Is more always better? Risk trade-offs among internationalizing new ventures

Abstract

PurposeThe purpose of this paper is to investigate how ventures manage the negative returns associated with higher levels of internationalization. Many new ventures are internationalizing to fully exploit new innovations and/or gain access to larger markets. Yet at some point the rising costs associated with internationalization outweigh any benefits, resulting in an inverted U-shaped relationship between internationalization and performance. Design/methodology/approachNew ventures are theorized to better manage high levels of internationalization by limiting exposure to other sources of risk. This can be achieved by leveraging greater size and/or limiting simultaneous diversification efforts on product innovation. To test the hypotheses, a regression using Heckman selection was run using a sample of 210 US-based, publicly held ventures in high-technology industries. FindingsThe results confirm that when higher levels of internationalization are coupled with either a low emphasis on product innovation or larger size, the negative returns are mitigated and actually become positive. Research limitations/implicationsA key implication lies in recognizing the role of risk management for internationalizing ventures. Future research could benefit by testing for generalizability in other countries as well as among privately held ventures. Practical implicationsTo manage the trade-offs associated at higher levels of internationalization, ventures need to maintain a low emphasis on product innovation or meet a threshold in terms of size. Originality/valueThe value of this research lies in better understanding how ventures are able to overcome rising costs at higher levels of internationalization.

The yin and yang nature of coopetition activities: non-linear effects and the moderating role of competitive intensity for internationalised firms

“…A similar model-testing style has been utilised by other scholars (e.g., Janssens, 2001;Karakaya and Parayitam, 2013; reference withheld). Statistically, it was not important that support did not exist for the main effect (Allison, 1998;Fernhaber and McDougall-Covin, 2014). The reason being was that a diminishing-returns effect was anticipated if businesses engage in excessive degrees of coopetition (building upon .…”

“…7 The authors are grateful for a point made by an anonymous reviewer for recommending more detail should be provided on the different ways that non-linear (inverted U-shaped) and moderating effects can be tested. The research team were appreciative of the different methods that are at academics' disposal (Sturman, 2003;Cadogan et al, 2009;Story et al, 2015;Haans et al, 2016) and chose certain model-testing procedures that were underpinned by earlier investigations (e.g., Aiken and West, 1991;Allison, 1998;Janssens, 2001;Karakaya and Parayitam, 2013;Fernhaber and McDougall-Covin, 2014; reference withheld). In short, the quantitative techniques used to test the research hypotheses and control paths were robust and appropriate to achieve the research objective.…”

“…Furthermore, as stressed throughout this article, the research team expected that a non-linear (inverted U-shaped) relationship exists between coopetition activities and market performance (as per. Consequently, it was of no concern that there was no support for the main effect(Janssens, 2001;Fernhaber and McDougall-Covin, 2014; reference withheld). Rather, it was more important that the non-linear (inverted U-shaped) and moderating effects were significant(Allison, 1999).…”

The Internationalization-Performance Relationship of Small-and-Medium-sized Enterprises: The Case of Taiwan’s ESCO Industry

“…Furthermore, the diversified resources (Chen et al, 2014), the scale of business operations (Wu et al, 2012; Zhou, 2018), the speed of international expansion (Olmos and Vial, 2015), and high-tech features (Fernhaber and McDougall, 2014) owned by multi-national enterprises have overall been found to exert a relatively significant impact on international business performance. According to these studies, we propose the integrated empirical hypothesis H4 as following:…”

Business model innovation of international new ventures: An empirical study in a Swedish context

“…Value creation is broadly looked at as the process of combining resources in a unique way to produce innovative output such as new products (Morris et al 2005). This type of value creation process of INVs has been scrutinized by previous research (e.g., Knight and Cavusgil 2004;Fernhaber and McDougall-Covin 2014;Abrahamsson et al 2015). In contrast to the emphasis on value creation of the earlier studies, this paper will zoom in on the business model elements of value delivery and value capture of INVs relative to other internationalized firms.…”