Foreign market selection of online retailers — A path-dependent perspective on influence factors

Abstract

Internationalization is a critical task for online retailers, yet the question of how and in which order online retailers choose foreign markets has not been investigated. Based on dynamic capabilities and institutional theory, the authors identify, test and explain factors influencing the foreign market selection behavior of European online retailers. Following a dynamic, path-dependent view of the market selection process over time, the hypotheses are tested using a longitudinal database containing observations of the foreign market selection behavior of 140 online retailers in Europe, accounting for 825 market entries over 15 years. The use of a rank-ordered logistic regression model allows the observation of how different attributes contribute to overall evaluations of the attractiveness of chosen markets, assuming that online retailers attempt to maximize the utility of markets for their specific interests, in dependence of the observed factors.The results indicate that market size, rule of law, and local market knowledge, as well as a common language and the logistics performance of a target country have a positive effect on the likelihood of selecting a target country. Although the internet is said to reduce the impact of distance, both cultural and geographic distance as well as added geographic distance still show a negative impact on the selection of foreign markets by online retailers.