The international penetration of ibusiness firms: Network effects, liabilities of outsidership and country clout

Abstract

The burgeoning of ibusiness firms in the modern digital economy challenges the received internationalization theory. Given that ibusinesses such as social networking sites create value by providing a digital platform for users to interact with one another, we employ a user-network perspective and externalization logic, suggesting that ibusinesses' internationalization process depends critically on users' collective interactions, instead of being solely driven by firms' market commitments as noted by the Uppsala model. However, ibusinesses may suffer from liabilities of outsidership due to the boundedness of international network effects. Drawing on social network theory, we demonstrate that such liabilities can be mitigated by first diffusing the ibusiness platform in countries with higher clout. Our analysis using a unique dataset of mobile ibusiness platforms finds empirical support for the hypotheses. We discuss theoretical implications for the network approach of the Uppsala model in the digital era.

Ecosystem-specific advantages in international digital commerce

“…As in any high-tech industry, platform quality is likely to be a function of firm-specific technological capabilities, which can help firms claim market leadership (McIntyre, 2011;Sheremata, 2004). IB research confirms that platform quality is positively associated with the likelihood of penetration in foreign markets (Chen et al, 2019).…”

“…Since the Internet can in many cases substantially reduce the cost of deploying FSAs across national borders, many digital firms may be characterized as Born Globals (Hennart, 2014), although some scholars specify that the internationalization of digital firms is constrained by reliance on locally embedded complementary resources (Verbeke, Coeurderoy, & Matt, 2018). Recent IB research demonstrates that platforms offer important opportunities for extending theory (Banalieva & Dhanaraj, 2019); scholars contend that the internationalization of digital firms may be beyond the scope of firm-centric logic, being driven more by user interaction than by unilateral firm commitment (Brouthers, Geisser, & Rothlauf, 2016;Chen, Shaheer, Yi, & Li, 2019;Coviello, Kano, & Liesch, 2017;Shaheer & Li, 2018).…”

The Internationalisation of Platform Companies: Does the digital get rid of Geography?

“…The findings by Chen et al (2019) are very relevant for our analysis for two reasons. First, they show that international spread is not just a matter of global network effects: national barriers still hold for digital businesses.…”

“…That is, being on the market or on the web is not enough -meeting customers' needs is essential for international growth; it lends support to the development of online reputations. But the main research findings concern the role of international networks and the influence of specific countries, labelled "country clout" (Chen et al, 2019). It was found that the global installed base only "exerts a trivial effect on the likelihood of penetration in new target countries" (Chen et al, 2019, p. 184).…”

“…The first has to do with the differences in national (or regional) regulations, languages, and cultures. Although it is true that, as Autio and Zander (2016) have argued, some online reputations develop fast, the process cannot be taken for granted as Chen et al (2019) have shown. If the offerings are not adapted to the local culture, market penetration becomes more difficult, and may even stall.…”