Academic journal article Management International Review

Internationalisation for Survival: The Case of New Ventures

Academic journal article Management International Review

Internationalisation for Survival: The Case of New Ventures

Article excerpt

Abstract The aim is to deepen our understanding about the internationalisation--survival relationship in the case of new ventures in traditional manufacturing sectors. Hypotheses were tested through Cox's proportional hazard regressions on a sample of 3,350 firms aged 10 years or less, from the textile-clothing and footwear industry in Spain. A vast majority of new ventures that were both established and closed down over that time are purely domestic firms. That means, a firm increases its likelihood of survival when it becomes international. The highest failure risk relates to those new ventures which are territorially agglomerated and are domestically oriented. Internationalisation is an unconditional strategy for surviving in the case of new manufacturing ventures. In addition, location and efficiency in the activity both matter when operating in international markets. Statistical tests show that an interactive effect of agglomeration and internationalisation exists, while no support for the interaction between age and internationalisation is found. Future research should investigate the trade-off between growth and survival forces to determine the optimum moment to go international and to characterise the strategic choices followed by those new ventures that survive longest.

Keywords Survival * Internationalisation * Traditional manufacturing sector * New ventures

1 Introduction

The current economic climate has brought internationalisation to the fore as a key strategy for surviving, particularly in traditional manufacturing sectors such as the textile and footwear industry (Coucke and Sleuwaegen 2008). This industry has suffered from a dramatic increase in rivalry and competence stemming from a global tendency towards deregulation of international markets (Scott 2006; Abecassis-Moedas 2007). This has meant a constant decline in competitiveness in this sector in developed economies that, according to Eurostat data, has caused a contraction in their output and jobs of an average of around 15-22 % in the EU over the period 2004-2009 (Puig and Marques 2010).

Globalisation is considered to benefit firms in their competitive efforts, search for optimum locations and efficiencies (Buckley and Ghauri 2004). However, new manufacturing ventures usually see globalisation as a threat, bearing in mind that quite often these firms operate mainly in domestic markets and have fewer resources than multinationals. This calls for research on how traditional manufacturing sectors may compete and survive in this fierce competitive context (Jones and Hayes 2004).

The entrepreneurship literature on the survival of new ventures suggests that entrepreneur education, the availability of financial resources, the institutional-business frame, and macroeconomic conditions at the time of establishment are key factors to be considered (Holmes et al. 2010). Researchers in the international business field have analysed the strategic decisions made by new ventures concerning market selection or the geographical scope of their actions and the effect of these on performance (Sapienza et al. 2006; Giovannetti et al. 2011). However, how and to what extent internationalisation affects the performance of new ventures is still inconclusive.

Meta-analysis by Bausch and Krist (2007) suggested that disagreement in the internationalisation-performance relationship is rooted in a type of context dependence, calling for research on the identification of moderators rather than principles or generalisations. In the case of traditional manufacturing ventures, other key factors should also be considered, such as location and activity (Puig et al. 2009), and the performance analysed should include survival and failure rates (Mudambi and Zahra 2007).Thus, the aim of this study is to analyse the internationalisation-survival relationship in the context of new ventures from a traditional manufacturing sector. The remainder of the paper is organised as follows. …

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