Never too early for startups to go global, study says
Startups taking the plunge into international markets early may not face any bigger challenges than those firms that remain domestic or choose to expand later on, according to a new study.
“Some companies choose to internationalize at a very young age, even without many resources,” says Maija Renko, associate professor of entrepreneurship at the University of Illinois at Chicago and the study’s lead author. “How and why do they do this?”
The study, “Liabilities, Advantages, and Buffers of Newness: How Young Age Makes Internationalization Possible,” shows that the resourcefulness, resilience and adaptability of entrepreneurs can create advantages that offset the risks of conducting business abroad early.
Factors thought to be disadvantageous for new companies — like limited knowledge-base, high coordination costs of organizing, and difficulties finding customers — can actually turn into advantages in the process of early internationalization, according to the study.
Easier access to digital marketplaces, social media, and new international networks are other key influences encouraging entrepreneurs to expand to foreign target markets.
“Connectivity of people and businesses across national borders keeps on increasing, and with that, international opportunities are becoming ever more present for new companies, as well as old,” Renko said.
Much of the discussion about the global marketplace is driven by traditional manufacturing industries and established corporations, Renko said. But the nature of the economy is changing as a result of innovation in the marketplace. And innovation is often introduced by new ventures.
“So, we should be asking, what can we do to help new companies innovate and internationalize?” Renko said. “How can American startups take their innovations to the global marketplace?
“The main thesis of the study is that being new and nimble does not need to hinder — and it can actually aid — in internationalization,” she said. “The mechanisms are, if anything, stronger today than five years ago.”
Renko and a team of researchers examined earlier studies on the internationalization of new firms. From this, they developed a conceptual model of how and why some new firms internationalize from the start.
The researchers reviewed quantitative studies published between 2005-2013 in entrepreneurship and management journals listed on the Financial Times’ 45 list.
The UIC study draws attention to the less-covered, yet important topics of international new venture research, Renko said.
Co-authors include Rodney Shrader, professor of managerial studies at UIC; Sumit Kundu, professor of management and international business at Florida International University; Alan Carsrud, visiting research professor at Abo Akademi University; and Annaleena Parhankangas, assistant professor of managerial studies at UIC.
The study, published in the journal Group & Organization Management, is online.