Academic journal article Multinational Business Review

Internationalization of New Ventures: Tests of Growth and Survival

Academic journal article Multinational Business Review

Internationalization of New Ventures: Tests of Growth and Survival

Article excerpt

1 Introduction

The strategy and international management literatures offer abundant explanations regarding why and how firms internationalize. Nevertheless, key models fail to capture one important element of internationalization: new ventures may be imprinted during their founding stage and, consequently, certain formative factors may influence their future behavior. This article investigates crucial factors influencing young ventures' internationalization. It is based on the model developed by [86] Sapienza et al. (2006) positing that internationalization has differing effects on firm survival and growth, which are moderated by organizational age, managerial experience, and resource fungibility. The paper first reviews and then empirically tests for the first time the model by [86] Sapienza et al. (2006). This paper adds further exploratory analysis to round up the analysis. Subsequent sections present and discuss the results. Consequently, it is argued here that there is a need for new conceptual thinking in order to better understand internationalizing young ventures.

Whilst the article by [86] Sapienza et al. (2006) has generally attracted considerable attention from scholars[1] , the core model presented in their work has not yet been tested. This further underscores the need for an empirical test of the propositions posited by [86] Sapienza et al. (2006). This is undertaken for the first time here.

2 Theory and hypotheses

Based on the model developed by [86] Sapienza et al. (2006), a broad range of factors were taken into consideration to examine new firms' survival and growth. Their degree of, and age at, internationalization; managerial experience; and resource fungibility lie at the core of their survival and growth. The age or relative youth of firms entering new markets is likely to influence their rates of capability development and deployment. Most young firms have few established processes that restrict their ability to adopt new routines, which enhances their ability to capitalize on emergent opportunities in new markets.

Managerial experience refers to the knowledge gained through executive practice with internationalization, either at an individual or organizational level. Resource fungibility is a concept that determines the extent to which a firm's resources may be deployed for alternative uses. Internationalization can, in turn, be defined as an "outward movement in a firm's international operations" ([97] Turnbull, 1987, pp. 21-2) or "the process of increasing involvement in international operations" ([102] Welch and Luostarinen, 1988, p. 36).

Numerous accounts can be found of exemplary descriptions, discussions and classifications of the international new venture literature ([26] Coviello and Jones, 2004; [81] Rialp et al. , 2005). In his review of the international new venture framework, [108] Zahra (2005) highlights research findings with regard to new venture internationalization, but also stresses that very little is known about the effects of internationalization on young companies' growth and survival prospects. Although substantial additional research efforts have been made since Zahra made this statement (for a comprehensive overview, see [53] Keupp and Gassmann, 2009), little progress has been made in this regard. More specifically, and besides studies on internationalization-performance mechanisms (for a comprehensive overview, see [84] Ruigrok et al. , 2007), no study has thus far used internationalization as the predictor variable in order to investigate potential linkages to survival and growth.

Therefore, as the first empirical test of its kind, this work contributes to an improved understanding of the rapid internationalization of new ventures. The research sheds light on the potential trade-off between internationalization and young firms' survival. While the Uppsala process model of internationalization suggests that late internationalization allows a firm to build up resources and capabilities, the rapid internationalization framework posits that a firm ought to be exposed to foreign environments as early as possible to gain positional advantages. …

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