Internationalization, search, and change: an organizational learning model of strategic change in the pharmaceutical industry

Research in international business and strategy emphasizes the important role knowledge plays in foreign expansion, and multiple research perspectives have viewed a firm?s knowledge as the key driver of competitive advantage. Thus, in today?s business environment, the ability to learn and source knowledge across boundaries is important to both firm performance and strategic change. My dissertation examines the ?knowledge-seeking? motive for international expansion, which suggests that firms expand abroad to gain new technical capabilities and knowledge from diverse institutions, which allow firms to change in dynamic markets. I extend organizational learning, the resource-based view, and internationalization theory to examine empirically how internationalization influences strategic changes by affecting exploratory search. This research also challenges the standard assumptions about the positive benefits of exploration on change, suggesting that a curvilinear relationship exists. Further, I argue that innovation capabilities enhance the relationship between strategic change and firm performance. These questions are examined using longitudinal data on pharmaceutical firms. The findings from this analysis reveal that internationalization has a curvilinear relationship with exploratory search. In addition, speed of internationalization, rhythm of internationalization, and international experience moderate the relationship between internationalization and exploratory search. Exploratory search was found to have an inverted U-shaped relationship with strategic change, suggesting the high exploratory search may negatively affect the firm. The analysis also revealed innovation capabilities negatively moderated the relationship between strategic change and firm performance (ROA). This study provides important contributions to the fields of strategic management, international business, and organizational learning.