Patricia P. McDougall

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

Examines the formation process of international new ventures (INVs)--i.e., firms that are international from the time of their formation. It is discovered that none of the existing theories from the field of international business explain the formation process because they focus on firm-level analysis of large, mature firms. An alternative formation process for international startups is proposed that identifies the specific characteristics of entrepreneurs and their social network of business alliances that makes them ideally suited for the international market. Data were gathered from twenty-four case studies of international new ventures identified through business press articles and an iterative networking process. The investigation involved interviews and analysis of documents and physical artifacts. Findings demonstrate that founders of INVs are more alert to the possibilities from different national markets due to the competencies developed from earlier activities, and only someone with these particular competencies is capable of combining the necessary resources across national borders to start an international business. Also, access to exceptional international funding networks is a major factor inducing these entrepreneurs to compete internationally rather than just locally. In addition, international entrepreneurs have routines for managing multicultural workforces, coordinating resources from different nations, and simultaneously targeting customers located in multiple geographic locations. Finally, founders rely on trust developed through repeated interactions over time to diminish opportunistic behavior in hybrid partners. (SFL)

Defining International Entrepreneurship and Modeling the Speed of Internationalization

This article provides a reformulated definition of international entrepreneurship. Consistent with the new definition, a model is presented of how the speed of entrepreneurial internationalization is influenced by various forces. The model begins with an entrepreneurial opportunity and depicts the enabling forces of technology, the motivating forces of competition, the mediating perceptions of entrepreneurs, and the moderating forces of knowledge and networks that collectively determine the speed of internationalization.

Toward a Theory of Entrepreneurial Cognition: Rethinking the People Side of Entrepreneurship Research

The failure of past “entrepreneurial personality”—based research to clearly distinguish the unique contributions to the entrepreneurial process of entrepreneurs as people, has created a vacuum within the entrepreneurship literature that has been waiting to be filled. Recently, the application of ideas and concepts from cognitive science has gained currency within entrepreneurship research, as evidenced by the growing accumulation of successful studies framed in entrepreneurial cognition terms. In this article we reexamine “the people side of entrepreneurship” by summarizing the state of play within the entrepreneurial cognition research stream, and by integrating the five articles accepted for publication in this special issue into this ongoing narrative. We believe that the constructs, variables, and proposed relationships under development within the cognitive perspective offer research concepts and techniques that are well suited to the analysis of problems that require better explanations of the contributions to entrepreneurship that are distinctly human.

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

Abstract 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 McDougalls (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 ventures strategy as well.

How New Ventures Exploit Trade-Offs Among International Risk Factors: Lessons For The Accelerated Internationization Of The 21St Century

The Organisation for Economic Co-operation and Development predicts that the internationalization of businesses will accelerate in the 21st century. Our study examined how the risks of accelerated ...

New Venture Growth: A Review and Extension

New venture growth differs from that of established firms and is an important topic for scholarly inquiry. Current literature on new venture growth has focused primarily on why new ventures grow to the exclusion of how and where that growth is occurring. This article reviews the literature on new venture growth and addresses key limitations within this stream of research. It unites the literature on why new ventures grow with that of how (through internal or external means) and where (in domestic or international markets) new ventures grow to advance an important research agenda for future new venture growth studies.

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.

Governance and Strategic Leadership in Entrepreneurial Firms

Corporate governance has been a central focus of strategic management research, particularly the associations among governance structures, strategic leaders, and firm performance. Extant research, however, provides little evidence of systematic relationships in these areas. There are a series of theoretical/conceptual rationales suggesting that such relationships might be more pronounced in entrepreneurial firms. Accordingly, we provide an overview and synthesis of the entrepreneurship literature addressing the intersection of governance and strategic leadership with firm performance. The strongest relationships reflected in this literature are consistent with a resource dependence perspective of the firm. We conclude with several suggestions for advancing research in this important domain.

The Emergence of Entrepreneurship Policy

Since the 1980s, many regulatory agencies were either downsized or closed and waves of publicly owned enterprises were privatized. Some scholars interpret this as signaling the retreat of government intervention. We suggest, however, that rather than retreating, public policy towards business is undergoing a profound shift. Specifically, a new set of policies designed to promote entrepreneurial activity has come to the forefront, that focuses on enabling the startup and viability of entrepreneurial firms rather than constraining existing enterprises.

The Distinctive and Inclusive Domain of Entrepreneurial Cognition Research

Through mapping both distinctive and inclusive elements within the domain of entrepreneurial cognition research, we accomplish our task in this introductory article to Volume 2 of the Special Issue on Information Processing and Entrepreneurial Cognition: to provide a fitting backdrop that will enhance the articles you will find within. We develop and utilize a “boundaries and exchange” concept to provide a lens through which both distinctive and inclusive aspects of the entrepreneurship domain are employed to frame this special issue.