"Integrating International New Ventures and Staged Theory: Age at Entry, Survival and Growth"

Abstract

The literature on international new ventures (INVs), or born-globals, has shown how this new breed of firms is fundamentally different from their more traditional, staged-internationalizing counterparts. Scholars of the former school advocate how early internationalization helps firms develop their adaptability to changing environments, and therefore better equip these firms to grow compared to their more slowly-internationalizing counterparts. In contrast, scholars of the latter school emphasize how first growing a small business within its home country reduces the risk of survival in early internationalization. This study integrates these two opposing perspectives by considering the timing of international entry as a strategic choice for young firms. We hypothesize that the effect of a firm’s age at international entry on survival and growth is more complicated than is argued in either of these two opposing schools. Specifically, we hypothesize that both failure probability of firms and their sales growth should be continuous but non-linear functions of their age at international entry. Utilizing a panel database of small- and medium-sized Australian manufacturers from which the original ‘born-global’ label was coined, we show that the failure probability at first decreases and then increases (‘U-shape’) as a function of firms’ age at international entry, while the short-term sales growth at first increases and then decreases (‘inverted U- shape’). This highlights the importance of the liabilities of newness and aging even after taking into account the potential learning advantage of newness as advocated by INV scholars. Interestingly, after accounting for the likelihood of internationalization based on a firm’s characteristics, a stay-domestic strategy incurs a higher failure rate than an internationalizing one, regardless of the age at international entry.