Why Don't Entrepreneurial Firms Internationalize More?

Abstract

The area of has received significant scholarly attention with the development of strong conceptual models during the last decade (e.g., McDougall and Oviatt, 2000; DeClercq et al., 2005; Zahra and George, 2002). These models consider the impact of organizational and environmental characteristics of entrepreneurial firms on the patterns of internationalization, wealth creation, survival, and growth. However, while and its consequences have been the focus of extensive research (Werner, 2002), the question of Why don't firms internationalize? has received much less attention. Considering that in spite of the march of globalization often trumpeted by the business press, the fact that most high-performing North American entrepreneurial firms still are domestically oriented (Cox and Camp, 2001) makes this an interesting question. Research has concluded that the lack of age (Oviatt and McDougall, 1994) and size (Westhead et al., 2001) are no longer reasons for not pursuing internationalization. Therefore, perceptual and experiential factors may be primary reasons firms do not internationalize (Manlova et al., 2002). Two possible factors in this stream are and entry barriers. The domestic success argument, inherently assumed in the Uppsala model of firm (Johanson and Vahlne, 1977), suggests that firms will pursue international activities only when their markets have matured. If there is abundant opportunity, firms will not internationalize. Conversely, the to internationalization argument suggests that firms do not internationalize because of differences in knowledge and/or national cultures between the headquarters country and other countries, and/or perceived financial or economic risks. According to this argument, firms may be interested in internationalization, but perceived external hurdles discourage them from doing so. The issue of has become increasingly relevant for entrepreneurial firms. We define an entrepreneurial firm as one which is designed to create wealth through new economic activity by bringing together unique packages of resources to exploit marketplace opportunities (Davidsson, 2005; Davidsson et al., 2002; Ireland et al., 2001; Shane and Venkataraman, 2000). Recent entrepreneurship research suggests that while the markets and resources for pursuing these opportunities and activities increasingly will be located beyond the borders of the entrepreneurial firm's home country (Lechner and Dowling, 2003; McDougall and Oviatt, 2000), relatively few firms are growing domestically, let alone internationally (Barringer et al., 2005; Gilbert et al., 2006; Zahra et al., 2000). Therefore, research that investigates possible explanations for this state of affairs appears to be warranted. This study considers and perceived entry barriers as possible explanations for by studying a sample of 872 entrepreneurial firms from 17 countries, thereby providing opportunity to extend this work beyond the U.S.-centric orientation of most entrepreneurial firm studies to date. We found that the perceived entry barriers of cultural differences and risk were significant negative predictors of internationalization, whereas success, including firm growth rates, generally was not a predictor. The remainder of the article is divided into three sections. In the next section, we review literature on the and cultural barriers arguments for entrepreneurial firm non-internationalization. Then, we report the results of the study. The most noteworthy result is that cultural barriers are a stronger predictor of non-internationalization than is success. In the final section, we describe how our findings build upon the work of previous literature, identify interesting directions for future research, and discuss potential implications for entrepreneurs and public policy makers. …

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