Market Entry and Priority of Small and Medium-Sized Enterprises in the Software Industry: An Empirical Analysis of Cultural Distance, Geographic Distance, and Market Size

Abstract

This article investigates the influence of cultural distance, geographic distance, and three market size variables in the target country preference of small and medium-sized enterprises (SMEs) in the software industry. In addition, the authors examine the shift of SMEs’ priorities in country selection by analyzing how these factors affect the selection of the first, second, and third target countries. The empirical findings suggest that approximately 70% of country choices can be explained by software market size and geographic distance alone. The findings also show that SMEs’ entry priorities shift quickly from countries within a short geographic distance to countries with high purchasing power and at a greater geographic distance. The authors discuss relationships of these macrolevel factors and compare them with prior qualitative and conceptual studies in this field. They also note implications for managers.