The Internationalisation of Service Firms The Impact of Value Creation on the Internationalisation Strategy of Firms Blagoeva, Denitsa Hazarbassanova Document Version Final published version Publication date: 2016 License CC BY-NC-ND Citation for published version (APA): Blagoeva, D. H. (2016). The Internationalisation of Service Firms: The Impact of Value Creation on the Internationalisation Strategy of Firms. Copenhagen Business School [Phd]. PhD series No. 35.2016 Link to publication in CBS Research Portal General rights Copyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright owners and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights. 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Oct. 2021 COPENHAGEN BUSINESS SCHOOL OF SERVICE FIRMS THE INTERNATIONALISATION SOLBJERG PLADS 3 DK-2000 FREDERIKSBERG DANMARK WWW.CBS.DK ISSN 0906-6934 Print ISBN: 978-87-93483-34-7 Online ISBN: 978-87-93483-35-4 Denitsa Hazarbassanova Blagoeva THE INTERNA- TIONALISATION OF SERVICE FIRMS The PhD School of Economics and Management PhD Series 35.2016 PhD Series 35-2016 The Internationalisation of Service Firms The impact of value creation on the internationalisation strategy of firms PhD dissertation by Denitsa Hazarbassanova Blagoeva Supervisors: PETER ØRBERG JENSEN, Associate Professor, Copenhagen Business School CHRISTIAN GEISLER ASMUSSEN, Professor with special responsibilities, Copenhagen Business School Doctoral School of Economics and Management Copenhagen Business School May 2016 Denitsa Hazarbassanova Blagoeva The Internationalisation of Service Firms 1st edition 2016 PhD Series 35.2016 © Denitsa Hazarbassanova Blagoeva ISSN 0906-6934 Print ISBN: 978-87-93483-34-7 Online ISBN: 978-87-93483-35-4 “The Doctoral School of Economics and Management is an active national and international research environment at CBS for research degree students who deal with economics and management at business, industry and country level in a theoretical and empirical manner”. All rights reserved. No parts of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage or retrieval system, without permission in writing from the publisher. The Internationalisation of Service Firms Denitsa Hazarbassanova Blagoeva Dedication To my Mom, because she knows everything about everything. 3 The Internationalisation of Service Firms Denitsa Hazarbassanova Blagoeva Acknowledgments I want to thank my supervisors who have provided me invaluable feedback and support throughout the three years of this project. They have been my anchor as I blindly explored what it meant to be a PhD student. Their engagement and concern have been vital to this project, and more so to me. Thank you, Peter and Christian, for sharing this journey with me. I want to send my deepest acknowledgements to my PhD colleagues at CBS, with whom I have been fortunate enough to share my PhD years. Henrik, Klement, Manya, Nausheen and Olga, working with you has been a pleasure. Finally, I want to thank Ed and BaiMei for being a wonderful and understanding family through turbulent times of mental restructuring. I can safely say that there would have been no PhD project without you! 4 The Internationalisation of Service Firms Denitsa Hazarbassanova Blagoeva Foreword This PhD is structured as an article based dissertation. • Chapter 1 is the introduction to the project, its aim, intended contribution, theoretical and methodological framework. • Chapter 2 is the first paper titled “The “service” landscape: How much do we know about the internationalisation of services?”. This is a joint paper with Peter D.Ø. Jensen and Hemant Merchant. This is a literature review paper, presented at the AIB conference, Vancouver, 2013. • Chapter 3 contains the first empirical test of the theoretical framework. This paper, titled “Value creation through internationalisation: the value creation logic and the internationalisation process of Internet firms” is single authored and (partially) published at Review of International Business and Strategy. • In Chapter 4 the theoretical framework is further developed and tested quantitatively. “Value guided internationalisation - identifying differences in foreign operation mode, speed and scope of internationalisation based on value creation logics” is a joint paper with Christian G. Asmussen, presented at mini-AIB 2015 Milano. • Chapter 5 summarises the findings of each of the articles and the overall contribution made to the realm of services internationalisation. It discusses implications and final reflections on the PhD project as a whole. 5 The Internationalisation of Service Firms Denitsa Hazarbassanova Blagoeva Blank page 6 The Internationalisation of Service Firms Denitsa Hazarbassanova Blagoeva Abstract The question the thesis aims at resolving is: How do the value creation logics of firms impact their internationalisation? The overall aim of this PhD project is to explore and test an approach to understanding the internationalisation of service firms, based not on opposing them to manufacturing ones, looking at descriptive service characteristics nor industry effects, but on the way they create value. Why and how are service firms different? and What are the drivers behind their internationalisation? are the questions motivating this PhD project. It explores if the value creation specificities may be universal axes around which all MNCs, both manufacturing and service ones, configure themselves internally and externally across geographic locations. We do not in fact know that services are different from manufacturing - some empirical evidence suggests they are (e.g. Laanti, McDougal and Baume, 2009), some - that they are not (e.g., Terpstra and Yu, 1988). What we do know is that services are very important. They generate roughly 80% of GDP in the United States and the European Union, and the proportion is well over 50% in most countries, industrial and developing alike (International Monetary Fund, the World Bank and OECD, 2014). The attention to internationalisation of services has significantly increased and yet, many questions remain open (e.g. Pla-Barber and Ghauri, 2012). This PhD project contributes to the field of internationalisation of service firms by adapting and testing a typology of firms developed in the realms of organisational science and strategic management. The inherent strength of a classification of firms by their value logic is to facilitate the understanding of service firms by allowing them to differ among themselves just as much as they differ from manufacturing. At the same time, relying on a strategic dimension - the value creation - allows some services to be similar to manufacturing. The theoretical foundations of the research are Thompson’s work on organisational technologies (1967), developed further by Stabell and Fjelstad’s notion of value creation logics (1998). The research within this PhD project is multi-method. In the introduction, the potential of the value creation classification for understanding the foreign operating mode, speed and scope of internationalisation is explored conceptually. The first paper identifies the need for such an approach through a review of extant literature on the internationalisation of services. The second and third papers test the value creation framework through a multiple case study and a large sample quantitative study. The contribution of the project is threefold. Firstly, this research offers a link between a value- based perspective of the firm and its internationalisation. Seeing firms as bundles of value creation units may explain the differences observed in firm internationalisation, thus developing a conceptually rigorous and more coherent framework of reference, valid for both manufacturing and service firms. 7 The Internationalisation of Service Firms Denitsa Hazarbassanova Blagoeva Secondly, the study not only extends a theoretical framework developed within organisation science and strategic management to the realm of international business, but it also tests it empirically on a large sample of firms, manufacturing and service ones. Finally, the study addresses the robustness of existing definitions and classifications of service firms, such as industry boundaries, how or whether services distinguish themselves from manufacturing, etc., thus contributing to the difficult task of defining services (Jensen and Petersen, 2014; Merchant and Gaur, 2008). The results of the research suggest the literature on service internationalisation is abundant and yet somehow fragmented and contradictory, thus open to ideas that may contribute to its unification. We propose to explain apparently contradictory findings with the fact that firms create value differently, thus requiring different responses to critical elements of the internationalisation process. This seems to be the case for digital firms - a group of firms considered having the same approach to internationalisation. When the concept is tested on a larger sample of firms, we find that the value logic classification delivers significant results for our measures of internationalisation. Additionally, we find that