Abstract
New-technology-based firms (NTBFs) embarking on a strategy of rapid internationalisation choose foreign market entries that minimise transaction costs and the related risks of failure. Means to reduce the young firms’ vulnerability to the appropriation of intellectual capital are particularly important influences on early foreign market choices. We explore the effect of the institutional dimension, specifically the national regulatory environment, on the location choices and the speed of internationalisation by British and German NTBFs. We provide evidence that entrepreneurial young firms choose to enter country markets offering better regulatory protection for their intellectual property. This decision is moderated by a home regulatory regime bias. In contrast, we observe that the speed of internationalisation is influenced less by the foreign regulatory regime and more by industry and firm characteristics. We also observe that managerial experience influences the location choices of NTBFs facing regulatory hazards.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsPreview
Unable to display preview. Download preview PDF.
References
Anderson, E., & Coughlan, A. 1987. International market entry and expansion via independent or integrated channels of distribution. Journal of Marketing, 51(1): 71–82.
Anderson, E., & Gatignon, H. 1986. Modes of foreign market entry: A transaction cost analysis and propositions. Journal of International Business Studies, 17(3): 1–26.
Andersson, S. 2000. The internationalisation of the firm from an entrepreneurial perspective. International Studies of Management and Organisation, 30(1): 63–92.
Arenius, P. 2005. The psychic distance postulate revised: From market selection to speed of market penetration. Journal of International Entrepreneurship, 3(2): 115–131.
Autio, E. 2005. Creative tension: The significance of Ben Oviatt’s and Patricia McDougall’s article ‘toward a theory of international new ventures’. Journal of International Business Studies, 36(1): 9–19.
Autio, E., Sapienza, H., & Almeida, J. 2000. Effects of age at entry, knowledge intensity, and imitability on international growth. Academy of Management Journal, 43(5): 909–924.
Barkema, H., & Vermeulen, F. 1997. What differences in the cultural backgrounds of partners are detrimental for international joint ventures? Journal of International Business Studies, 28(4): 846–864.
Barkema, H., Bell, J., & Pennings, J. 1996. Foreign entiy, cultural barriers, and learning. Strategic Management Journal, 17(2): 151–166.
Barzel, Y. 1989. The economics of property rights. Cambridge: Cambridge University Press.
Benito, G., & Gripsrud, G. 1992. The expansion of foreign direct investment: Discrete rational location choices or a cultural learning process? Journal of International Business Studies, 23(3): 461–476.
Buckley, P. (Ed.) 2004. What is international business? Basingstoke: Palgrave.
Buckley, P., & Casson, M. 1976. The future of the multinational enterprise. London: Macmillan.
Bürgel, O., Fier, O., Licht, G., & Murray, G. C. 2004. The internationalization of young high-tech firms: An empirical analysis in Germany and the United Kingdom. ZEW Economic Studies 22. Heidelberg: Physica-Verlag.
Busenitz, L., Gomez, C., & Spencer, J. 2000. Country institutional profiles: Unlocking entrepreneurial phenomena. Academy of Management Journal, 43(5): 994–1003.
Butchart, R. 1987. A new UK definition of high-technology industries. Economic Trends, 400(February): 82–88.
Cooper, A., & Dunkelberg, W. 1986. Entrepreneurship and paths to business ownership. Strategic Management Journal, 7(1): 53–68.
Coviello, N. E., & Munro, H. 1995. Growing the entrepreneurial firm: Networking for international market development. European Journal of Marketing, 29(7): 49–62.
Cressy, R. 2006. Why do most firms die young? Small Business Economics, 26(2): 103–116.
Davidson, W. 1980. The location of foreign direct investment activity: Country characteristics and experience effects. Journal of International Business Studies, 11 (2): 9–22.
Davis, L., & North, D. 1971. Institutional change and American economic growth. Cambridge: Cambridge University Press.
De Clercq, D., Sapienza, H., & Crijns, H. 2005. The internationalization of small and medium-sized firms: The role of organizational learning effort and entrepreneurial orientation. Small Business Economics, 24(4): 409–419.
Delios, A., & Beamish, P. 1999. Ownership strategy of Japanese firms: Transactional, institutional and experience influences. Strategic Management Journal, 20(10): 915–933.
Delios, A., & Henisz, W. 2003. Political uncertainty and the sequence of entry by Japanese firms 1980–1998. Journal of International Business Studies, 34(3): 227–241.
Dimitratos, P., & Jones, M. V. 2005. Guest editorial: Future directions for international entrepreneurship research. International Business Review, 14(2): 119–128.
Djankov, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. 2002. The regulation of entry. Quarterly Journal of Economics, 117(1): 1–37.
Ginarte, J. C., & Park, W. G. 1997. Determinants of patent rights: A cross-national study. Research Policy, 26(3): 283–301.
Glaeser, E., & Shleifer, A. 2002. Legal origins. Quarterly Journal of Economics, 117(4): 1193–1230.
Hagedoom, J., Cloodt, D., & van Kranenburg, H. 2005. Intellectual property rights and the governance of international R&D partnerships. Journal of International Business Studies, 36(2): 175–186.
Henisz, W. 2000. The institutional environment for multinational investment. Journal of Law, Economics & Organization, 16(2): 334–364.
Hennart, J. -F. 1986. What is internalization? Weltwirtschaftliches Archiv, 122(4): 791–804.
Johanson, J., & Vahlne, J. 1977. The internationalization process of the firm: A model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8(1): 23–32.
Johanson, J., & Vahlne, J. 1990. The mechanism of internationalization. International Marketing Review, 7(4): 11–24.
Knight, G., & Cavusgil, S. 2004. Innovation, organizational capabilities, and the born-global firm. Journal of International Business Studies, 35(3): 124–141.
Kostova, T. 1997. Country institutional profiles: Concept and measurement. Academy of Management Best Paper Proceedings: 180–189.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. 1998. Law and finance. Journal of Political Economy, 106(5): 1113–1155.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. 1999. The quality of government. Journal of Law, Economics, and Organization, 15(1): 222–282.
Lu, J., & Beamish, P. 2006. SME internationalization and performance: Growth vs profitability. Journal of Inteenational Entrepreneurship, 4(1): 27–48.
Madsen, T., & Servais, P. 1997. The internationalization of born globals: An evolutionary process? International Business Review, 6(6): 561–583.
Martin, X., & Salomon, R. 2003. Knowledge transfer capacity and its implications for the theory of the multinational corporation. Journal of International Business Studies, 34(4): 356–373.
Mascarenhas, B. 1992. Order of entry and performance in international markets. Strategic Management Journal, 13(3): 499–510.
McDougall, P., & Oviatt, B. 2000. International entrepreneurship: The intersection of two research paths. Academy of Management Journal, 43(5): 902–906.
McDougall, P. P., Shane, S., & Oviatt, B. M. 1994. Explaining the formation of international new ventures: The limits of theories from international business research. Journal of Business Venturing, 9(6): 469–488.
North, D. 1990. Institutions, institutional change and economic performance. Cambridge: Cambridge University Press.
OECD 1997. The Oslo manual: Proposed guidelines for collecting and interpreting technological innovation data. Paris: Organisation for Economic Cooperation and Development.
O’Grady, S., & Lane, H. 1996. The psychic distance paradox. Journal of International Business Studies, 27(2): 309–333.
Ostergard, R. 2000. The measurement of intellectual property rights protection. Journal of International Business Studies, 31(2): 349–360.
Oviatt, B., & McDougall, P. 1994. Toward a theory of international new ventures. Journal of International Business Studies, 25(1): 45–64.
Oviatt, B., & McDougall, P. 1995. Global start-ups: Entrepreneurs on a worldwide stage. Academy of Management Executive, 9(2): 30–44.
Oviatt, B., & McDougall, P. 2005. Defining international entrepreneurship and modeling the speed of internationalization. Entrepreneurship Theory & Practice, 29 (5): 537–554.
Oxley, J. 1997. Appropriability hazards and governance in strategic alliances: A transaction cost approach. Journal of Law, Economics and Organization, 13(2): 387–409.
Oxley, J. 1999. Institutional environment and the mechanisms of governance: The impact of intellectual property protection on the structure of inter-firm alliances. Journal of Economic Behavior and Organization, 38(3): 283–309.
Preece, S., Miles, G., & Beats, M. 1998. Explaining the international intensity and global diversity of early-stage technology-based firms. Journal of Business Venturing, 14(3): 259–281.
Reitzig, M. 2004. Strategic management of intellectual property. Sloan Management Review, 45(3): 35–41.
Rialp, A., Rialp, J., & Knight, G. A. 2005. The phenomenon of early internationalizing firms: What do we know after a decade (1993–2003) of scientific enquiry? International Business Review, 14(2): 147–166.
Sapienza, H., Autio, E., George, G., & Zahra, S. A. 2006. A capabilities perspective on the effects of early internationalization on firm survival and growth. Academy of Management Review, 31(4): 914–933.
Scott, W. 1995. Institutions and organizations. Thousand Oaks, CA: Sage.
Shrader, R. 2001. Collaboration and performance in foreign markets: The case of young high-technology manufacturing firms. Academy of Management Journal, 44 (1): 45–60.
Shrader, R., Oviatt, B., & McDougall, P. 2000. How new ventures exploit trade-offs among international risk factors: Lessons from the accelerated internationalization of the 21st century. Academy of Management Journal, 43(6): 1227–1247.
Storey, D., & Tether, B. 1998. New technology-based firms in the European Union: An introduction. Research Policy, 26(9): 933–946.
Tan, B., & Vertinsky, I. 1996. Foreign direct investment by Japanese electronics firms in the United States and Canada: Modelling the timing of entry. Journal of International Business Studies, 27(4): 655–682.
Teece, D. 1986. Transaction cost economics and the multinational enterprise. Journal of Economic Behavior and Organization, 7(1): 21–45.
Teece, D. 2000. Managing intellectual capital: Organizational, strategic, and policy dimensions. Oxford: Oxford University Press.
Thornhill, S., & Amit, R. 2003. Learning about failure: Bankruptcy, firm age, and the resource-based view. Organization Science, 14(5): 497–509.
Williamson, O. 1991. Comparative economic organization: The analysis of discrete structural alternatives. Administrative Science Quarterly, 36(2): 269–296.
World Bank 2006. Doing business in 2006: Creating jobs. Washington, DC: World Bank and International Finance Corporation.
Yli-Renko, H., Autio, E., & Sapienza, H. 2001. Social capital, knowledge acquisition, and knowledge exploitation in young technology-based firms. Strategic Management Journal, 22(6/7): 587–613.
Zaheer, S. 1995. Overcoming the liability of foreignness. Academy of Management Journal, 38(2): 341–363.
Zahra, S. 2005. A theory of international ventures: A decade of research. Journal of International Business Studies, 36(1): 20–28.
Zahra, S., & George, G. 2002. Absorptive capacity: A review, reconceptualization, and extension. Academy of Management Review, 27(2): 185–203.
Zahra, S., Ireland, R., & Hitt, M. 2000. International expansion by new venture firms: International diversity, mode of market entry, technological learning, and performance. Academy of Management Journal, 43(5): 925–950.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Copyright information
© 2014 Journal of International Business Studies
About this chapter
Cite this chapter
Coeurderoy, R., Murray, G. (2014). Regulatory Environments and the Location Decision: Evidence from the Early Foreign Market Entries of New-Technology-based Firms. In: Cantwell, J. (eds) Location of International Business Activities. Palgrave Macmillan, London. https://doi.org/10.1057/9781137472311_8
Download citation
DOI: https://doi.org/10.1057/9781137472311_8
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-50122-9
Online ISBN: 978-1-137-47231-1
eBook Packages: Palgrave Business & Management CollectionBusiness and Management (R0)