International New Ventures Research Articles

Variety in International New Ventures–Typological Analysis and Beyond

SUMMARY Different from the earlier research with its tendency towards a rather homogenous view on International New Ventures (INVs), the contribution of this study is the identification and understanding of the possible variety among INVs. The study aims at exploring the following: (1) Are INVs different from one another in terms of their international development? and (2) If they are, how and why are the differences manifested in these firms? The pioneering INV-framework by Oviatt and McDougall (1994) is applied, accompanied by a long-term perspective on their development and inclusion of several factors as possible agents of the differences. Based on the analysis of eight INVs, the results highlight the importance of the founding conditions, the internationalization motives and the international experience of the founding managers on the INV's development in the early phase. Both initial and subsequent development of the INVs varied with regard to geographical breadth and type of operations abroad, and ...

The survival of international new ventures

International new ventures (INVs) are a popular mode of entry into foreign markets. INVs, those companies that enter foreign markets at inception, often suffer the two liabilities of newness and foreignness, which may increase the odds of their failure. This paper empirically examines the survival of INVs by comparing them with other sequential modes of international operations (e.g., acquisitions). Data from 275 British firms show that INVs have lower unconditional survival probabilities than other modes of foreign market entry. Our analyses also show that differences in survival probabilities disappear when the firms’ competitive strategies are considered.

A theory of international new ventures: a decade of research

Oviatt and McDougall’s JIBS article identified and defined international new ventures (INVs) and their prominent role in the global marketplace. The article spurred worldwide interest in INVs by raising questions about the validity and efficacy of existing theory, especially about the Uppsala process model of internationalization. The article also laid an important theoretical foundation for research into international entrepreneurship (IE), where younger and wellestablished companies use their entrepreneurial activities to create value as they internationalize their operations. This paper reviews Oviatt and McDougall’s original propositions, highlighting their important contributions to the field. The paper also highlights the progress made in research using Oviatt and McDougall’s framework, the major debates that persist about the nature and role of INVs, the source of their competitive advantages, and the key issues to be explored in future research.

Technological Resource Leveraging and the Internationalisation of New Ventures

A growing body of research on international entrepreneurship suggests that new ventures have succeeded in entering international markets by creatively exploiting their tangible and intangible technological resources. Using the resource-based view of the firm, this paper explores the impact of leveraging selected tangible and intangible technological resources on the speed and degree of sales internationalisation among US software new ventures. Even though R&D investments are not significant predictors of the speed or degree of sales internationalisation, technological networks and technological reputations are. The interactions of networks and reputation with R&D spending are also positively and significantly associated with higher sales internationalisation. Technological networks also interact positively with R&D spending to expedite sales internationalisation, but the interaction of these investments with technological reputations is not significant. The results show that intangible technological resources play an important role in the internationalisation of software new ventures' sales. The implications of the findings for future international entrepreneurship research are discussed.

A Comparison of International and Domestic New Ventures

Differences between international new ventures (INVs) and domestic new ventures (DNVs) were examined using a sample of 214 IPO new ventures (ventures 6 years old or less). INVs were found to be significantly different on the basis of their entrepreneurial team experience, strategy, and industry structure. Specifically, the entrepreneurial team of INVs exhibited higher levels of previous international and industry experience. The strategies of INVs were more aggressive, and they operated in more channels of distribution than did DNVs. INVs competed on the basis of differentiation, placing greater emphasis on product innovation, quality, service, and marketing as strategic weapons. In addition, INVs were more likely than DNVs to operate in industries characterized by a high degree of global integration.

The Internationalization of New Ventures

International new ventures (INV) are firms that trade out of their national borders from an early stage. The traditional internationalization stage models have not considered this issue. In this context, the existence of INV represents an important open research topic and merits attention. The internationalization of these ventures is a complex phenomenon and many perspectives are needed to understand it. The purpose of the research discussed here, however, is to present an entrepreneurial perspective to understand this process. From this perspective the authors analyse how these ventures can obtain the necessary tangible and intangible resources to face the internationalization process. They demonstrate the role of entrepreneurial networks in the internationalization of these types of ventures. Empirical research enables the authors to offer a more complete definition of international new ventures and to describe the characteristics of their entrepreneurial networks and the importance of those networks in the creation of such firms.

The Survival of International New Ventures

The early years are a particularly hazardous period for new ventures. This paper focuses on the survival of international new ventures (INVs), approaching the question from an empirical point of view. It is pointed out that the choice of an INV strategy is endogenous, in the sense the firms self-select into the strategy modes that are best suited to their resources. When this self-selection is ignored, INVs appear to have lower survival probabilities than other multinational firms. However, this result disappears when the endogeneity of the firms' strategies is taken into account. A revised version of this paper, joint with Shaker Zahra, has appeared: Journal of International Business Studies, vol.38(2): 333-352, 2007.

New venture internationalization, strategic change, and performance: A follow-up study

Although many scholars, business experts, and government agencies enthusiastically advise all firms, including new and small ventures, to internationalize, such advice does not appear to be based on empirical evidence. Few researchers have empirically examined the link between new venture performance and the internationalization of new ventures. At best, the evidence suggests that there is no significant relationship. We used a sample of 62 U.S. new venture manufacturers in the computer and communications equipment industries during the late 1980s. These industries were purportedly globalizing and may have been leading other industries into increased international operations. We found that higher levels of internationalization (percentage of foreign sales to total venture sales) were associated with higher relative market share two years later. However, there was no significant direct relationship between percentage of international sales and subsequent return on investment (ROI). Perhaps international operations simply cost more than expected. Or perhaps, as MacMillan and Day (1987) found in their study of corporate ventures over a 4-year time period, increases in market share may be a prelude to higher ROI as scale benefits translate into higher profitability. However, the 2-year time period of our study may simply not be long enough for investments in higher market shares to produce improved profits. During the 2-year study period, many of the ventures changed their level of internationalization. Of the 36 ventures who were domestic (no international sales) in the prior study, 10 expanded into international markets over the 2 years. Of the 26 originally international ventures (international sales of at least 5%), half increased their percentage of international sales, nine reduced it, and four stayed the same. Whereas the average change in international sales percentage of the ventures was only 2.9 percentage points, the large standard deviation of 13.0 percentage points, and the leptokurtic distribution (9.2) reflected the dramatic changes made by some of the ventures. Using subgroup analysis we examined these changes in percentage of international sales in conjunction with changes in strategies and performance. Ventures that had increased international sales, relative to those that had not, exhibited more positive associations between the degree of strategic change and performance as measured in terms of both relative market share and ROI. Increased international sales in technology-based new ventures seems to require simultaneous strategic changes in order to positively impact venture performance. This study is a follow-up to McDougall's (1989) finding that technology-based new ventures that had sales in foreign markets had significantly different strategies than similar ventures that sold their products only domestically. The current study enriches the previous findings by adding consideration of (1) changes in degree of internationalization, (2) changes in strategy, and (3) venture performance. Although we found no performance penalty associated with increasing international sales alone, indiscriminant advice for new ventures to sell in foreign markets without other supporting strategic actions is inconsistent with our findings. Internationalization, alone, did not lead to increased profitability. Entrepreneurs of young technology-based firms who are considering internationalization should take heed of our results. Internationalization of sales does not appear to be a simple matter of applying established strategies and procedures developed for a domestic arena. Successful internationalization appears to require changes in the venture's strategy as well.

Explaining the formation of international new ventures: The limits of theories from international business research

International new ventures (INVs) represent a growing and important type of start-up. An INV is defined as a business organization that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries (Oviatt and McDougall 1994). Their increasing prevalence and important role in international competition indicates a need for greater understanding of these new ventures (Oviatt and McDougall 1994). Logitech, as described in a case study by Alahuhta (1990), is a vivid example of an INV. Its founders were from two different countries and had a global vision for the company from its inception. The venture, which produces peripheral devices for personal computers, established headquarters in both Switzerland and the U.S. Manufacturing and R&D were split between the U.S. and Switzerland, and then quickly spread to Taiwan and Ireland. The venture's first commercial contract was with a Japanese company. Using 24 case studies of INVs, we found that their formation process is not explained by existing theories from the field of international business. Specifically, neither monopolistic advantage theory, product cycle theory, stage theory of internationalization, oligopolistic reaction theory, nor internalization theory can explain the formation process of INVs. These theories fail because they assume that firms become international long after they have been formed, and they therefore highlight large, mature firms. They also focus too much on the firm level and largely ignore the individual and small group level of analysis (i.e., the entrepreneur and his or her network of business alliances). We propose that an explanation for the formation process of INVs must answer three questions: (1) who are the founders of INVs? (2) why do these entrepreneurs choose to compete internationally rather than just in their home countries? and (3) what form do their international business activities take? Who are the founders of INVs? We argue that founders of INVs are individuals who see opportunities from establishing ventures that operate across national borders. They are “alert” to the possibilities of combining resources from different national markets because of the competencies (networks, knowledge, and background) that they have developed from their earlier activities. Following the logic of the resource-based view of the firm, we argue that the possession of these competencies is not matched by other entrepreneurs. Only the entrepreneur possessing these competencies is able to combine a particular set of resources across national borders and form a given INV. Why do these entrepreneurs choose to compete internationally rather than just in their home countries? The founders of INVs recognize they must create international business competencies from the time of venture formation. Otherwise, the venture may become path-dependent on the development of domestic competencies and the entrepreneur will find it difficult to change strategic direction when international expansion eventually becomes necessary. As the founder of one INV explained, “The advantage of starting internationally is that you establish an international spirit from the very beginning” (Mamis 1989:38). What form do their international business activities take? Founders of INVs prefer to use hybrid structures (i.e., strategic alliances and networks) for their international activities as a way to overcome the usual poverty of resources at the time of start-up. This study has important implications for the practice of management. In financing decisions relating to INVs, venture capitalists and other venture financiers should look for entrepreneurs who have a global vision, international business competence, and an established international network. When entrepreneurs start INVs they should create hybrid structures to preserve scarce resources. Finally, given the path-dependence of competence development, founders of new ventures should consider whether establishing a domestic new venture with plans to later internationalize will be as successful a strategy as establishing a new venture that is international from inception.