Internationalization in the Digital Age: The Role of Cultural Distance and Industry Dynamism

Abstract

This study examines the impact of information and communication technologies (ICT) on the degree of internationalization by focusing on multinational enterprises (MNEs). We argue that ICT helps MNEs to reduce internally as well as externally transaction costs in an international context, resulting in a higher degree of internationalization. We further argue that the positive impact becomes more pronounced under the the condition of high cultural distance and a high level of industry dynamism. Our empirical results are strongly congruent with our hypotheses. We used a panel dataset from four major European countries, consisting of 567 firm year observations from 2011-2017. Overall, our study contributes to the emerging research stream about internationalization in the digital age. It shows that ICT acts as a filter for uncertainty ex-post and ex-ante in the internationalization process.