Survival, growth, and performance of Hungarian International New Ventures

Miklós Stocker

doi:10.1556/204.2019.41.1.4

Abstract

There is a growing debate in the literature about International New Ventures (INV). Survival of INVs – along with their growth and financial performance – seems to be an interesting phenomenon, but it has only been tackled in a small sample of studies. This study examines Hungarian INVs and some of their key characteristics in the years 2009–2014. The Hungarian Corporate Tax Database was used to analyse the entire population of Hungarian companies during that period. The database consists of 385,723 companies in 2009 and 422,500 companies in 2014, and comprises the whole Hungarian private sector. Of these companies, 6,547 can be identified as INVs in the period under analysis. In this paper, the survival, growth, and business performance characteristics of Hungarian INVs are examined. Hungarian INVs recorded an exceptionally high survival rate; after five business years, 70% of the INVs remained in business, but nearly half of them withdrew to the home market, which means that only 35% of the Hungarian INVs became Sustainable International New Ventures (SINVs). Hungarian SINVs employed on average about 25 employees, registered extremely high (around 75%) export intensity, had steadily growing earnings and equity (43.6% and 56.3% mean CAGR), showed a stable return on equity of about 10% after their first year in existence, and created added value of approximately 37,000 EUR per employee.

Highlights

Among newly founded companies, failure rates are usually high, but the probability of survival is higher for those companies that can enter foreign markets soon after their inception
90% of International New Ventures (INV) survive their first year of existence, and of the whole population of Hungarian INVs, around 80% survive the second year, 75% the third year, and 70% the fourth year
Hungarian INVs have had exceptionally good survival rates; approximately 90% survived the first year, 80–85% survived the second year, around 75% survived the third year, and more than 70% survived their fourth year of existence

Summary

Introduction

Failure rates are usually high, but the probability of survival is higher for those companies that can enter foreign markets soon after their inception. Not all International New Ventures are destined for success; the examination of INVs can be crucial in understanding the characteristics and discovering the indicators which can differentiate them, in order to identify and facilitate those enterprises which can become the Sustainable INVs that will contribute the most to their national economy. This study examines Hungarian INVs and their key characteristics and financial performance in the years 2009–2014. The database consists of 385,723 companies from 2009 and 422,500 companies from 2014, and comprises the entire Hungarian private sector. Of these companies, 6,547 could be identified as International New Ventures. This paper examines the characteristics and business performance of INVs, differentiating between those that are Sustainable (SINV), Withdrawn (WINV) and Terminated (TINV)

Results

Discussion

Conclusion