Internationalisation of High-Tech Start-Ups and Fast Growth - Evidence for UK and Germany

Abstract

NON-TECHNICAL SUMMARYIn recent years, much of the debate of policy makers, business academics and practitioners alike has centred on the nature and implications of the increasing importance of trans -and multi-national, ec onomic activity. Globalisation, the phenomenon of increasing economic interdependence across n ational borders, is believed to be particularly pertinent to hightechnology industries. These sectors are commonly characterised by high costs for research and development, decreasing product and technology life cycles and strong competition from foreign firms. Strategies that large multinationals have followed to react to the 'forces' of globalisation have included, for example, international expansion to achieve economies of scale and simultaneous product launches in several countries in order to maximise international r eturns in dynamic markets subject to fierce and immediate competitor responses. Each of these strategies requires large managerial and financial resources. Therefore, the question arises as to how can high-tech start-ups, the smallest players in the high-technology sectors, cope with these challenges? Can these firms sustain resource-intensive entry modes in order to establish an international presence? Acting in technological niches, the expansion into foreign markets can be a way to increase sales and to thus to recover initial sunk costs over a shorter time frame.Our research, based on survey data for British and German high-tech startups, examines whether internationalisation leads to faster growth among high-tech start-ups. Results show that firms with international sales have higher sales growth than firms that sell only domestically. We find that technological sophistication of products and the experience of entrepreneurs has a positive impact on growth. In addition, intense competition and shorter windows of opportunity increase the pressure to grow rapidly to appropriate the returns from innovation. The findings suggest that high tech firm founders should be more determinedly international in their vision and strategies from the very start of their business to increase the economic success of their efforts. Abstract: For firms acting in technological niches the expansion into foreign markets can be a way to increase sales and to thus to recover initial sunk costs over a shorter time frame. Our research, based on survey data for nearly 600 British and German high-tech start-ups, examines whether internationalisation leads to faster growth among high-tech start-ups. Results show that firms with international sales have higher sales growth than firms that sell only domestically. We find that technological sophistication of products and the experience of entrepreneurs has a positive impact on growth. In addition, intense competition and shorter windows of opportunity increase the pressure to grow rapidly to appropriate the returns from innovation. The findings suggest that high tech firm founders should be more determinedly international in their vision and strategies from the...

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