Along with the world’s intensified globalisation, managers nowadays are increasingly concerned with how to expand internationally. Assoc Prof Jane Lu’s awarding-winning study at the Asian Academy of Management focused on a time-related feature of international expansion process—speed of foreign expansion. This issue has not been studied in previous research. Assoc Prof Lu asked the question of whether there are advantages and/or disadvantages to being a fast mover in expanding internationally. She entangled this question from three aspects: environment velocity, the firm’s resources and international experience.  Assoc Prof Lu suggested in this study that it is not a simple issue of “should fast or slow speed make a profitable firm?” but a more complex and contingent one.

She first explained two levels of benefits associated with international strategies: the first-order benefits that include increasing market power, leveraging on foreign market opportunities and exploiting ownership advantages, and the second-order benefits “accrued mainly from social processes between units within a firm or interplaying with the external environments”. Assoc Prof Lu suggested that faster speed is positively associated with appropriation of the first-order benefits, but may reduce a firm’s likelihood to achieve its optimal realisation of second-order benefits. She has pointed out that “arguably, first-order and second-order benefits will not be equally important in all competitive environments”.

In high-velocity environments, faster speed will allow a firm “to seize the windows of opportunities in foreign markets such as taking advantage of preferential policies, pre-empting relationships with stakeholders, occupying consumers’ perceptual territory, securing best partners, locations, and so on, before they disappear or are pre-empted by competitors”. Therefore, Assoc Prof Lu suggested that firms should move faster in a high-velocity environment so that they can gain profits in the international strategies.

Organisational resources (e.g. financial, technological, marketing, and managerial resources) also play an important role in determining the speed of international expansion and its outcome. Expanding beyond the limit which the firm can afford will result resource deficiency and serious time-compression diseconomies, making the firm harder to benefit from the opportunities emanating from its foreign expansion.

Also, international experience matters in the speed-performance relationship. Prior international experience would assist the firms to assess its resources and capabilities, evaluating the compatibility between the firm and the opportunities and problems in specific markets. Without such experience, the firms may suffer from time compression diseconomies problems.

The author proposed that, external environmental factor and the internal resource factors may work interactively when affecting the speed-performance relationship. In order to gain success in international expansion by moving faster in a high-velocity environment, a firm needs to have significant resources and organisational flexibilities. Those firms in possession of abundant financial, technological, and/or marketing resources will benefit more from a fast foreign expansion strategy. 

The author studied the foreign direct investment (FDI) of 1,263 Japanese firms from 1986 to 1997. She identified four industries “with high industry growth coupled with fast changes in technology and other disruptive forces such as governmental regulations” as highly volatile environment: including machinery and computer equipment; electronics industry; transportation equipment; and photographic, medical and optical goods. Compared to those firms operated in relatively stable industry environments, she found that Japanese firms in these four industry environments with high volatility gained higher return on assets when they took quick actions  expanding into foreign markets.

“One type of property-based resources – financial capital, and two types of knowledge-based resources – technological and marketing resources” were found to aid the Japanese firms to achieve success in their fast foreign expansions during the decade from middle 80s till Asian financial crisis.

The results of Assoc Prof Lu’s study have implications for the theories in international business. “While there is a general bias toward fast speed in both academic and popular business press, there has been very little empirical study actually investigating the performance implications of fast organisational action in general, speed of foreign expansion in particular.”  This study was able to provide one of the first empirical tests of the relationship between speed of foreign expansion and corporate performance. According to her, “there is no simple answer to the question whether a firm should internationalise quickly”. She added, “We developed a contingency framework and established the roles of environmental- and firm-level factors in affecting the ways how foreign expansion speed contributes to firm performance.”

This study also has important practical implications. Assoc Prof Lu suggests that “managers involved in decision making and implementation of internationalisation should consciously determine an appropriate speed of foreign expansion, taking into account both environmental and firm-level factors. There is both benefit and cost in being fast. Managers should be cautioned against the prevailing call for fast expansion and to be aware of a possible “speed trap”. Before they can decide on an appropriate international expansion pacing strategy, they need to examine both their firm resource situation as well as their external competitive environment.”