International market selection by small enterprises: Cognitive biases and heuristics in decision-making

Classical evolutionary theory prescribes following a step-by-step process of internationalization, but in practice, companies often ignore the significant psychic distance to the target market and quickly enter culturally distant markets. The article studies how small enterprises of Primorsky krai (Russia) choose a foreign market to enter and identifies the factors enabling entrepreneurs to deal with high uncertainty and overlook cross-national differences when making their choice. The research methodology includes internationalization theory, a non-systemic approach to choosing an international market, the concept of psychic distance, as well as the developments of behavioural economics and psychology. The methods of verbal protocols and interviews were applied. The primary data of 50 protocols were coded and processed through content analysis. The study describes the process of choosing a foreign market considering entrepreneurs' cognitive limitations. During this process, entrepreneurs are guided by opportunities available abroad rather than the risk level. In their decision-making, entrepreneurs rely on the availability heuristic, anchoring and adjustment heuristic, as well as the feeling of knowing. Entrepreneurs' overconfidence leads to hasty decisions based on cognitive limitations. The data explain the reasons behind the accelerated internationalization of small enterprises in Primorsky krai. The work attempts to involve the entrepreneur in a more thorough initial assessment of the foreign market. Increasing the number of cases under review, conducting longitudinal studies, and deeper analysis of the factors that form the entrepreneur's perception of foreign markets could become a further progression of the present study.