Academic journal article New England Journal of Entrepreneurship

International New Venture Founders: Who Are They?

Academic journal article New England Journal of Entrepreneurship

International New Venture Founders: Who Are They?

Article excerpt

Entrepreneurs who start new ventures for the purpose of conducting business across national boundaries are largely unexplained by existing international business theory and research. This article reports on a comparison of the founders of 55 international new ventures with their counterparts who started 166 domestic-only new ventures. These two groups differed significantly in terms of their international social networks at the time of the start-up, prior international business experience, and foreign language ability.

To establish sustainable competitive advantage in today's global economy,1 businesses increasingly must consider crossing aeo-political boundaries to transact business in foreign markets. Large corporations have the financial and technical resources to cross national borders and, when necessary, lobby home and host governments to pry open closed markets. Small- to mediumsized ventures, in contrast, face substantial transaction problems.2 These issues have been explored in a growing body of research.3

However, these research efforts have focused mainly on existing ventures' expansion into international markets. Entrepreneurs who start international new ventures (INVs) with the initial purpose to conduct business across national boundaries remain largely unexamined and unexplained,4 perhaps because historically their numbers have been small.

This is changing. Recent founding rates for INVs appear to be increasing, and this phenomenon has begun to attract the attention of managers, public policymakers, and researchers. McDougall, Shane, and Oviatt5 used case research methods to study a sample of twenty-four such INVs. Their study specifically pointed out that monopolistic advantage theory, product cycle theory, stage theory of internationalization, oligopolistic reaction theory, and internalistic theory all fail to explain the formation of INVs, because all these theories assume that firms become international some time after they are formed. By contrast, INVs derive significant competitive advantage at start-up from the use of resources and/or the sale of outputs across national boundaries.

McDougall, Shane, and Oviatt6 propose that any theory of how INVs are formed must address three questions.

1. Who are the founders of INVs?

2. Why do they choose to compete internationally?

3. What form do their activities take?

A single, very early study by Vesper and Vorhies7 foreshadowed McDougall, Shane and Oviatt's. Vesper and Vorhies conducted in-depth interviews with ten entrepreneurs who had founded INVs. Three themes emerged from these interviews.

1. Almost all the entrepreneurs attributed their business idea to information they had obtained from friends or business contacts. One entrepreneur reported this lesson learned from his INV founding experience: "The best way to find leads for exporting a new product is personal contacts." This would suggest that social networking theory could be productively applied to studying the INV founding process.

2. The interviews generally supported a comment made by one of the subject entrepreneurs. ". . . It's always easier to buy something [in a foreign country] than to sell something [in a foreign country]." Exporting requires selling something in a foreign country and was considered to be a more complex business activity than importing; it required more international business expertise. Prior job experience was generally considered to be the best source of this expertise, with schooling second.

3. The entrepreneurs generally agreed that knowledge of a foreign language was not at all important. Only one felt that knowledge of a foreign language mattered, and by coincidence he had studied in Europe before starting his INV None of the ten had learned a foreign language in order to start their INVs.

These themes generally suggest an investigation of three characteristics of founding entrepreneurs:

1. …

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