito sempre positivo. Ringrazio tutti i compagni di corso, in particolare Niccolò Innocenti e Paolo Bricco, con i quali abbiamo condiviso gioie e dolori, soddisfazioni e tanta fatica. Il periodo di visiting presso l’Uppsala University in Svezia ha sicuramente rappresentato un momento di grande apprendimento e crescita. La paura prima della partenza era tanta, la soddisfazione dopo il ritorno ancora di più. Ringrazio per questo i colleghi svedesi, in particolare la Prof.ssa Alexandra Waluszewski per il coraggio e determinazione che ha saputo trasmettermi. Sul piano personale, le persone che in questi anni ci sono sempre state sono molte. Ringrazio in primo luogo Francesca Giannotti, che prima di essere una collega è un’amica e una sorella maggiore, e Antonio Petrella, collega, amico e compagno di progetti e presentazioni! Le amiche e amici, che sono un po’ la famiglia che ti scegli. Una su tutti Costanza, che sempre c’è stata e sempre ci sarà. E infine la mia famiglia, quella allargata e quella acquisita, che mi riempiono il cuore e sono il vero senso della mia vita. Mia mamma: ne abbiamo passate tante in questi anni, fatti di cose molto brutte e altre molto belle, eppure ci siamo sempre rialzate e siamo più forti di prima, pronte ad affrontare i cambiamenti futuri che potranno solo unirci ancora di più. Tea e Leone, inseparabili e fedeli compagni di vita. E infine il mio Gianni, con il quale ho condiviso ogni momento degli ultimi 9 anni e questo è solo l’inizio di una vita insieme. 6 7 Table of contents Acknowledgments 5 Table of contents 8 List of tables 11 List of figures 12 List of abbreviations 13 Introduction 15 Chapter 1. Theoretical background of the research 25 1.1 Introduction 25 1.2 Main theoretical perspectives on internationalization 29 1.3 The Uppsala model of internationalization 32 1.3.1 Psychic distance: conceptualization and critical review 37 1.3.2 Some criticism of the Uppsala model and the need for a revision 46 1.4 The network approach to internationalization 49 1.5 The Uppsala model revisited 59 1.6 Liabilities in internationalization: the liability of foreignness 65 1.6.1 Empirical investigation and problems of measurement 71 1.6.2 In search for other liabilities: newness and smallness 73 1.7 The liability of outsidership 79 1.8 The IMP approach on business networks and interaction 84 Chapter 2. Empirical context, research questions and methodology 90 2.1 The empirical context of the research 90 2.1.1 Retail internationalization 93 2.1.2 The internationalization of fashion retailing 99 8 2.1.3 Vertical integration in the textile and apparel sector 104 2.1.4 Categories of international fashion retailer and retail formats 108 2.2 Research framework and research questions 110 2.3 Methodological review 113 2.4 Research strategy 124 Chapter 3. Retail stores openings: empirical evidences and emerging 127 issues 3.1 Introduction 127 3.2 Methodological notes 128 3.3 Analysis of retail stores opening from 2011 to 2013 131 3.4 A focus on Italian brands 141 3.4.1 The Italian textile-apparel industry 142 3.4.2 Stores opening by Italian brands 145 Chapter 4. Liabilities, business relationships and stores openings: case 156 analysis of Italian firms 4.1 Methodological notes 156 4.2 The case of Luisa Spagnoli 158 4.2.1 Company profile 158 4.2.2 The store as key element of the internationalization process 161 4.3 The case of Stefano Ricci 168 4.3.1 Company profile 168 4.3.2 Internationalization and stores opening 173 4.3.3 The experience of Stefano Ricci in Russia 177 4.4 The case of Montezemolo 184 4.4.1 Company profile 184 9 4.4.2 The localization in the industrial district of Prato 186 4.4.3 The organization of activities inside and outside the district 192 4.4.4 The internationalization process of the firm 193 Discussion of findings, limitations and future research agenda 199 References 219 10 List of tables Table 1: Definition and operationalization of perceptual psychic distance 37 Table 2. News and openings in JDT and PMB in 2011-2013 127 Table 3. Country of brand origin and number of openings 128 Table 4. Number of brands and country of brand origin 132 Table 5. The Italian textile-apparel industry (2008-2013) 135 Table 6. Country of destination and stores opening by Italia brands 140 Table 7. Italian brands and number of openings 142 Table 8. Country of destination and stores opening by Italia brands 143 Table 9. Definition of SMEs 145 Table 10. SMEs and large companies 146 Table 11. Data from 100 companies’ annual reports 147 Table 12. Methodology 153 Table 13. Growth of turnover, EBITDA and net profits 157 Table 14. Luisa Spagnoli’s stores abroad 157 Table 15. Controlled companies 167 Table 16. Growth of turnover, EBITDA and net profits 169 Table 17. Evolution of Company’s turnover and net profits 182 11 List of figures Fig. 1: The basic mechanism of internationalization – State and change 32 aspects Fig. 2: The Five/Five Stages Model 54 Fig. 3: The business network internationalization process model – stock and 58 flow Fig. 4: Integration processes between manufacturing and retailing 102 Fig. 5: Research framework: liabilities in internationalization, business 107 relationships and stores opening Fig. 6: Building the database 126 Fig. 7: Top international retailer’s country of origin 129 Fig. 8: Openings in macro regions 133 Fig. 9: Stores opening in emerging and mature markets 133 Fig. 10: Retail formats in 2011-2013 136 Fig. 11: Stores opening in emerging and mature markets by Italian brands 144 Fig. 12: Italian openings in macro regions 144 Fig. 13: Turnover by world regions 169 12 List of abbreviations BRIC: Brasil, Russia, India and China CDBA: Cost of Doing Business Abroad DOS: Directly Operated Store EBITDA: Earnings Before Interest Taxes Depreciation and Amortization EU: European Union FDI: Foreign Direct Investment IE: International Entrepreneurship IMP: Industrial Marketing and Purchasing INV: International New Ventures JDT: Journal du Textile LOF: Liability of Foreignness LOO: Liability of Outsidership MNC: Multinational Company PBM: Pambianco Magazine PD: psychic distance SC: Supply Chain SME: Small and Medium Enterprises TPOS: Third-Parties Operated Stores T/A: textile and apparel UAE: United Arabian Emirates WTO: World Trade Organization 13 14 Introduction The thesis addresses the topic of liabilities and business relationships in the internationalization process of the firm.