International Knowledge, Reputation And New Venture Internationalization: The Impact Of Intangible Resources Attained Through Internal And External Sources

Thesis (PhD) - Indiana University, Business, 2006International new ventures are an increasingly prevalent phenomenon. Of particular interest is the ability of these new ventures to develop and exploit a competitive advantage internationally. Recent research drawing on the resource-based view emphasizes how the internal resources of a new venture lead to the development of such a competitive advantage. While insightful, this research has tended to overlook those resources possessed vicariously by a new venture through external sources. Another shortfall of prior research is the lack of consideration for potential interdependencies among resources and the resulting implications on different aspects of new venture internationalization. These represent critical gaps in the literature that could potentially explain how new ventures overcome resource constraints related to the so-called liabilities of smallness and newness to pursue and benefit from what is otherwise considered to be a large scale strategy. In this dissertation, I addressed these gaps by integrating the resource-based view with the economic geography and network literatures to consider the complex relationships between new venture internationalization and two internal sets of resources (the new venture's international knowledge and reputation) and external sets of resources (the potential international knowledge and reputation available through the new venture's headquartered location, venture capital firms, and alliance partners). A sample of 213 U.S.-based, high-technology new ventures that underwent an IPO between 1995 and 2000 was analyzed. The results underscore the importance of both internal and external sources of international knowledge for new venture internationalization, implying that new ventures internationalize not alone but as a player within their network. Although it was expected that new ventures with higher levels of international knowledge would develop the absorptive capacity to more effectively exploit and benefit from the resources available externally, the opposite relationship was found. Thus, vicariously exploiting external resources illustrates one way internationalizing new ventures can compensate for internal resource gaps. While the main effects of reputation on new venture internationalization were not supported, the existence of two significant interactions suggests that this relationship may be more complex. The results of the study were fairly consistent across three measures of internationalization

Untangling the Relationship between New Venture Internationalization and Performance

To help untangle the inconsistency in prior performance studies for new venture internationalization, the dynamic capabilities perspective is revisited to consider whether the relationship is more complex than previously assumed. While internationalization requires the reconfiguration of routines and resources, survivability is argued to peak at moderate levels of internationalization where the associated resources and risk is balanced between local and foreign markets. In contrast, sales growth is suggested to peak at either low or high levels of internationalization where a singular market focus and set of capabilities is being exploited. The results confirm that the level of new venture internationalization exhibits an inverted U-shaped relationship with survival, while the opposite U-shaped relationship exists with sales growth

The Impact of Early Imprinting on Evolution of New Venture Networks

Given the argued importance of networks to new ventures, this paper is intended to fill a noted gap in the literature pertaining to the factors that influence the evolution of new ventures\u27 alliance networks. Drawing on the imprinting literature, we propose that one has to look beyond the first partner per se, and instead focus on the extant relationships the initial partner has with other firms. More specifically, we argue and find that the network size and centrality of a new venture\u27s initial alliance partner influence the subsequent size of the new venture\u27s network

When do Domestic Alliances help Ventures Abroad? Direct and Moderating Effects from a Learning Perspective

While the importance of strategic alliances for new venture internationalization is well acknowledged, the effect of domestic partners remains less understood. Building on organizational learning theory\u27s vicarious learning arguments, we suggest that internationally experienced domestic partners positively influence new ventures\u27 international intensity. Moreover, acknowledging that ventures may have multiple learning sources, we argue that the effect is more pronounced when substituting for the lack of new ventures\u27 top management teams\u27 international experience, or when complementing the insights about foreign markets received from foreign alliance partners. The analysis of 194 publicly held new ventures largely supports our hypotheses

International Exposure Through Network Relationships: Implications for New Venture Internationalization

Drawing on the network literature and attention-based view, we examine the extent to which international exposure from key informal (geographically proximate firms) and formal (alliance partners) network relationships impacts new venture internationalization. Our findings are three-fold. First, international exposure from both types of network relationships positively influence new venture internationalization, and serve as substitutes for each other. Second, the effects differ based on the age of the venture. While older ventures benefit more from international exposure from alliance partners, younger ventures are more influenced by international exposure from geographically proximate firms. Third, our analysis confirms a three-way interactive effect of age and international exposure from informal and formal relationships on new venture internationalization

How Do Young Firms Manage Product Portfolio Complexity? The Role of Absorptive Capacity and Ambidexterity

Building a complex portfolio of products can be beneficial for young firms due to increased sales growth and competitiveness. Yet, the benefits from product portfolio complexity (PPC) are often outweighed by rising costs, leading to an inverted U-shaped relationship between PPC and performance. Recent research has called for an increased understanding of how firms are able to better manage higher levels of PPC. We suggest that absorptive capacity and ambidexterity are vital to enhancing the benefits and mitigating the costs of increasing PPC. Using a sample of 215 young high technology firms, we find support for positive moderating effects of absorptive capacity and ambidexterity on the inverted U-shaped relationship between PPC and firm performance

Is More Always Better? Risk Trade-offs among Internationalizing New Ventures

Purpose – The 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/approach – New 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. Findings – The 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/implications – A 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 implications – To 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/value – The value of this research lies in better understanding how ventures are able to overcome rising costs at higher levels of internationalization

Venture Capitalists as Catalysts to New Venture Internationalization: The Impact of Their Knowledge and Reputation Resources

Venture Capitalists (VC) play an important role in influencing the strategic direction of the firms in which they invest. The findings of this study reveal that VCs can serve as a catalyst to new venture internationalization through the provision of knowledge and reputation resources. Furthermore, the international knowledge of a VC is more positively related to new venture internationalization when the VC is also reputable

International Entrepreneuship and Geographic Location: An Empirical Examination of New Venture Internationalization

In this paper, we argue that geographic location may be one reason why some ventures are able to acquire the resources needed to internationalize while others cannot. We use ecological arguments to predict an inverted U-shaped relationship between the concentration of industry clustering within a geographic location and the venture\u27s internationalization. We also explore whether venture characteristics influence the nature of this relationship. Our hypotheses are regressed on international intensity and scope, and analyzed through a sample of 156 publicly held new ventures. Results confirm that location influences new venture internationalization, and firm characteristics impact the nature of the relationship

Exploring the Role of Industry Structure in New Venture Internationalization

While we have gained considerable knowledge since the late 1980s regarding the phenomena of international new ventures, less is known about the influence of industry structure on these ventures. In the present paper, we draw on literature from industrial economics, international business and entrepreneurship to identify industry structure variables that fit within the theoretical framework of international new ventures. We then offer propositions as to how the identified industry structure variables individually and jointly influence the likelihood of new venture internationalization