Patterns and Determinant of Internationalization by New Ventures in India: A study of entrepreneurial, firm and industry factors

Abstract

Researchers had recognized the important contribution of SMEs to international trade, but Oviatt & Mcdougall (1994) highlighted the importance of younger and smaller firms and their distinguishing features that help them internationalize quickly (Zahra, 2005). Since Oviatt & McDougall’s seminal work on International New Ventures (INV), the analytic framework to analyze INVs has been refined and extended by many researchers, but it is still in a nascent stage (Zahra, 2005) Despite growing research on internationalization by new ventures, very few studies have focused on the role and influence of cognitive factors of entrepreneurs and managers in this process (Acedo & Jones, 2007; Acedo & Florin, 2006; Zahra, Korri, & Yu, 2005). Many researchers (Keupp & Gassmann, 2009; Kiss, Danis, & Cavusgil, 2012; Peiris, Akoorie, & Sinha, 2012) have highlighted the importance of analyzing the effect of capabilities and resource configuration in entrepreneurial firms that internationalize. Similarly, research that explores the role and impact of industry factors on internationalization process of INV is quite limited. It is also restricted to few geographical locations (Andersson, Evers, & Kuivalainen, 2014; Andersson, 2004; Evers, 2011; Fernhaber, Mcdougall, & Oviatt, 2007; Jones, Coviello, & Tang, 2011). Studies have identified the need to focus research on internationalization of new ventures in the wider variety of cultural environments (Kiss et al., 2012; Westhead, Wright, & Ucbasaran, 1997). There is a need to study entrepreneurial, firm and industry factors affecting internationalization process in new ventures in contexts other than developed countries. Post liberalization in 1991, many Indian firms internationalized to access markets, resources, capabilities, and technology, to compete with domestic firms and MNCs, to achieve efficiency or to acquire strategic assets for accelerating their internationalization. In the last two decades, early internationalization by many new ventures in India has been a growing phenomenon (Kiss et al., 2012). This study explores patterns and determinants of Internationalization by New Ventures in India focusing on the role of entrepreneurial (especially cognitive), firm and industry factors. More specifically, this study tries to answer the following inter-related questions: Q.1 What have been the patterns of internationalization by new Ventures in India? Q.2 What determines the decision (or incidence) to internationalize by new Ventures of India? o What role cognitive and individual factors of entrepreneurs and managers play in determining the incidence of Internationalization by Indian New Ventures? o What role firms’ capabilities and resources play in determining the incidence of Internationalization by Indian New Ventures? o What role industry factors play in determining the incidence of Internationalization by Indian New Ventures? Q.3 What factors affect the extent or the intensity of Internationalization by New Ventures in India? More specifically, o What role firm capabilities and resources play in determining the intensity of Internationalization by Indian New Ventures? o What role industry factors play in determining the intensity of Internationalization by Indian New Ventures? This study is based on primary and secondary databases using descriptive, multinominal logit and Tobit regression analyses. To study cognitive and individual factors, primary data was gathered from 98 Small, and Micro Enterprises (SMEs)’s owners and managers. Firm and industry related secondary data were collected from Prowess and Industry Outlook Database. Contrary to expectations, education, international experience and certain cognitive factors expected to support early internationalization are not related to incidence and intensity of internationalization of INVs. Presumably, founders and top management teams with international experience know about the problems associated with dealing international markets better and, therefore, explore internationalization at a later date. So, international experience, proactivity, and attitude towards internationalization do contribute to internationalization but at a later stage of the entrepreneurial life cycle. New ventures with technological capabilities in knowledge-intensive industries are more likely to internationalize early. These new ventures have a higher intensity of internationalization as well. However, new ventures with high marketing and network capabilities tend to focus on domestic markets. While new ventures located in highly internationalized industries tend to internationalize early and have higher internationalization intensity, those located in highly competitive industries are less likely to internationalize quickly, and the intensity of internationalization is also found to be low in these new ventures.