International exposure through network relationships: Implications for new venture internationalization

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Abstract

Drawing on the network literature and attention-based view, we examine the extent to which international exposure from key informal (geographically proximate firms) and formal (alliance partners) network relationships impacts new venture internationalization. Our findings are three-fold. First, international exposure from both types of network relationships positively influence new venture internationalization, and serve as substitutes for each other. Second, the effects differ based on the age of the venture. While older ventures benefit more from international exposure from alliance partners, younger ventures are more influenced by international exposure from geographically proximate firms. Third, our analysis confirms a three-way interactive effect of age and international exposure from informal and formal relationships on new venture internationalization.

Highlights

► International exposure from both informal and formal networks influences venture internationalization. ► Effects of international exposure on venture internationalization differ by age. ► Age and international exposure from informal and formal networks jointly impact venture internationalization.

Section snippets

Executive summary

The importance of networking in the international context continues to escalate due to the increasing interdependencies between firms, countries and markets (Dunning, 1995). For new ventures that battle liabilities of foreignness and newness concurrently, the relevancy of networks is magnified even further (Johanson and Vahlne, 2009). Despite the growing literature stream on networks, there are three relatively ignored aspects of network relationships that could have significant implications

International exposure through network relationships

International exposure, which is defined as the extent to which a venture's management team comes into contact with international knowledge through prior experiences or network relationships, is an essential ingredient for new ventures that aspire to enter foreign markets. Although international exposure through the prior work experiences of venture managerial teams has been found in numerous studies to positively affect venture internationalization (Bloodgood et al., 1996, Carpenter et al.,

Sample

This study utilizes a sample of 448 high-technology, U.S.-based new ventures that completed an IPO between 1995 and 2005. The Securities Data Corporation's (SDC's) Global New Issues database was used to identify firms that potentially could be included in the sample. To be included, firms had to first be located in the U.S. and to have conducted an IPO between 1995 and 2005. Public firms were chosen in order to have a consistent data source against which to measure both the independent and

Results

Correlations, means and standard deviations of the variables are presented in Table 1. The average age of the new ventures was 4.75 years, with the average size being $148.25 million in assets. Of the 448 ventures, a total of 213 reported international sales.

To determine whether a problem of multicollinearity existed, the approach recommended by Neter et al. (1996) was followed and variance inflation factors (VIFs) were computed when all variables were included in each model. The VIFs ranged from

Discussion

The purpose of this study was to further examine the understudied role of international exposure through network relationships on new venture internationalization. As prior research has shown, informal and formal network relationships can impose varying effects on new ventures. Our study focused on two highly visible examples of informal and formal network relationships to examine how international exposure from these two network sources affects new ventures' internationalization and how these

Conclusions

In conclusion, our study demonstrates that international exposure remains a key catalyst leading to internationalization. For new ventures pursuing internationalization, international exposure can be gleaned and leveraged through both geographically proximate firms and alliance partners. Further, the effects on new venture internationalization of international exposure from informal network relationships (e.g. geographically proximate firms) differ from the effects of international exposure

Acknowledgments

The authors thank Patricia McDougall-Covin for her helpful suggestions on a prior version of the manuscript.

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