Incentive for Speed: an Incentive-Based View of Post-Entry Internationalization Speed of New Venture

Abstract

While the initial international expansion of new ventures has received substantial research interest in extant international entrepreneurship research, our understanding of the pace of international expansion of new ventures after they already expand abroad – the post-entry internationalization speed (PEIS) – is limited, despite its theoretical and practical importance. For new ventures that have already expanded abroad, or international new ventures (INVs), PEIS acts as a double-edged sword that can bring tremendous upside potential and at the same time substantial downside risk for INVs. Using agency arguments, this study theorizes that stock options given to the CEO and outside directors of INVs insulate these individuals from downside risk but still expose them to tremendous upside potential associated with faster PEIS. Empirical analyses from the population of publicly held U.S. INVs over the 2005-16 period show that while INVs expand faster abroad when their CEO or outside directors are compensated with more stock options, PEIS becomes slower when both the CEO and outside directors are compensated with more stock options. By developing an incentive-based view of PEIS of INVs, this study departs from and complements previous studies in the international entrepreneurship literature that have predominantly focused on the role of firm-level resources or capabilities as a driver of internationalization speed of INVs.