Skip to main content
SpringerLink
Log in

Untangling the relationship between new venture internationalization and performance

  • Published:
Journal of International Entrepreneurship Aims and scope Submit manuscript

Abstract

To help untangle the inconsistency in prior performance studies for new venture internationalization, the dynamic capabilities perspective is revisited to consider whether the relationship is more complex than previously assumed. While internationalization requires the reconfiguration of routines and resources, survivability is argued to peak at moderate levels of internationalization where the associated resources and risk is balanced between local and foreign markets. In contrast, sales growth is suggested to peak at either low or high levels of internationalization where a singular market focus and set of capabilities is being exploited. The results confirm that the level of new venture internationalization exhibits an inverted U-shaped relationship with survival, while the opposite U-shaped relationship exists with sales growth.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2

Similar content being viewed by others

References

  • Adjei F, Cyree K, Walker M (2008) The determinants and survival of reverse mergers vs IPOs. J Econ Financ 32(2):176–194

    Article  Google Scholar 

  • Aldrich H, Auster ER (1986) Even dwarfs started small: liabilities of age and size and their strategic implicaitons. Res Organ Behav 8:165

    Google Scholar 

  • Augier M, Teece DJ (2007) Dynamic capabilities and multinational enterprise: penrosean insights and omissions. Manag Int Rev 47(2):175–192

    Article  Google Scholar 

  • Autio E, Sapienza HJ, Almeida JG (2000) Effects of age at entry, knowledge intensity, and imitability on international growth. Acad Manag J 43(5):909–924

    Article  Google Scholar 

  • Birkinshaw J, Hood N (1998) Multinational subsidiary evolution: capability and charter change in foreign-owned subsidiary companies. Acad Manag Rev 23(4):773–795. doi:10.5465/amr.1998.1255638

    Google Scholar 

  • Bitar J, Hafsi T (2007) Strategizing through the capability lens: sources and outcomes of integration. Manag Decis 45(3):403–419. doi:10.1108/00251740710745043

    Article  Google Scholar 

  • Bloodgood JM, Sapienza HJ, Almeida JG (1996) The internationalization of new high-potential U.S. ventures: antecedents and outcomes. EntrepTheory Pract 20(4):61–76

    Google Scholar 

  • Brush CG, Vanderwerf PA (1992) A comparison of methods and sources for obtaining estimates of new venture performance. J Bus Ventur 7(2):157

    Article  Google Scholar 

  • Bruton GD, Filatotchev I, Chahine S, Wright M (2010) Governance, ownership structure, and performance of IPO firms: the impact of different types of private equity investors and institutional environments. Strateg Manag J 31(5):491–509

    Google Scholar 

  • Buckley PJ, Dunning JH, Pearce RD (1984) An analysis of the growth and profitability of the world’s largest firms 1972–1977. Kyklos 37(1):3

    Article  Google Scholar 

  • Bühner R (1987) Assessing international diversification on West German corporations. Strateg Manag J 8(1):25–37

    Article  Google Scholar 

  • Burgel O, Murray GC (2000) The international market entry choices of start-up companies in high-technology industries. J Int Market 8(2):33–62

    Article  Google Scholar 

  • Cao L (2011) Dynamic capabilities in a turbulent market environment: empirical evidence from international retailers in China. J Strateg Mark 19(5):455–469. doi:10.1080/0965254x.2011.565883

    Article  Google Scholar 

  • Carpenter MA, Pollock TG, Leary MM (2003) Testing a model of reasoned risk-taking: governance, the experience of principals and agents, and global strategy in high-technology IPO firms. Strat Manag J 24(9):802–820. doi:10.1002/smj.338

    Article  Google Scholar 

  • Cheng Y-T, Van de Ven AH (1996) Learning the innovation journey: order out of chaos? Organ Sci 7(6):593–614

    Article  Google Scholar 

  • Chien S-Y, Tsai C-H (2012) Dynamic capability, knowledge, learning, and firm performance. J Organ Chang Manag 25(3):434–444. doi:10.1108/09534811211228148

    Article  Google Scholar 

  • Cieślik J, Kaciak E, Welsh D (2012) The impact of geographic diversification on export performance of small and medium-sized enterprises (SMEs). J Int Entrep 10(1):70–93. doi:10.1007/s10843-012-0084-7

    Article  Google Scholar 

  • Coeurderoy R, Cowling M, Licht G, Murray G (2012) Young firm internationalization and survival: empirical tests on a panel of ‘adolescent’ new technology-based firms in Germany and the UK. Int Small Bus J 30(5):472–492. doi:10.1177/0266242610388542

    Article  Google Scholar 

  • Contractor FJ, Kundu SK, Chin-Chun H (2003) A three-stage theory of international expansion: the link between multinationality and performance in the service sector. J Int Bus Stud 34(1):5–18

    Article  Google Scholar 

  • Corner PD, Wu S (2012) Dynamic capability emergence in the venture creation process. Int Small Bus J 30(2):138–160. doi:10.1177/0266242611431092

    Article  Google Scholar 

  • Coviello NE, Jones MV (2004) Methodological issues in international entrepreneurship research. J Bus Ventur 19(4):485

    Article  Google Scholar 

  • Coviello NE, Munro HJ (1995) Growing the entrepreneurial firm. Eur J Market 29(7):2–61

    Article  Google Scholar 

  • Coviello N, Munro H (1997) Network relationships and the internationalisation process of small software firms. Int Bus Rev 6(4):361

    Article  Google Scholar 

  • Dimitratos P, Johnson J, Slow J, Young S (2003) Micromultinationals: new types of firms for the global competitive landscape. Eur Manag J 21(2):164. doi:10.1016/s0263-2373(03)00011-2

    Article  Google Scholar 

  • Drnevich PL, Kriauciunas AP (2011) Clarifying the conditions and limits of the contributions of ordinary and dynamic capabilities to relative firm performance. Strat Manag J 32(3):254–279. doi:10.1002/smj.882

    Article  Google Scholar 

  • Dunning JH (1995) Reappraising the eclectic paradigm in an age of alliance capitalism. J Int Bus Stud 26(3):461–491

    Article  Google Scholar 

  • Eisenhardt KM, Martin JA (2000) Dynamic capabilities: what are they? Strat Manag J 21(10/11):1105

    Article  Google Scholar 

  • Fernhaber SA, Li D (2010) The impact of interorganizational imitation on new venture international entry and performance. Entrep Theory Pract 34(1):1–30. doi:10.1111/j.1540-6520.2009.00365.x

    Article  Google Scholar 

  • Fischer HM, Pollock TG (2004) Effects of social capital and power on surviving transformational change: the case of initial public offerings. Acad Manag J 47(4):463–481. doi:10.2307/20159597

    Article  Google Scholar 

  • Florin J, Lubatkin M, Schulze W (2003) A social capital model of high-growth ventures. Acad Manag J 46(3):374–384

    Article  Google Scholar 

  • Gilbert BA, McDougall PP, Audretsch DB (2006) New venture growth: a review and extension. J Manag 32(6):926–950

    Article  Google Scholar 

  • Giovannetti G, Ricchiuti G, Velucchi M (2011) Size, innovation and internationalization: a survival analysis of Italian firms. Appl Econ 43(12):1511–1520

    Article  Google Scholar 

  • Gomes L, Ramaswamy K (1999) An empirical examination of the form of the relationship between multinationality and performance. J Int Bus Stud 30(1):173–187

    Article  Google Scholar 

  • Griffith DA, Harvey MG (2001) A resource perspective of global dynamic capabilities. J Int Bus Stud 32(3):597

    Article  Google Scholar 

  • Han M (2006) Developing social capital to achieve superior internationalization: a conceptual model. J Int Entrep 4(2/3):99–112. doi:10.1007/s10843-007-0003-5

    Google Scholar 

  • Hitt MA, Hoskisson RE, Kim H (1997) International diversification: effects on innovation and firm performance in product-diversified firms. Acad Manag J 40(4):767–798. doi:10.2307/256948

    Article  Google Scholar 

  • Holmlund M, Kock S (1998) Relationships and the Internationalisation of Finnish small and medium-sized companies. Int Small Bus J 16(4):46

    Article  Google Scholar 

  • Hymer S (1976) The international operations of national firms: a study of direct foreign investment. MIT Press, Cambridge

    Google Scholar 

  • Jantunen A, Puumalainen K, Saarenketo S, Kyläheiko K (2005) Entrepreneurial orientation, dynamic capabilities and international performance. J Int Entrep 3(3):223–243. doi:10.1007/s10843-005-1133-2

    Article  Google Scholar 

  • Keupp MM, Gassmann O (2009) The past and the future of international entrepreneurship: a review and suggestions for developing the field. J Manag 35(3):600–633

    Article  Google Scholar 

  • Khavul S, Pérez-Nordtvedt L, Wood E (2010) Organizational entrainment and international new ventures from emerging markets. J Bus Ventur 25(1):104–119. doi:10.1016/j.jbusvent.2009.01.008

    Article  Google Scholar 

  • Knight GA, Cavusgil ST (1996) The born global firm: a challenge to traditional internationalization theory. Adv Int Mark 8:11–26

    Google Scholar 

  • Knight GA, Cavusgil ST (2004) Innovation organizational capabilities and the born-global firm. J Int Bus Stud 35(2):124–141

    Article  Google Scholar 

  • Kobrin SJ (1991) An empirical analysis of the determinants of global integration. Strat Manag J 12:17–31

    Article  Google Scholar 

  • Kotha S, Rindova VP, Rothaermel FT (2001) Assets and actions: firm-specific factors in the internationalization of U.S. internet firms. J Int Bus Stud 32(4):769

    Article  Google Scholar 

  • Lee H, Kelley D, Lee J, Lee S (2012) SME survival: the impact of internationalization, technology resources, and alliances. J Small Bus Manag 50(1):1–19. doi:10.1111/j.1540-627X.2011.00341.x

    Article  Google Scholar 

  • LiPuma JA (2012) Internationalization and the IPO performance of new ventures. J Bus Res 65(7):914–921. doi:10.1016/j.jbusres.2011.05.007

    Article  Google Scholar 

  • Lu JW, Beamish PW (2001) The internationalization and performance of SMEs. Strat Manag J 22(6/7):565. doi:10.1002/smj.184

    Article  Google Scholar 

  • Lu JW, Beamish PW (2004) International diversification and firm performance: the S-curve hypothesis. Acad Manag J 47(4):598–609. doi:10.2307/20159604

    Article  Google Scholar 

  • Lu JW, Beamish PW (2006) SME internationalization and performance: growth vs. profitability. J Int Entrep 4(1):27–48

    Article  Google Scholar 

  • Luo Y (2000) Dynamic capabilities in international expansion. J World Bus 35(4):355

    Article  Google Scholar 

  • Madhok A (2000) The international biotechnology industry: a dynamic capabilities perspective. J Int Bus Stud 31(2):325–335

    Article  Google Scholar 

  • Madsen TK, Servais P (1997) The internationalization of born globals: an evolutionary process? Int Bus Rev 6(6):561

    Article  Google Scholar 

  • McDougall PP, Oviatt BM (1996) New venture internationalization, strategic change, and performance: a follow-up study. J Bus Ventur 11(1):23

    Article  Google Scholar 

  • McDougall PP, Oviatt BM, Shrader RC (2003) A comparison of international and domestic new ventures. J Int Entrep 1(1):59–82

    Article  Google Scholar 

  • Mudambi R, Zahra SA (2007) The survival of international new ventures. J Int Bus Stud 38(2):333–352

    Article  Google Scholar 

  • Oviatt BM, McDougall PP (1994) Toward a theory of international new ventures. J Int Bus Stud 25(1):45–64

    Article  Google Scholar 

  • Oviatt BM, McDougall P (1995) Global start-ups: entrepreneurs on a worldwide stage. Acad Manag Exec 9(2):30–43. doi:10.5465/ame.1995.9506273269

    Google Scholar 

  • Porter ME (1980) Competitive strategy techniques for analyzing industries and competitors. The Free Press, New York

    Google Scholar 

  • Porter ME (1990) The competitive advantage of nations. Harvard Business Review, Boston

    Google Scholar 

  • Prange C, Verdier S (2011) Dynamic capabilities, internationalization processes and performance. J World Bus 46(1):126–133. doi:10.1016/j.jwb.2010.05.024

    Article  Google Scholar 

  • Preece SB, Miles G, Baetz MC (1999) Explaining the international intensity and global diversity of early-stage technology-based firms. J Bus Ventur 14(3):259

    Article  Google Scholar 

  • Qian G, Li L (2003) Profitability of small- and medium-sized enterprises in high-tech industries: the case of the biotechnology industry. Strat Manag J 24(9):881–887. doi:10.1002/smj.344

    Article  Google Scholar 

  • Ranft AL, Lord MD (2000) Acquiring new knowledge: the role of retaining human capital in acquisitions of high-tech firms. J High Tech Manag Res 11(2):295

    Article  Google Scholar 

  • Reuber AR, Fischer E (1997) The influence of the management team’s international experience on the internationalization beahviors of SMEs. J Int Bus Stud 28(4):807–825

    Article  Google Scholar 

  • Reuber AR, Fischer E (2002) Foreign sales and small firm growth: the moderating role of the management team. Entrep Theory Pract 27(1):29–45

    Article  Google Scholar 

  • Roberts N, Grover V (2012) Investigating firm’s customer agility and firm performance: the importance of aligning sense and respond capabilities. J Bus Res 65(5):579–585. doi:10.1016/j.jbusres.2011.02.009

    Article  Google Scholar 

  • Robinson KC (1999) An examination of the influence of industry structure on eight alternative measures of new. J Bus Ventur 14(2):165

    Article  Google Scholar 

  • Robinson KC, McDougall PP (1998) The impact of alternative operationalizations of industry structural elements on measures of performance for entrepreneurial manufacturing ventures. Strat Manag J 19(11):1079

    Article  Google Scholar 

  • Rugman AM (1981) Inside the multinationals. Columbia University Press, New York

    Google Scholar 

  • Rugman AM, D’Cruz JR (1996) Partners across borders: the five partners business network model. Manag Int 1(1):15–26

    Google Scholar 

  • Rugman AM, Oh CH (2010) Does the regional nature of multinationals affect the multinationality and performance relationship? Int Bus Rev 19(5):479–488. doi:10.1016/j.ibusrev.2009.02.012

    Article  Google Scholar 

  • Ruigrok W, Wagner H (2003) Internationalization and performance: an organizational learning perspective. Manag Int Rev 43(1):63–83

    Google Scholar 

  • Sapienza HJ, Autio E, George G, Zahra SA (2006) A capabilities perspective on the effects of early internationalization on firm survival and growth. Acad Manag Rev 31(4):914–933

    Article  Google Scholar 

  • Siddharthan NS, Lall S (1982) The recent growth of the largest US multinationals. Oxf Bull Econ Stat 44(1):1–13

    Article  Google Scholar 

  • Staw BM (1981) The escalation of commitment to a course of action. Acad Manag Rev 6(4):577–587. doi:10.5465/amr.1981.4285694

    Google Scholar 

  • Stinchcombe AL (1965) Social structure and organizations. In: March JG (ed) Handbook of organizations. Rand McNally, Chicago

    Google Scholar 

  • Stray S, Bridgewater S, Murray G (2001) The internationalisation process of small, technology-based firms: market selection, mode choice and degree of internationalisation. J Glob Mark 15(1):7

    Article  Google Scholar 

  • Tallman S, Li J (1996) Effects of international diversity and product diversity on the performance of multinational firms. Acad Manag J 39(1):179–196. doi:10.2307/256635

    Article  Google Scholar 

  • Teece D, Pisano G (1994) The dynamic capabilities of firms: an introduction. Ind Corp Chang 3(3):537–556

    Article  Google Scholar 

  • Tzeng C-H (2008) Developing high-technology latecomer firms to compete internationally: a three-sector growth model. J Int Manag 14(2):190–206. doi:10.1016/j.intman.2008.01.003

    Article  Google Scholar 

  • Vernon R (1971) Sovereignty at bay: the multinational spread of U.S. enterprises. Basic Books, New York

    Google Scholar 

  • Weerawardena J, Mort GS, Liesch PW, Knight G (2007) Conceptualizing accelerated internationalization in the born global firm: a dynamic capabilities perspective. J World Bus 42(3):294–306. doi:10.1016/j.jwb.2007.04.004

    Article  Google Scholar 

  • Yigang P, Chi PSK (1999) Financial performance and survival of multinational corporations in China. Strat Manag J 20(4):359

    Article  Google Scholar 

  • Zaheer S (1995) Overcoming the liability of foreignness. Acad Manag J 38(2):341–363. doi:10.2307/256683

    Article  Google Scholar 

  • Zahra SA, George G (2002) International entrepreneurship: the current status of the field and future research agenda. In: Hitt M, Ireland R, Sexton D (eds) Strategic entrepreneurship: creating a new mindset. Blackwell, London, pp 255–288

    Google Scholar 

  • Zahra SA, Ireland RD, Hitt MA (2000) International expansion by new venture firms: international diversity, mode of market enry, technological learning, and performance. Acad Manag J 43(5):925–950. doi:10.2307/1556420

    Article  Google Scholar 

  • Zhou L, Wu A, Barnes BR (2012) The effects of early internationalization on performance outcomes in young international ventures: the mediating role of marketing capabilities. J Int Mark 20(4):25–45

    Article  Google Scholar 

  • Zott C (2003) Dynamic capabilities and the emergence of intraindustry differential firm performance: insights from a simulation study. Strat Manag J 24(2):97. doi:10.1002/smj.288

    Article  Google Scholar 

Download references

Acknowledgments

The author wishes to thank Hamid Etemad, Editor-in-Chief of JIE, and the anonymous reviewers for their guidance throughout the review process. The author also thanks Tricia McDougall-Covin for her helpful suggestions on a previous version of the manuscript.

Author information

Authors and Affiliations

  1. College of Business, Butler University, 4600 Sunset Avenue, Indianapolis, IN, 46208, USA

    Stephanie A. Fernhaber

Authors
  1. Stephanie A. Fernhaber
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Stephanie A. Fernhaber.

Additional information

A prior version of this manuscript was presented at the Babson College Entrepreneurship Research Conference in Switzerland, 2010.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Fernhaber, S.A. Untangling the relationship between new venture internationalization and performance. J Int Entrep 11, 220–242 (2013). https://doi.org/10.1007/s10843-013-0104-2

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10843-013-0104-2

Keywords

Search

Navigation