Pathway to international growth in the digital age

Pathway to international growth in the

digital age An examination of the internationalization process of

International New Ventures in the digital service industry

M.F.G. Tromp 10003215

10-07-2016 – Second Draft

Master Business Administration – International Management Track University of Amsterdam

First supervisor: E. Dirksen MSc. Second supervisor: Dr. C. Gelhard

M.F.G. Tromp - MSc Thesis Business Administration – June 2016

2

Statement of originality This document is written by Student Marjoleine Tromp who declares to

take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original

and that no sources other than those mentioned in the text and its references

have been used in creating it.

The Faculty of Economics and Business is responsible solely for the

supervision of completion of the work, not for the contents.


3

Table of contents

Table of contents ...................................................................................................................................... 3

List of tables and figures .......................................................................................................................... 4

1. Introduction .......................................................................................................................................... 6

2. Theoretical Framework ........................................................................................................................ 8

2.1 Internationalization process ................................................................................................... 8

2.2 Traditional view of the internationalization process ............................................................. 9

2.3 The International New Venture ........................................................................................... 10

2.4 Changes in the international environment ........................................................................... 12

2.5 INVs from an International Entrepreneurship perspective .................................................. 15

2.6 Performance in relation to the INV ..................................................................................... 18

3. Hypothesis development .................................................................................................................... 21

3.1 Conceptual framework ........................................................................................................ 25

4. Data & method ................................................................................................................................... 26

4.1 Sample ................................................................................................................................. 26

4.2 Method ................................................................................................................................. 28

4.2.1. Independent variable ............................................................................................... 28

4.2.2 Dependent variable .................................................................................................. 29

4.2.3 Control variables ...................................................................................................... 30

4.2.4 Homogeneity and sphericity .................................................................................... 31

5. Results ................................................................................................................................................ 33

6. Discussion ........................................................................................................................................... 45

7. Limitations and recommendations ..................................................................................................... 46

9. Conclusion .......................................................................................................................................... 48

Literature ................................................................................................................................................ 49

Appendix ................................................................................................................................................ 54

Appendix A: Descriptive statistics of dependent variables ....................................................... 54

Appendix B: Normality tests for 15 variables with 3 categories ............................................... 55

Appendix C: Skewness and Kurtosis scores for 15 variables with 3 categories ....................... 57

Appendix D: Descriptive statistics of dummy variables home countries .................................. 62

Appendix E: Matrices of variance ratios ................................................................................... 63

Appendix F: Pairwise comparison of years for turnover categorized by industry .................... 64

Appendix G: Pairwise comparison of years for assets categorized by industry ........................ 65

Appendix H: Pairwise comparison of years for employees categorized by industry ................ 66


4

List of tables and figures

Table 1: Types of International New Ventures ........................................................................ 11

Table 2: Triggers of INV’s rapid internationalization process ................................................ 17

Figure 1: Conceptual framework .............................................................................................. 25

Figure 2: Histogram of variable turnover 2014 before and after transformations ................... 29

Table 3 : Information country of origin of INV in the sample ................................................. 31

Table 4: Indicators of Years used in pairwise comparison tables ........................................... 34

Figure 3: Graph of interactions for turnover ............................................................................ 35

Table 5: Turnover - Pairwise comparisons for Industry categorized by Years. ....................... 36

Table 6: Turnover - Pairwise comparisons Years (shortened) ................................................. 37

Table 7: Turnover - Pairwise comparisons Years categorized by Industry (shortened) .......... 37

Figure 4: Graph of interactions for assets ................................................................................ 38

Table 8: Assets - Pairwise comparisons for Industry categorized by Years ............................ 40

Table 9 Assets- Pairwise comparisons for Years (shortened) .................................................. 41

Table 10: Assets- Pairwise comparisons for Years categorized by Industry (shortened) ........ 41

Figure 5: Graph of interactions for employees ......................................................................... 42

Table 11: Employees - Pairwise comparisons for Industry categorized by Years ................... 43

Table 12 Employees - Pairwise comparisons for Years (shortened) ........................................ 44

Table 13: Employees - Pairwise comparisons for Years categorized by Industry (shortened) 44


5

Abstract

This study investigates International New Ventures (INVs) and their internationalization

process in relation to the natures of their services. More precisely the primary objective of this

thesis is to examine the pathway to growth of digital service INVs and how this differs from

the growth patterns of non-digital INVs. It is predicted that due to the intangible nature of

digital services and the subsequent drop in coordination costs, international expansion will be

more efficient and faster. Three mixed design repeated measure ANOVAs are performed to

examine the growth of different INVs in terms of turnover, assets and employees over five

recorded time periods. The sample consists panel data of European INVs operating in the

service and manufacturing industry. The results indicate the digital service INVs do not differ

significantly from non-digital INVs. Implications and recommendations for future research

are discussed.


6

1. Introduction Globalization processes changed the international business (IB) field drastically.

Technological advancements are the driving force behind these increasingly globalized

markets and have established new foundations for Multinational Enterprises (MNEs)(Garrett,

2000). Since the 1980s a new form of MNE achieved growing attention in the IB literature

because it was able to operate internationally very rapidly and early from existence (Cavusgil

& Knight, 2015). These international new ventures (INVs) were able to operate in

international markets without undergoing the gradual learning and exploration processes like

their mature peers. Today, INVs have appeared in abundance all around the globe. However,

there is still a long way to go before we truly understand the dynamics of this relatively new

type of firm (Zander, McDougall-Covin, & Rose, 2015).

INVs follow a different pathway to international growth compared to large established

MNEs. The traditional MNE internationalizes through small incremental steps, by slowly

gaining (foreign) market knowledge and reducing the risk of operating abroad (Johanson &

Vahlne, 1977). Entering new international markets is an important strategic option for a firm

in order to obtain a fast pathway towards growth and performance (Lu & Beamish,

2001)(Hennart, 2007). In the new digital economy information, communication and

computation technologies have changed and many products have become non-physical and

knowledge-based (Tapscott et al., 2000)(Brynjolfsson, 2002). These intangible, knowledge-

based goods can be distributed for almost zero marginal costs (Schmid, 2001), which has

consequences for the total costs of doing business abroad.

This thesis examines the relationship between the digital nature of an INV’s services

and the consequences for its internationalization process. Services are the most suited for

examination because they have the ability to be completely digitally produced (Schmid,

2001). The contributions of this paper to the gaps in the existing literature are twofold. First, it

provides insight in the under-researched area of the internationalization process of firms in the

service industry (Zander et al., 2015)(Cavusgil & Knight, 2015). Second, by explicitly

separating digital services, it provides initial research on the influence of digitalization of the

value chain on the internationalization process of businesses. With the predicted growth of

technological advancements in every aspect of the organization, it is important to understand


7

the influence of digitalization of products and services on a firm’s strategy and performance

in the international field (Helbing, 2014)(Zander et al., 2015).

Cavusgil and Knight suggest that in the future the concept of an INV might even

become outmoded because operating internationally from the start might become self-evident

(2015). Since technology enables small virtual firms to coordinate their value chain through

the World Wide Web and different hardware devices, like smartphones, tablets, watches, and

maybe even fridges or streetlights, entrepreneurs might not need to pay attention anymore to

the location of their firm (Cavusgil & Knight, 2015). Naturally, these suggestions are major

jumps to conclusions, however, they do exemplify the importance of understanding the global

presence of the INV as an important factor in assessing the current and prospected global

economy.

This thesis is build up in the following way. First, the literature review discusses the

traditional view of the internationalization process, the changes in the international

environment and the emergence of the INV. The transition towards a digital and globalized

economy has led to increasing numbers of global entrepreneurs who have experience

operating in the international field (Oviatt & McDougall, 2005b). This is why International

Entrepreneurship (IE) became an important new perspective in the literature. The findings and

implications of this theoretical lens are also discussed in the literature review. Subsequently,

the development of several hypotheses about the expected pathway to growth of the digital

service INV is discussed. The hypotheses are followed by a description of the data collection

and the method. Panel data are used to investigate the longitudinal process of

internationalization. Finally, results are presented followed by the discussion, limitations and

recommendations for future research.


8

2. Theoretical Framework This literature review examines the existing literature on INVs and the different theoretical

perspectives used to research the phenomenon. First, the internationalization process is

discussed from a general viewpoint. Subsequently, the literature on internationalization is

considered from a traditional perspective where internationalization happens in gradual

sequential steps (Zander et al., 2015). This is followed by a detailed description of the INV

and the reasons why the INV does not fit in the traditional view of internationalization.

Subsequently, the international business context and the different theoretical lenses that have

been used to study INVs are discussed. Lastly, the findings on the relationship between

operating internationally and performance is considered. This part leads to the formulation of

the hypotheses and the conceptual framework.

2.1 Internationalization process In this research, the term internationalization process will be used to refer to the extension of

a firm's operations into foreign countries. It entails an outward movement of the firm' s

operations and increased involvement in international operations (Araujo & Rezende, 2003)

(Buckley & Ghauri, 1999). Internationalization process of a firm has many consequences for

its organizational strategy and has been studied extensively in the IB field (Rugman, Verbeke,

& Nguyen, 2011).

The motives for getting involved in international operations are the key material for

international business studies. They all involve strategic capabilities, like achieving

economies of scale and scope, use the best technology and talent that is available worldwide

and enable organizational learning on a worldwide basis (Bartlett & Ghoshal, 2003)(Lu &

Beamish, 2004). However, there are also strong discouraging factors for internationalization,

for example, the liabilities of foreignness and newness. The first refers to the impact of

various forms of distance that a firm faces in a foreign market, which lead to disadvantages

and extra costs compared to domestic firms (Rugman et al., 2011). These distances can be

geographical, economical, institutional or cultural, usually summarized in the umbrella term

‘pshychic distance' (Hutzschenreuter, Kleindienst, & Lange, 2015). The latter liability refers

to the additional costs that can derive from poorly understood market conditions due to their


9

newness (Rugman et al., 2011). These strategic considerations for firms to internationalize are

the key topic of discussion in research on the internationalization process.

In the traditional view of IB literature, the internationalization process does not happen

overnight. It is thought to be a gradual process with a learning curve that happens in

sequential steps (Zander et al., 2015). Many scholars have discussed the gradual learning

process of the firms when operating abroad. The following section discusses the traditional

approaches used to interpret and understand the firm's internationalization process.

2.2 Traditional view of the internationalization process

The internationalization process has been discussed widely in the existing IB literature. In the

traditional view, the MNE originates from large and mature domestic firms that are able to

take the extra risk of going abroad, due to the great amount of resources they build up as they

matured over the years (Oviatt & McDougall, 2005b). The large size of the MNE was thought

to be a requirement for doing business abroad.

There have been different approaches to internationalization in the past that can be

distinguished in two broad perspectives: the Uppsala model and the innovation-related

approaches. The first is one of the most widespread concepts to theorize internationalization

and owes its name to the University where was developed. The Uppsala model describes the

pattern of firms operating and developing in their domestic market for (many) years and

gradually internationalize through small steps (Johanson & Vahlne, 2009). Johanson and

Vahlne found strong empirical support for their model of the gradual process of

internationalization (Moen & Servais, 2002). The model is based on the concept that firms

always need to assess the potential risk of doing business abroad and the costs of learning to

operate in an unknown foreign country against the potential benefits of exploiting their firm-

specific advantages in another country (Rugman et al., 2011). Typically, firms start by

making a non-equity investment in a foreign country, for example through exporting. In a

later stage, the firm establishes a subsidiary and optionally begins production in the foreign

country (Johanson & Vahlne, 1977).

The process as described in the Uppsala model is moderated by the important factor of

psychic distance, which is defined as ‘the sum of factors preventing the flow of information

from and to the market’ (Johanson & Vahlne, 1977, p. 24). Psychic distance can be caused by

various differences between countries that cause distance. The concept is closely related to the


10

liability of foreignness, however, according to the literature review by Hutzschenreuter,

Kleindienst, & Lange on the use of the concept of distance in IB literature, psychic distance is

most used in the literature as an umbrella term (2015). Psychic distance could cover all kinds

of distances including culture distance, institutional distance, geographic distance and

economic distance (Hutzschenreuter et al., 2015). The internationalization process, according

to the Uppsala model, is a gradual learning process that helps a firm to overcome psychic

distance, through the use of knowledge about foreign markets, integration, increasing

commitment and resource allocation to the foreign markets (Johanson & Vahlne, 1977)

(Johanson & Vahlne, 2009).

The second stream of research comprises the innovation-related internationalization

models (Moen & Servais, 2002)(Madsen & Servais, 1997). The two streams of research seem

quite similar, however, there are some key differences. The innovation-related models present

different development stages focused on the export behavior of the firm (Bilkey & Tesar,

1977). The process is viewed as a step-by-step development, in contrast with the Uppsala

model that treats the internationalization process as a dynamic model with an obligatory

learning curve (Andersson, 2000). The innovation-related model views the process as

innovative and discovering new ways of doing business, while the Uppsala model views the

process as a time-consuming organizational learning process (Madsen & Servais, 1997).

Changes in the international environment have put the Uppsala model and the

innovation-related internationalization models to the test. Empirical evidence shows that there

are companies that overcome their psychic distance very quickly and internationalize from

inception, without having to go through step-by-step development or learning stages. These

rapidly internationalizing companies are defined as International New Ventures or Born

Globals on which this paper will now elaborate further (Cavusgil & Knight, 2015) (Oviatt &

McDougall, 2005b) .

2.3 The International New Venture

In the following section, the definition of the International New Venture firm is given and

explained in context with another definition of the phenomenon: Born Global. The difference

between the two terms is discussed. This leads to the argumentation why the INV does not fit

the traditional view of the Uppsala model or innovation-related models.


11

By definition, the International New Venture and Born Global firm differ from each

other. Born Global firms focus much more on export sales and foreign sales, rather than the

coordination of activities op the value chain in foreign countries, such as production

subsidiaries (Coviello, 2015) The International New Venture as first described by Oviatt &

McDougall in 1994 purposefully encompasses four different forms of INVs in order to cover

the different forms (Oviatt & McDougall, 1994). Not every INV chooses the same pathway to

growth (Zander et al., 2015). There are two nuances to be made in the classification of the

INV based on a sliding scale: the coordination of value chain activities and the number of

countries entered. According to these nuances, Oviatt & McDoughall divide these different

forms of INVs into the following categories: Export/Import Start-up, Geographically Focused

Start-up, Multinational Trader and the Global Start-up (2005b) (see Table 1). When

consulting these two sliding scales depicted in Table 1, it becomes clear that many firms do

not fit in the bottom right category of Global Start-up and do not have a truly global focus.

Therefore, many studies erroneously use the termination ‘born global’(Coviello, 2015). The

word ‘global’ is perhaps misplaced, because international or regional might be better suited.

Most firms that have been given the name ‘born global’ are actually born regional (Rugman

& Verbeke, 2007). Table 1: Types of International New Ventures

Number of countries involved

Few Many

Coordination

of value

chain

activities

Few

Export/Import Start-up

Multinational Trader

Many

Geographically Focused

Start-up

Global Start-up

Source: Oviatt and McDoughall, 2005b, p. 37

As a result this study uses the term international new venture (INV) in accordance

with the definition coined by Oviatt & McDougall, to refer to a company that, ‘from

inception, seeks to derive significant competitive advantage from the use of resources and the

sale of outputs in multiple countries’ (Oviatt & McDougall, 1994, p. 31). It is important to


12

notice that the size of the INV does not matter, as long as it operates internationally at a very

early age (Oviatt & McDougall, 2005b).

Being an international new venture essentially indicates that the first steps of the

traditional internationalization models are skipped. The firm does not go through progressive

accumulation of resources and capabilities (Lopez, Kundu, & Ciravegna, 2008). It follows a

different path than the traditional globally operating MNE that internationalizes through small

and incremental steps gaining market knowledge and reducing risk (Johanson & Vahlne,

1977). Instead, the firm enters a foreign market soon after inception and might not even have

the first sales in the home country (Chetty & Campbell-Hunt, 2004). It also entails that the

firm is able to enter markets that have a great psychic distance in relation to the home market,

despite having limited resources and organizational knowledge (Lopez et al., 2008).

When designing the Uppsala model, Johanson and Vahlne, include three exceptional

conditions that might allow a firm to internationalize earlier in the process without having to

go through the incremental learning steps of doing business abroad (1977). Firms could

internationalize sooner when they possess large resources because it reduces the risk of

internationalizing drastically. Or when the foreign market conditions are extremely favorable

in the sense that they are stable and similar to their market conditions in the home country. Or

lastly, when the foreign markets are similar to an already entered market, because the

previous experience might be applicable to the new market (Oviatt & McDougall,

2005b)(Johanson & Vahlne, 1977). However, empirical observations of INVs proved that

they did not fit in any of these three exceptional conditions formulated by Johanson and

Vahlne and thus that there must be other causes for the rapid internationalization INVs (Oviatt

& McDougall, 2005b).

In summary, the INV is a firm that does not follow the predicted gradual learning

steps and its internationalization might not occur in stages at all (Oviatt & McDougall,

2005b). The following section looks into more detail how the international business

environment changed and developed the right circumstances for INVs to originate and

develop new capabilities.

2.4 Changes in the international environment

The following section takes a closer look at the changes in the business environment that

made it possible for INVs to emerge. These changes include the technological advancements


13

and the globalization of the international markets, which is a process that is still going on

today. First, this literature review provides some historical context on the first description of

the international business environment of the INV. Next, it takes a closer look at the global

economy today and the developments that are influential for the INV.

From the start of the 1990s, it was clear that these empirical observations of the INVs

and their internationalization were incongruent with the traditionally expected pattern of

internationalization, as described by Johannson & Vahlne (1977)(2009). Several authors

researched this phenomenon in order to provide some new insights, both internally and

externally, on the causes of the rapid internationalization of these firms. The first attempts to

summarize the literature up to that date were done by (Oviatt & McDougall, 1994) (Moen &

Servais, 2002). According to this literature review, written in 1994, the international

environment changed in its economical, social and technological conditions, which provided

firms with the opportunity to create new sources of sustainable advantages (1994). Due to the

rapid growth of communication and transportation technologies, transaction costs of

international operations had decreased dramatically (Oviatt & McDougall, 1994) (Porter,

1990).

Now, more than twenty years later, technological advancements have developed

exponentially (Chien & Karamcheti, 2013), with great consequences for the further

globalization process of international markets. Globalization is understood as ‘the growing

interdependence of national economies’ (G. Knight, 2000, p. 12). It is associated with of

homogenization of markets, reduced trade and investment barriers and the distribution of the

production process across multiple countries (G. Knight, 2000). The exponential growth of

technology is one of the main driving factors of globalization, because it makes the world

smaller by enabling real-time communication all across the globe (Garrett, 2000).

Globalization is indissolubly connected to technological advancements. Other scholars have

described the globalization of international markets as a transition to the ‘digital economy’

(Brynjolfsson, 2002)(Schmid, 2001)(Tapscott et al., 2000). Digital economy can be

understood as the overall change in the economy due to the changing features of information,

communication and computation technologies in which many products have become non-

physical and knowledge-based (Tapscott et al., 2000) (Brynjolfsson, 2002). Moreover, with

the Internet, this knowledge has become accessible for anyone and the developments in

information technology have changed the way products and services are produced


14

(Brynjolfsson, 2002). For example, it is now possible for consumers to be involved in the

production process of knowledge-based goods and services. These consumers co-create the

product or service that they buy. In other words, they have become ‘prosumers’, producers

and consumers at the same time (Helbing, 2014)(Ritzer & Jurgenson, 2010).

In the digital economy, knowledge-based goods and services can be distributed for

almost zero marginal costs via new information technologies, this has great consequences for

the further globalization of international markets (Schmid, 2001). This transition in the global

economy led to three different conditions for internationalization: homogenization of markets,

the appearance of global niche markets and the presence of increasing numbers of global

entrepreneurs who have experience operating in the international field (Oviatt & McDougall,

2005b). First of all, markets have become more liberal in the past years in order to stimulate

trade (Garrett, 2000). Globalization is a push factor for the convergence of markets

worldwide, because the technological developments have increased the potential revenue of

opening up the economy to worldwide trade. Or in other words, technology increased the

‘opportunity costs of closure’, which can be understood as the potential loss that a certain

country faces when it does not open up the economy to (free) trade (i.e. remains a closed

economy) (Garrett, 2000). As a result, economic policies have become more liberal and trade

barriers have been reduced. This process also goes hand in hand with the homogenization of

consumers worldwide, which have been exposed to the same products and services. Firms

have the opportunity to offer products worldwide without having to make major changes on

the national level (Camuffo, Romano, & Vinelli, 2001)(Madsen & Servais, 1997). In

summary, these new conditions of increasingly homogenous markets and consumers, caused

by globalization, are strong pull-factors for firms to enter foreign markets.

Next to these homogenization processes, globalization also allowed firms to specialize

themselves in international niche markets (Madsen & Servais, 1997). The existence of the

MNE was generally explained by their large size (Oviatt & McDougall, 2005b). The small

firms operating in international niche markets proved the opposite: that is possible for small

players to act in the international field as well. At the same time, these relatively small

international firms had to become more flexible and responsive in order to reduce the amount

of risk they faced when operating abroad. More homogeneous niche markets in combination

with the innovative quick-response mentality in companies made operating internationally

more accessible for smaller companies (Covin & Miller, 2014).


15

The third important development in the context of INVs is the increasing number of

people that have elaborate experience in the international field (Oviatt & McDougall, 2005b).

As discussed previously, small firms were now able to internationalize but also had to be

flexible, responsive and innovative in order to survive. Therefore, INVs needed employees

with and international entrepreneurial orientation, with characteristics like opportunity

seeking, risk taking, proactivity and innovative behavior (Covin & Miller, 2014). In fact, this

entrepreneurial orientation became so important, that it signaled a turn in conversation in the

IB literature, which will be discussed in the following section.

2.5 INVs from an International Entrepreneurship perspective

Essentially, back in 1994, the world had gotten smaller through the use of new

communication technologies. The need to understand their internationalization process grew,

because INVs were appearing in increasing number worldwide and these small international

firms were apparently not simply smaller versions of large MNEs and could not be treated as

such (Lu & Beamish, 2001). At that time, INVs started to not only emerge from countries

with a small home market as expected, but also started emerging from countries with big

internal markets, for example, the United States (Cavusgil & Knight, 2015).

An influential and award-winning paper by Knight and Cavusgil from 2004 signaled a

turn in conversation in the discussion of quickly internationalizing young companies and

provided a new empirical and theoretical exploration of INVs because it highlighted the role

of innovative and entrepreneurial company founders (Zander et al., 2015) (Cavusgil &

Knight, 2015). The new turn indicated a combination of two research fields: IB research and

entrepreneurship research. IB researchers could not ignore the growing presence of

entrepreneurial firms in the international field and on the other hand entrepreneurship-

researchers could not ignore the globalization or internationalization of the market

(McDougall & Oviatt, 2000a). Hence, a new research combination was made between an IB

view and an entrepreneurial view: International Entrepreneurship (IE) (Zander et al., 2015).

This combined the theoretical lenses to understand a phenomenon (Coviello, 2015).

IE entails ‘the discovery, enactment, evaluation, and exploitation of opportunities—

across national borders—to create future goods and services’ (Oviatt & McDougall, 2005,

p.40). The shift to an entrepreneurial perspective of the quickly internationalizing firms

provided fundamental new points of departure when trying to understand the


16

internationalization process of INVs. Since understanding the logic and reasoning of the

international entrepreneur started to become so important, scholars started to emphasize two

aspects of entrepreneurship: the role of the individual and treating uncertainty and resource

constraints that this individual faces as a given fact (Covin & Miller, 2014)(Zander et al.,

2015). In the early development stage of the INV, resource constraints are the most difficult

problem to overcome. Compared to larger MNEs, INVs have relatively less access to

financial markets and do not have the option to relocate resources internally. The IE approach

takes the entrepreneur and the uncertainties he or she faces as a fundamental point of

departure to examine how the INV deals with such resource constraints.

More than two decades later, INVs are still emerging in substantial numbers

worldwide (Zander, et al., 2015) (Knight & Cavusgil, 2004). While the emergence of INVs

was something very novel twenty years ago, today they are found in abundance all around the

globe (Cavusgil & Knight, 2015). The research on INVs has grown along with the

phenomenon and research from an IE perspective emerged in great numbers (Zander et al.,

2015)(Cavusgil & Knight, 2015)(Covin & Miller, 2014). As a result, the IE perspective has

been used in many different disciplines. It draws from various different perspectives like

international business, entrepreneurship, strategic management and marketing (Peiris,

Akoorie, & Sinha, 2012).

The Resource Based View (RBV) was also added to the list of theoretical lenses that

are now merged into the multidisciplinary IE approach. From this perspective, the INV's

international competitive advantage comes from the ability of the firm to leverage unique tacit

knowledge about global opportunities (Peiris et al., 2012)(Peng, 2001). The international

entrepreneur is the embodiment of this knowledge. According to a literature review of Peng

on the usage of the RBV in IB literature, the RBV provides a powerful theoretical

perspective, because it presents a unifying framework. The IE theoretical field benefits

because diverse research lenses can be unified through the RBV (Peng, 2001).

Overall scholars found enough evidence to reach consensus about certain triggers of

internationalization of INVs. These include multiple factors, from different economic

perspectives, which have been summarized in Table 2 (Cavusgil & Knight, 2015). First, from

an industry-based perspective researchers confirmed the following triggers of INVs: size of

the firm's home market, the appearance of global niche markets, technological developments

in production, the emergence of global networks and alliances of firms. Second, from a firm-


17

based perspective scholars have reached consensus on multiple organizational capabilities, for

example, experience in the international field, innovativeness and entrepreneurial attitude of

the firm (Cavusgil & Knight, 2015). Furthermore, the environmental changes that enabled this

rapid expansion of young firms (globalization and technological advances) developed

exponentially over the last years (McKinsey, 2013)(Chien & Karamcheti, 2013). From a

managerial perspective, advances in technology literally make the world smaller for the

entrepreneur with quick access to key information on global opportunities (Cavusgil &

Knight, 2015) (Peiris et al., 2012). All these findings have in common that they all have the

potential to increase the speed of internationalization and therefore enabling the company to

operate internationally from a young age. Table 2: Triggers of INV’s rapid internationalization process

Industry-based perspective - Size of home market

- Appearance of global niche markets

- Technological developments in production

- Emergence of global networks

- Alliances

Firm-based perspective - Experience in the international field

- Innovativeness

- Entrepreneurial attitude

Managerial perspective - Access to key information

Source: Cavusgil & Knight, 2015

This section explored the theoretical lenses through which internationalization process

of young, rapidly internationalizing firms are understood and provided insights into the

potential causes for the existence of the INV. These accelerating factors are all components of

the ultimate goal for INVs to reach the best possible firm performance by exploiting

international markets. The following section will elaborate on the relationship between INVs

and performance.


18

2.6 Performance in relation to the INV

In the past decades academic literature on internationality and performance has occurred in

abundance (Covin & Miller, 2014). Performance is a broad term that can be interpreted from

multiple perspectives (Lu & Beamish, 2006). In the following chapter, the different findings

on he performance of international firms are discussed with a specific focus on the findings

on commonly used indicators of performance: profitability and growth.

In the IB field, the multinationality-performance relationship is widely discussed. On

the one hand, it is an accepted view that increased multinationality increases performance,

because it makes it possible for firms to achieve higher profits and benefit from a larger

number of market imperfections all across the globe (Lu & Beamish, 2001). According to a

literature review of more than 100 empirical studies by Hennart, there are three main causes

for better performance when a firm operates internationally (2007). Firstly,

internationalization makes it possible to exploit economies of scale. Secondly, the

organizational learning process goes faster and lastly, it gives the firm access to resources,

which it would not have in its home market (Hennart, 2007). However, internationalization is

also always associated with additional costs, like liabilities of foreignness and newness,

overcoming psychic distance and increased coordination costs (Hennart, 2007). Many

scholars have researched internationalization in relation to performance, with mixed results.

Until today there is no universal, positive relation found between operating in multiple

countries and performance. Some found a linear relationship (e.g. Pangarkar, 2008), others

found multiple moderating factors of the multinationality-performance relationship (Hennart,

2007). This resulted in many different theories on curvilinear models that take the different

costs at different stages of international operations into account (Contractor, Kundu, & Hsu,

2003). For example, the U-shaped relationship (Ruigrok & Wagner, 2003) and an inverted U-

shaped relationship (Gomes & Ramaswamy, 1999).

In addition, a research by Lu & Beamish argued that the relation between

internationalization and performance is S-shaped, consisting of three distinct phases ( Lu &

Beamish, 2004). This study suggests that the relationship with performance is moderated by

the different costs of internationalization. In phase one, internationalization is not yet

profitable, because the costs of expanding abroad are still very high compared to formerly

discussed benefits of internationalization. However, as the liabilities of newness and

foreignness decrease, the total benefits of internationalization become profitable and the total


19

gains of internationalization become profitable in phase two. As the firm keeps expanding, the

total coordination costs will also rise significantly. This is the point where the firm enters

phase three of the process, where the coordination costs become higher than the total benefits

of internationalization, making the net gains not profitable anymore ( Lu & Beamish, 2004).

The study by Lu and Beamish is exemplary for the complicated relationship that exists

between the internationalization process and performance. More support for the complex

relationship was found by Vermeulen & Barkema, who found strong support for the

moderating effect of expansion patterns in the form of pace, rhythm, and scope that influence

the international performance (2002).

The literature that focuses on the growth of the MNE has produced less ambiguous

findings. Growth is an important aspect of the firm's performance, since the most prominent

goal of expanding abroad is gaining economies of scale, organizational learning and access to

more resources (Hennart, 2007). A second study by Lu and Beamish shows that exporting

internationally had a significant positive effect on an INV's growth even when the effect on

profitability was found to be negative (Lu & Beamish, 2006). When an INV grows fast,

liabilities of foreignness and newness can be quickly overcome. The existence of the MNE is

usually explained due to their large size. However, scholars recognize that large size may be

both cause and effect of operating internationally (Oviatt & McDougall, 2005b).

It is important to note here that most theories about the multinationality-performance

relationship are generally dealing with large MNEs and not INVs. Even though INVs are

MNEs, not all MNEs are INVs. When considering INVs another discussion arises in relation

to performance: what parameters distinguish an INV from an MNE. Controversy exists

around the timeframe in which the INV is established. This deals with two exact moments

that need to be decided upon: when is the firm established and when is it considered to

operate internationally. Controversies include the debate about this exact moment of inception

of the INV. For example, the gestation time of every company needs to be taken into account.

Additionally, some INVs exist which are a spin-off of a larger existing company, which gives

them an unfair head start in the international market with consequences for their performance

(Zahra, 2005). In the past years of INV research, most scholars have relied on the claim made

by Oviatt & McDoughall back in 1994, that researchers should rely on ‘observable resource

commitments’ to determine the exact moment of inception of the INV (Oviatt & McDougall,

1994)(Oviatt & McDougall, 2005b)(Zahra, 2005). In other words, the first observable


20

commitment to engagement in foreign activities is considered to be the starting point of the

internationalization process.

In conclusion, it can be stated that the research on the performance measurement of

MNE is inconclusive. Many studies have found multiple moderating factors that influence the

international performance of a firm. In addition, the growth of the MNE has been reported as

a more robust performance measurement in the internationalization process. From the

perspective of an INV growth makes sense as primary objective because of the great risk and

uncertainty the INV is facing compared to the larger MNEs. This means that in the starting

phase of the firm the entrepreneur of an INV might choose to maintain a growth strategy,

rather than a strategy to maximize profit in order to achieve economies of scope and scale as

fast as possible (Gabrielsson & Pelkonen, 2008). Building on this conclusion, this research

will examine the internationalization process of the INV with a focus on growth since growth

is expected to show the most change in the first stage of the internationalization process of the

young international firms. The hypothesis development will elaborate further on this

viewpoint.


21

3. Hypothesis development This chapter discusses the existing gaps in the literature, which this research will address with

a focus on international performance measured in firm growth. There is still a long way to go

before we truly understand the internationalization process of INVs (Zander et al., 2015). In

this study will contribute to the existing literature by addressing the research gaps concerning

the internationalization process of the digital service industry.

Many studies have been conducted on the influence of a firm’s products as a

moderator on its internationalization process. Firms can benefit especially of their

internationalization by exploiting firm-specific assets when these assets are intangible and

information intensive (Lu & Beamish, 2004). Intangible assets tend to be transferrable to

different markets, but on the other hand are costly to produce. Hence, exploitation of

intangible assets on a large scope in different international markets is simply more efficient

and profitable (Lu & Beamish, 2004). Taking this one step further, the increased potential

profitability of intangible assets can be better understood within the context of discussed

digital economy. Knowledge-based goods, like software or digital music production, can be

distributed for almost zero marginal costs (Schmid, 2001) (Tapscott et al., 2000). The

potential consequences that these digital products and services have on the

internationalization process remains an understudied field in the IB literature (Zander et al.,

2015) (Cavusgil & Knight, 2015).

In accordance with this presented research gap, this study focuses on the performance

of INVs with intangible, digital products. In order to uncover the effect of exploiting a value

chain that consists only digital processes, this research focuses on INVs that operate in the

digital service industry. More precisely, it will research how and to what extent the

international market expansion strategies of digital service INVs deviates from the

internationalization patterns of non-digital INVs. Firms that deliver their services virtually

might allow them to expand more effectively due to a significant reduction of their

coordination costs (Lu & Beamish, 2004)(Zander et al., 2015). With this research gap, this

study aims to provide more insight on the influence of the nature of the service on the

internationalization process. Hence, the following research question is addressed: How does

the digital nature of the INV’s services affect its internationalization process in terms of

growth?


22

Services are the perfect products that allow a company to deliver online, for example,

data storage services (e.g. Dropbox), data transfer services (e.g. WeTransfer) or digital

entertainments services (e.g. Spotify). This research will focus on digital services for two

different reasons. First, it allows for an examination of an internationalization process that has

the potential to have a completely digital value-chain. It is important to make this distinction

because digital advancements are going on in almost all areas of the economy (Brynjolfsson,

2002), think for example of computer integrated manufacturing or automatization of back

office processes (Schmid, 2001). In order to draw conclusions about the influence of the type

of products that a firm produces and its internationalization process, this study will make a

clear distinction between firms with a digital value chain and firms that have a non-digital or

semi-digital value chain (Brynjolfsson, 2002).

Another reason this study focuses on digital services is to clearly distinguish between

goods and services. This seems obvious, however, digital nature of products and services have

started a whole different debate. Services have been used and described extensively in

economic literature and are usually defined as ‘immaterial goods’ (Hill, 1977). Consequently,

how do we define digital products, like digital books and music? The question arises what

makes these good tacit or immaterial and to what extent digital products differ from digital

services. As a result of this debate, this research will focus only on the internationalization

process of firms that deliver digital services, immaterial goods that can be delivered virtually

to the consumer (Schmid, 2001). This way, any ambiguities concerning the definition of a

digital product is avoided.

In order to draw conclusions about the different internationalization processes, the

digital service based firm will be compared to firms operating in the traditional service

industry (tertiary industry) and the manufacturing industry (secondary industry). Although it

will be discussed as distinct categories, in reality, service industry and manufacturing industry

also deal with digitalization (Schmid, 2001). For the purpose of this research, it is expected

that the impact of information technologies is less prominent in internationalization process of

the service industry and even more for the manufacturing industry because the tangible assets

will still cause for higher costs (Miozzo & Soete, 2001)(Gabrielsson & Pelkonen, 2008).

These costs include all activities that involve the coordination of business activities across

countries, for the simple reason that tangible assets are less efficiently transferred than digital

business activities.


23

This research on the influence of disruptive technological change of the INV's value

chain on its internationalization process is relevant because the digital economy is changing

the international market at a rapid pace (Schmid, 2001)(Zander et al., 2015). Predicted

technological developments substantially pressure the need for more understanding in this

field. At the same time, the risk for firms to operate internationally from their birth still is

enormous (Zander et al., 2015). In a future business environment, where technological

advances keep developing exponentially (Chien & Karamcheti, 2013), firms need to become

more innovative along the value chain (Zander et al., 2015) and understand more about the

influence of a firm's products (goods and services) on their short- and long-term success in the

internationalization process (Javalgi, Griffith, & White, 2003).

As discussed in the literature review, growth is a relatively constant factor of

international performance. Additionally, INV's existence is generally thought to be a product

of their optimistic and aggressive strategies to achieve growth and market power in multiple

countries (Gabrielsson & Pelkonen, 2008). Therefore this study will focus on the growth of

the INV measured in total turnover (sales), total assets and number of employees. Based on

the assumptions that digital services are intangible and knowledge-based and have almost

zero distribution or coordination costs, it is expected that digital service INVs will

internationalize with a different growth rate than INVs from other sectors when considering

the first stage of their internationalization process. The following hypothesis is formulated:

Hypothesis 1: In their internationalization process, INVs operating in the digital service

industry will grow significantly different than INVs operating in the general service industry

and manufacturing industry.

Due to the predicted lower coordination costs of business activities, it is predicted that digital

service INVs that have a completely digital value chain will grow not only different but also

faster than their peers from the general service industry and the manufacturing industry. The

following hypotheses are addressed concerning the direction of the comparison of the three

industries:


24

Hypothesis 2a: In their internationalization process, INVs operating in the digital service

industry will grow faster than INVs operating in the general service industry in terms of

turnover (sales).

Hypothesis 2b: In their internationalization process, INVs operating in the digital service

industry will grow faster than INVs operating in the manufacturing industry in terms of

turnover (sales).

Hypothesis 3a: In internationalization process, INVs operating in the digital service industry

will grow faster than INVs operating in the general service industry in terms of assets.


industry will grow faster than INVs operating in the manufacturing industry in terms of

assets.

Considering the developments of knowledge-based products and services in the digital

economy, the development of the number of employees is predicted to grow differently.

Technological advancements in communication and transportation have drastically changed

the international infrastructure for INVs. When knowledge has been codified, it can be

transferred more efficiently than ‘traditional' knowledge. When uncodified knowledge is

transferred, loss of information is inevitable due to transmission and interpretation errors

(Teece, 1998). Codified communication of information between computers is economically

beneficial for firms because it makes these processes less costly and less ambiguous. With

this background information, it makes sense for INVs that operate in with knowledge-based

products (digital services) to leave a lot of work in the hands of computer code. Hence, INVs

operating in the digital service industry could be productive with a smaller workforce (Peiris

et al., 2012)(Helbing, 2014).

A second phenomenon that supports this hypothesis is the prosumer trend. As shown

in the literature review, prosumers are involved in both consumption and production (Helbing,

2014)(Ritzer & Jurgenson, 2010). Digital services are very suited outputs that could be

simultaneously produced and consumed (Gabrielsson & Pelkonen, 2008). These trends add to


25

the hypothesis that digital service INVs will show a different growth pattern concerning their

number of employees. Therefore the following hypothesis is formulated:

Hypothesis 4a: In their internationalization process, INVs operating in the digital service

industry will grow slower than firms operating in the general service industry in terms of

employees.


industry will grow slower than firms operating in the manufacturing industry terms of

employees.

3.1 Conceptual framework

The formulated hypotheses are depicted in Figure 1: the conceptual framework. The first

hypothesis predicts a moderating relationship between digital service INVs and their growth.

The second, third and fourth hypothesis look in more detail at the growth of the INV. The

second and third consists of two positive predicted relationships between the moderating

digital service INV and their growth in assets and turnover. The fourth relationship is

predicted to be a negative one and predicts that digital service INVs will grow slower in terms

of employees compared to general service industry and the manufacturing industry. Figure 1: Conceptual framework

H1

Digital Services

Growth Assets

Turnover

Employees

H2a+

H2b+

H3a+

INV

H3b+

H4a- H4b-


26

4. Data & method In the following chapter, the data collection method is presented. Since the

internationalization process is a longitudinal process, a repeated measure method is used

using panel data. The sample selection procedure is described in detail for iteration purposes.

In the last part of this chapter a description of the variables and the statistical method is

presented. This thesis uses three mixed design repeated measure ANOVAs because this

method can compare several means when there are two or more independent variables which

have been measured using different entities (Field, 2013).

4.1 Sample

In order to draw a generalizable conclusion, a representative sample was drawn from the

population with non-probability sampling technique, because the complete population is

unknown (Saunders & Lewis, 2012). Europe has been chosen as the geographical focus,

because the sizes of the home markets are all relatively small. Therefore firms from these

countries face stronger push factors to internationalize early (Zander et al., 2015) (Garrett,

2000). Additionally, all countries in the sample are a member of the European Union and

based on an open economy (Ruigrok, Amann, & Wagner, 2007) and all countries can be

considered developed or western, which indicates a highly developed service sector (Javalgi

et al., 2003). Hence, these two factors increased the probability of finding suitable digital

service INVs.

For this research, a sample is selected consisting of young and small companies,

because this amount of data on small international companies has not been used often before,

simply because it used to be unavailable. As a consequence, the companies used for this

analysis are likely to be unlisted (Zander et al., 2015) (Lu & Beamish, 2001). Therefore the

secondary dataset is collected through Bureau van Dijk’s database Orbis, a worldwide

database with information on almost 180 million companies. This database offers the most

information on unlisted companies worldwide and detailed information on companies starting

from the year 2006 (“Orbis | Detailed global private company information,” 2016.).

Since we are only interested in the INVs it is necessary to explicate what is considered

an INV. There are different parameters known for identification of INVs. The most supported

parameters are: the period between inception and internationalization is not longer than three

years and degree of internationalization (DOI) of the company needs to be at least 25% of its


27

export as percentage of their total revenue (McDougall & Oviatt, 2000b) (Autio, Sapienza, &

Almeida, 2000). These parameters have been used successfully in the past (Knight, 1997)

(Madsen et al., 2000) (Fan & Phan, 2007) (Peiris, Akoorie, & Sinha, 2012). Exporting is

generally regarded as the first step into an international market. In addition, it is most likely to

signal the earliest sign of an INV because it lacks the resources to immediately engage in

other forms of entry modes into a foreign market that requires more equity (Lu & Beamish,

2001)(Rugman et al., 2011). To determine if firms met the INV criteria two different criteria

were used:

1. Year of incorporation 2004-2012

2. Export Revenue/ Operating revenue (%) (2006-2014)

In this sampling procedure the year of incorporation is considered to be the first year of

existence (e.g. if a firm was incorporated in 2004, it needed to have at least a DOI of 25% in

2006). Consequently, considering the three-year-range, 2004 and 2012 were the most logical

cut-off points for the year of incorporation since Orbis offers financial data from the year

2006 and financial data of the year 2015 was not yet available. Additionally, criterion two

refers to the availability of the ratio of export revenue/operating revenue % in the database.

Missing data on such an important selection criterion would undermine the robustness of the

analysis (Zhang & Shaw, 2012).

Filtering the results in Microsoft Excel based on the INV criteria, resulted in a list of

INVs that had a DOI > 25% within the first three years of their existence. In addition,

companies deriving from a country that was not or had only just become, a member of the

European Union were removed (e.g. Croatia and Bosnia-Herzegovina). This way, potential

biases due to significant differences in the openness of economies between non-EU members

and EU-members are avoided (Javalgi et al., 2003).

In addition to the two selection criteria for INV, firms were selected from Orbis using

their Standard Industrial Classification (SIC) code. Contrary to other classification codes, SIC

codes explicitly distinguish service industries and therefore it is considered the most suited

identifier (SICCODE.com, 2016). With every additional number, the industry classification

gets more precise. It is important to note that the classification codes are not mutually

exclusive, which was considered during the selection procedure. The description of the

variables will go into more detail about the selection procedure for the three different


28

industries. This sampling method resulted in a sample of 508 suited INVs categorized by SIC

codes.

4.2 Method

Three mixed design repeated measure ANOVAs are run to test the proposed moderating

effect of INV with digital services on the change in growth between 2010-2014. It is a

mixture of repeated measure design and a between groups design (Field, 2013). The data in

this study are analyzed with Statistical Package for Social Sciences (SPSS) software. In this

section, the different variables are presented followed by a description of the normal

distribution of the variables, homogeneity of variance and sphericity, which are assumptions

of the mixed design repeated measures ANOVA (Field, 2013).

4.2.1. Independent variable

The independent variable is a categorical variable with three nominal measurement levels.

Hence, in this mixed design repeated measures ANOVA, the independent data is treated as

three different independent variables. The category ‘Computer Programming, Data

Processing, And Other Computer Related Services’ was identified using the industry SIC

code 737 (“SICCODE.com - The Leader in SIC and NAICS Codes, Company Search,

Business Lists,” 2016). This industry will be referred to as ‘digital service industry.

The next measurement level of INVs consists of observations that operate in the

broader service industry. SIC codes classification system labeled SIC codes starting with 70

until 89 as ‘Service Industry'. For example, they include industries with SIC codes ranging

from number 701 ‘hotels and motels' and 874 ‘Management and Public Relations Services’

(“SICCODE.com - The Leader in SIC and NAICS Codes, Company Search, Business Lists,”

2016). Excluding companies within industry 737, constructed the second measurement level,

which will be referred to as ‘general service industry. The last measurement level was

constructed in a similar way, using the SIC codes 20-39, which are companies operating in

the manufacturing industry. For example, this sample included companies from industry

232‘Men's and Boys' Furnishings, Work Clothing, and Allied Garments’ and 349

‘Miscellaneous Fabricated Metal Products’ (“SICCODE.com - The Leader in SIC and NAICS

Codes, Company Search, Business Lists,” 2016). INVs operating in one of these industries

will be labeled as ‘manufacturing industry.


29

4.2.2 Dependent variable

In total three different dependent variables are used with five observations (years) per n firms.

The performance of the INV is measured based on their growth in turnover (1), assets (2) and

employees (3). The sampling procedure described the sample of 508 companies, which led to

a total of 2540 observations to be examined. The dependent variables are all continuous

variables and have a ratio measurement level. From the Orbis database, all absolute numbers

were returned per company per year per growth measurement. The normality checks and

transformations of the dependent variables will now be discussed.

The normality of the distribution of the dependent variables is checked via histograms

and boxplots. The shape of the distributions and the skewness and kurtosis scores showed that

the variables were not normally distributed. To overcome the non-normal distribution, all

variables were transformed using a natural logarithm (ln logarithm with base e). Figure 2

below shows an example of one of the 15 variables before and after transformation. This

specific transformation was chosen because it mathematically enhances the impact of the

small values in the sample. Or in other words, it puts the focus on the smaller companies. This

is especially interesting for this research in accordance with the IE view as it tries to

specifically look at those small firms that internationalize while taking a much greater risk

than their bigger peers would when they perform the same internationalizing steps. Figure 2: Histogram of variable turnover 2014 before and after transformations

Source: SPSS


30

After the transformation, the outliers are spotted using boxplots and removed. The

descriptives of the dependent variables can be found in Appendix A. To determine that there

were not any outliers for specific industries, the distributions of the outcome variables

categorized by industry were also checked. In total the distributions of 45 variables were

checked: three variables (turnover, assets, employees) with five measurement levels (2010,

2011, 2012, 2013, 2014) in three different categories (digital service industry, general service

industry, and manufacturing industry). Since a secondary dataset is used the inevitable

missing values for every variable are reported to SPSS as missing. Further tests were

performed in order to check if the data was normally distributed.

The Shapiro-Wilk test returned non-significant values (p > 0.05), indicating no

significant deviation from normal for almost all of the variables (see Appendix B). In total 9

variables returned a significant value for the normality test, indicating that the distribution

deviated significantly from normal. The Shapiro-Wilk tests need to be approached with

caution when the sample size is large (Field, 2013). Therefore the skewness and kurtosis

scores were consulted in combination with the Q-Q plots and histograms. The skewness and

kurtosis scores were all between 1 and -1 indicating a normal distribution for all 45 variables

(see Appendix C) (Field, 2013).

4.2.3 Control variables

The IE stream of research has determined multiple factors that influence the

internationalization process of the INV from and industry-based perspective. One of the most

important factors that might influence the analysis ate the home-market conditions (Cavusgil

& Knight, 2015). Table 3 shows the division of the different countries of origin of the INVs.

This exploratory table already shows an unequal division of countries. In order to be sure that

the variance in the dependent variables is not caused by any home-market conditions, all

firms in the sample are controlled for their country of origin. The control variables are

constructed as dummy variables using 0 and 1. The descriptive statistics of the dummy

variables is available in Appendix D.


31

Table 3 : Information country of origin of INV in the sample

Country EU Membership

Abbreviation

Digital General Services

Manufacturing

Total

Germany 1958 DE 3 7 6 16

France 1958 FR 17 32 38 87

United Kingdom 1973 GB 33 109 132 274

Greece 1981 GR - - 37 37

Hungary 2004 HU 1 5 83 89

Ireland 1973 IE - 3 2 5

Total 508

Source: “Orbis | Detailed global private company information,” 2016

4.2.4 Homogeneity and sphericity

This analysis deals with three different mixed design repeated measure ANOVAs, which

means we have to deal with the assumption of sphericity in addition to the assumption of

homogeneity of variances. Levene’s test of equality of error variances was significant for

every dependent variable, which means that the assumption of homogeneity of variances was

violated. However, Levene's test needs to be treated with caution when sample sizes are large

because in large samples Levene's test can be significant even when group variances are not

very different (Field, 2013) (Zimmerman, 2004). Therefore it should be interpreted with the

variance ratios of the dependent variables. The variance ratios show that the variances

between groups are homogeneous for all three dependent variables (see Appendix E). In

addition, the large sample in combination with equal group sizes per dependent variable

(n=497) makes violation of the assumption less important, because chances of Type I error

are already very small (Field, 2013).


32

Sphericity refers to the equality of variance of differences between treatment levels

(Field, 2013). Since this research measures more than three treatment levels, namely five

different years, sphericity needs to be assessed using Mauchly’s test. Mauchly’s test of

sphericity indicated that the assumption of sphericity has been violated (χ²(9) = 589.365, p <

.001)( χ²(9) = 549.710, p < .001) (χ²(9) = 645.116, p < .001). Therefore the null hypothesis

that the ‘variances of differences between conditions are equal' (Field, 2013, p. 546) is

rejected for the 3 models. This outcome was expected since the change of violation sphericity

increases with every extra repeated measure (Field, 2013).

As a result, the F-ratios cannot be consulted, because they might be biased, increasing

the risk of a Type I error. Therefore corrections must be applied to the F-ratios with the

epsilon statistic (ε), which represents the degree to which sphericity is present. Greenhouse-

Geisser correction is chosen to correct for sphericity (ε = 0.551) (ε = 0.478) (ε = 0.582). This

correction is the most conservative and is the most appropriate for a violation of sphericity

below ε = 0.75 (Field, 2013).


33

5. Results The main goal of this analysis is to examine the relationship between INVs and their growth

and how this relationship is moderated by the niche sector of the digital service industry.

Multiple dependent variables are considered concerning the growth of the firms in its

internationalization process. The research specifically looks at growth and not profit, because

it is argued that small international firms will show more change in terms of growth than in

terms of profit in the first stage of their internationalization process (Lu & Beamish, 2006).

This chapter deliberates on the results of the three mixed design repeated measure ANOVA

models.

Three separate mixed repeated measures ANOVAs are performed to examine the three

different outcome variables turnover, assets, and employees. They are executed separately in

order to provide a clear overview of the interactions we are interested in for this analysis. The

between-subject factor ‘Industry’ contains three levels: digital, general service and

manufacturing and the within-subject factor ‘Time’ is measured on five different occasions:

2010, 2011, 2012, 2013 and 2014. All analyses are corrected for the country of origin, using

the described dummy variables DE, FR, GB GR, HU and IE as covariates. After the removal

of outliers, a total of n = 497 INVs were left in the sample. Underneath the results are

described.

Starting from the first hypothesis the mixed repeated measures ANOVA analysis

returns the test of between-subject effects. On other words the effects of the three levels of the

between-subject factor Industry. Across industries the group differences in turnover averaged

across five years is not significant (F(2, 383) = 1.419, p = 0.243, ηp2 = .007). The same is the

case for the differences in employees (F(2, 311) = 0.723, p = 0.486, ηp2 = .005). However, the

same test of between-subject effects for the assets was significant (F(2, 343) = 3.600, p =

0.28, ηp2 = .021), so the differences in assets averaged across the five time points are

significantly explained by the type of industry. Therefore, H1 is not definitely answered yet.

The test of between-subject effect gives a general idea of the interactions found in the three

analyses. Specifically, it does not deal with the digital service INVs separately. In order to

have a better understanding of what causes the between-subject effect, the within-subject

effects, graphs, and pairwise comparisons are used. The pairwise comparisons tables use

numerical indicators for the different time points, which are displayed in Table 4.


34

Table 4: Indicators of Years used in pairwise comparison tables

Indicator Corresponding year

1 2010

2 2011

3 2012

4 2013

5 2014

In the first model, the outcome variable turnover is examined. The test of between-

subject effects was found to be not significant, however, the within-subject effect of the

interaction years*industry is significant (F(4.412, 844.858) =7.007, p < 0.001, ηp2 = .035).

This indicates that the changes in turnover across the five years are not equivalent across

industry groups for the interaction years*industry. To get a better idea of what the interactions

mean, they are displayed in a graph in Figure 3. Using this graph, the different interactions

can be interpreted using pairwise comparisons with a Bonferroni adjustment (Field, 2013).


35

Figure 3: Graph of interactions for turnover

Source: SPSS Even though the graph shows a steeper plot for digital service INVs than for general

service and manufacturing INVs, the pairwise comparisons of turnover show that there are no

significant differences between the industries across time points (see Table 5). Table 5 shows

that all pairwise comparisons of the different industries separated by years are not significant

for turnover. However, since the interaction effect of years*industry is significant, the

pairwise comparison between the different years is also examined (see Table 6). As shown in

Table 6, turnover significantly grew across the different time points. This significant change

is broken down into the different industry categories in the pairwise comparison Table 7 (see

for the extended pairwise comparisons of years Appendix F). It is visible that the INVs in all

industries showed a significant growth in turnover from time point 1 to 2 (2010 to 2011) (p <

.001 for all three industries). After this first growth spurt, the increase in turnover slowly

starts to decline for every industry. In conclusion, there is no significant difference found


36

between digital service INVs and general service or manufacturing INVs for turnover.

Subsequently, the direction of this relationship, which was predicted to be faster in H2b and

H2a is also found to be insignificant.

Table 5: Turnover - Pairwise comparisons for Industry categorized by Years.

Source: SPSS


37

Table 6: Turnover - Pairwise comparisons Years (shortened)

Source: SPSS

Table 7: Turnover - Pairwise comparisons Years categorized by Industry (shortened)

Source: SPSS

Next, the interactions with the outcome variable assets are examined similarly. Contrary to

turnover, the test of between-subject effect was significant for assets indicating that Industry

significantly explains the variance in assets averaged over the five time points. The test of

within-subject effects shows a significant interaction effect of years*industry (F(3.878,

665.039=4.208, p = .003, ηp2 = .024). The graph for assets is plotted underneath in the graph

depicted in Figure 4. The pairwise comparison of Industry separated by Years shows that not

all interactions are significant (Table 8). The only significant differences are found between

general service industry and the manufacturing industry. All comparisons with the digital

service industry are not significant (see Table 8). Therefore no evidence has been found for

H2a and H2b. In addition, this has definitive consequences for H1. Since all tests of between-


38

subject for turnover and employees are not significant, and the between the between-subject

effect (Industry) for assets is only significant between general service and manufacturing

INVs, it can be concluded that digital service INVs do not significantly differ in their

internationalization process from general service and manufacturing INVs. In other words, the

lack of significant difference between digital service INVs and the two other types of INVs in

all three types of growth measurements rejects H1. Figure 4: Graph of interactions for assets

Source: SPSS In addition to the difference between industries, the pairwise comparisons of years are

examined for assets. The difference between 2011 and 2012 for digital service INVs catches

the eye in the graph because it slopes downwards between 2011-2012. However, the pairwise

comparison shows that this change in assets is not significant (p = 1.000) (Table 9). The other

comparisons of the different years are significant (see Table 9). The pairwise comparisons


39

between the years are further broken down by separating the year comparisons per industry in

Table 10 (the complete list of pairwise comparisons is available in the Appendix G). In these

comparisons, a growth pattern is visible which is similar to turnover. The difference between

time point 1 (2010) and time point 2 (2011) is the most significant for all three industries.

Furthermore, the interesting change, as spotted in the plot between 2011 and 2012, turns out

to be insignificant for every industry. Both digital service INVs and manufacturing INVs also

experience a significant growth in assets between time point 3 and 4 (2012-2013) and time

point 4 and 5 (2013-2014). The general service INVs do not grow significantly after the first

recorded years. In conclusion, it can be stated that digital service INVs do not grow

significantly faster in terms of assets compared to the general service INVs (H3a) or

manufacturing INVs (H3b).


40

Table 8: Assets - Pairwise comparisons for Industry categorized by Years

Source: SPSS


41

Table 9 Assets- Pairwise comparisons for Years (shortened)

Source: SPSS

Table 10: Assets- Pairwise comparisons for Years categorized by Industry (shortened)

Source: SPSS

Lastly, the effect of digital service INVs on the growth in employees will be examined.

As shown by the insignificant test of between-subject effects, there was no significant

difference found in employees between the three different industries averaged across time

(F(2, 311) = 0.723, p = 0.486, ηp2 = .005). Contrary to the results for turnover and assets, the

within-subject effect of years*industry is not significant for employees (F(4.990, 776.010) =

1.421, p = 0.214, ηp2 = .009). Therefore it is assumed that the changes in employees across the

three different categories are not significantly different (H4a and H4b). This is confirmed by


42

the pairwise comparison of the different industries across all five time points shown in Table

11, which shows no significant comparisons across industries. Figure 5: Graph of interactions for employees

Source: SPSS

The plot of employees does show an interesting development of digital service INVs

over the five different years (see Figure 5). However, Table 12 reveals that there is only a

significant change in employees found between time point 1 and 2 (2010 and 2011). Closer

examination shows that this was only the case for manufacturing and general service INVs

(Table 13) (the complete list of this pairwise comparison is available in the Appendix H). No

significant difference between time points was found for the digital service INVs. Still, it is

important to notice that only the digital service INVs show a small decline from 2013-2014 as

depicted in the graph (Figure 5). This change in employees is however not significant (p =

1.000) (see Table 13 comparison between time point 4 and 5).


43

Table 11: Employees - Pairwise comparisons for Industry categorized by Years

Source: SPSS


44

Table 12 Employees - Pairwise comparisons for Years (shortened)

Source: SPSS

Table 13: Employees - Pairwise comparisons for Years categorized by Industry (shortened)

Source: SPSS

In summary, these results suggest that the different industry types do not have an effect on the

three dependent variables. Even though the plots of the dependents depict a different slope for

digital service INVs, the comparison with other industries was found to be not significant

using the pairwise comparison tables. In the following chapter, the results and implications of

these findings are discussed.


45

6. Discussion This research examined the internationalization process of INVs operating in the digital

service industry by comparing their pathway to growth with service and manufacturing INVs

in terms of turnover, assets and employees using a mixed design repeated measures ANOVA.

Since not many scholars have focused on the internationalization process of firms in the

increasingly digital service industry (Zander et al., 2015), this research contributes by

providing initial insights the influence of technological advancements in the service industry

on the internationalization process of INVs. In addition, this research also contributes to the

under-researched area concerning the internationalization process of service firms (Zander et

al., 2015).

The results from this study are incongruent with the expectations that followed from

the literature review, which suggested that specialization in digital services allows a firm to

expand more efficiently and obtain economies of scope and scale within a shorter time-span.

This was predicted due to expected reduction of coordination costs caused by advancements

in information technologies. However, no evidence was found that digital service INVs differ

significantly from their non-digital peers in their pathway to international growth in terms of

turnover, assets and employees over the scope of the five recorded years. Only assets showed

a significant effect of the between-subject factor Industry, which was caused by the difference

between general service industry and the manufacturing industry. In short, the answer to the

posed research question ‘how does the digital nature of the INV’s services affect its internationalization process in terms of growth?’ remains unanswered.

An explanation for the absence of an effect of digital service INVs could be that

technological developments are happening in all parts of the digital economy (Brynjolfsson,

2002)(Cavusgil & Knight, 2015). The decreased coordination costs due to the transferability

of codified knowledge could affect all industries in equal amount. Or, alternatively, the

separation of firms by industry might be a too rough method to effectively uncover the true

effect of deeply embedded technological advancements on an INV's internationalization

process.

In addition to the technological advancements in production, the identified drivers for

internationalization, as found in the literature review, could also interfere with the effect of

digital services. The results of this study indicate that the successful exploitation of


46

knowledge-intensive products and services could depend in greater amount on other firm

capabilities than the ones considered in this thesis. For example, from an industry-based

perspective a firm’s presence in a global network and its alliances could be better indicators

of a firm’s international growth than its digital value chain.

Furthermore the results show that INV's growth in assets and turnover slowly declines

as the company matures. However, the number of employees did not change significantly

after the first recorded year, while assets and turnover did grow significantly. From an IE

perspective, this could provide a new point of view that could further emphasize the role of

the entrepreneur because maintaining a growth rate with the same amount of employees might

require more international experience and more risk taking from the entrepreneur (Oviatt &

McDougall, 2005b).

Additionally, the curve of the digital service INVs showed an interesting development

in terms of employees. Even though this result was insignificant, it showed a decline in

employees as the company matured. Worldwide there is a trend towards short-term

employees and fractured work (Helbing, 2014). It would make sense for a digital service INV

to first attract employees to build the digital product, but when the algorithm works the INV

could, theoretically, manage with fewer employees. Knowledge intensity can now be

incorporated in the non-physical product. In other words, computer code can execute the

service instead of an employee. This means that when the computer code is done, it will only

need maintenance and requires less human capital (Peiris et al., 2012). This study did not

provide definite proof of such a relation between the number of employees and

internationalization process of digital service INVs. However, it would be an interesting topic

for future research.

In summary, the results of this study of the influence on digital service INVs on their

internationalization process are inconclusive. In the following chapter, the limitations of this

study are discussed in combination with recommendation for future research.

7. Limitations and recommendations This research has several limitations. The first limitation deals with the identification of INVs.

Constructing the DOI measurement of just one variable has received critique in the literature

because the measurements have a tendency to be chosen based on data availability


47

(Ramaswamy, Kroeck, & Renforth, 1996). In future research, a solution could be to construct

the DOI of multiple variables, optimizing the validity. A second limitation entails the usage of

the SIC code to identify the different industry types. The SIC code is a slightly older

identification code and might, therefore, be considered a rough method to identify different

industries, because of extensive number of niche industries that are present nowadays

(Miozzo & Soete, 2001) (SICCODE.com, 2016). In addition, the separation of manufacturing

and service industry might also be considered a problematic aspect. Since in reality firms are

involved in business practices that include elements of both categories. Therefore future

research should always use caution when separation different industries (Miozzo & Soete,

2001).

In addition, a third, related limitation deals with the measurable impact of technology.

As stated earlier, technological advancements are happening all across the value chain. The

cost reduction both manufacturing and service activities. The embeddedness of technology

across the value chain makes it difficult to measure the impact of technological advancements

independently (Miozzo & Soete, 2001). Lastly, due to the geographical focus of this study on

European economies that are a member of the European Union, it is difficult to generalize the

results of digital service INVs. For example, because entrepreneurs from developing

economies might not have access to technology that is necessary for the production of digital

goods (Kiss, Danis, & Cavusgil, 2012).

Generally, the results of this study imply that there are still a lot of opportunities for

future research on the relationship between digital services and the internationalization

process of INVs. Future research might consider to provide a more detailed selection method

for INVs that measures the exact moment of internationalization and takes additional entry

modes than exporting into account. Furthermore, a broader or different geographical focus

could also add to more understanding of the INV phenomenon.

Future research could also focus on a specific digital service: the service firms that

function solely as a peer-to-peer platform. These international firms are unique because they

sell products that they do not own as assets. Delineating examples of such firms are Airbnb

and Uber. These young digital peer-to-peer firms cleverly jump to the trend of the digital

economy by enabling the 'prosumers' to share resources with each other. The rapid growth of

these peer-to-peer platforms and the accompanied technological advancements might show a


48

more significant effect on the internationalization process than the rough method of separating

INVs by SIC codes, as presented in this study.

9. Conclusion This research has examined INVs operating in the digital service industry in order to identify

INVs that have a completely digital value chain. The pathway to growth of this type of INV

was investigated and to what extend this pathway differed from other non-digital INVs. The

total turnover, total assets, and number of employees were measured over the time period of

five years between 2010-2014. All interactions were corrected for the country of origin of the

firm. The results of this study were inconclusive and did not provide evidence for a significant

different pathway to growth of the digital service INV compared to their peers from the

service and manufacturing industry. Furthermore, the results show that the growth of INV

slowly declines as they mature. The growth of number of employees differed because it only

showed a significant change in the first recorded year for every INV.


49

Literature Andersson, S. (2000). The Internationalization of the Firm from an Entrepreneurial

Perspective. International Studies of Management & Organization, 30(1), 63–92.

Araujo, L., & Rezende, S. (2003). Path dependence, MNCs and the internationalisation

process: a relational approach. International Business Review, 12(6), 719–737.

Autio, E., Sapienza, H. J., & Almeida, J. G. (2000). Effects of age at entry, knowledge

intensity and imitability on international growth. Academy of Management Journal,

43(5), 909–924.

Bartlett, C. A., & Ghoshal, S. (2003). What is a global manager? Harvard Business Review,

81(8), 101–108.

Bilkey, W. J., & Tesar, G. (1977). The Export Behavior of Smaller-Sized Wisconsin

Manufacturing Firms. Journal of International Business Studies, 8(1), 93–98.

Brynjolfsson, E. (2002). Understanding the Digital Economy: Data, Tools, and Research. MIT

Press.

Buckley, P. J., & Ghauri, P. N. (1999). The Internationalization of the Firm. Cengage

Learning EMEA.

Camuffo, A., Romano, P., & Vinelli, A. (2001). Back to the Future: Benetton Transforms Its

Global Network. MIT Sloan Management Review, 43(1), 46–52.

Cavusgil, S. T., & Knight, G. (2015). The born global firm: An entrepreneurial and

capabilities perspective on early and rapid internationalization. Journal of

International Business Studies, 46(1), 3–16.

Chetty, S., & Campbell-Hunt, C. (2004). A Strategic Approach to Internationalization: A

Traditional versus a “Born-Global” Approach. Journal of International Marketing,

12(1), 57–81.

Chien, A. A., & Karamcheti, V. (2013). Moore’s Law: The first ending and a new beginning.

IEEE Computer Society, (12), 48–53.

Contractor, F. J., Kundu, S. K., & Hsu, C.-C. (2003). A three-stage theory of international

expansion: The link between multinationality and performance in the service sector.

Journal of International Business Studies, 34(1), 5–18.

Coviello, N. (2015). Re-thinking research on born globals. Journal of International Business

Studies, 46(1), 17–26.


50

Covin, J. G., & Miller, D. (2014). International Entrepreneurial Orientation: Conceptual

Considerations, Research Themes, Measurement Issues, and Future Research

Directions. Entrepreneurship Theory and Practice, 38(1), 11–44.

Fan, T., & Phan, P. (2007). International New Ventures: Revisiting the Influences behind the

“Born-Global” Firm. Journal of International Business Studies, 38(7), 1113–1131.

Gabrielsson, M., & Pelkonen, T. (2008). Born internationals: Market expansion and business

operation mode strategies ‘ the digital media field. Journal of International

Entrepreneurship, 6(2), 49–71.

Garrett, G. (2000). The Causes of Globalization. Comparative Political Studies, 33(6-7), 941–

991.

Gomes, L., & Ramaswamy, K. (1999). An empirical examination of the form of the

relationship between multinationality and performance. Journal of International

Business Studies, 30(1), 173–187.

Helbing, D. (2014). Economy 4.0 and Digital Society: The Participatory Market Society is

Born (Chapter 8 of Digital Society). Social Science Research Network,

Hennart, J.-F. (2007). The theoretical rationale for a multinationality-performance

relationship. Management International Review, 47(3), 423–452.

Hill, T. P. (1977). On Goods and Services. Review of Income & Wealth, 23(4), 315–338.

Hutzschenreuter, T., Kleindienst, I., & Lange, S. (2015). The Concept of Distance in

International Business Research: A Review and Research Agenda. International

Journal of Management Reviews, 0(1), 1-20

Javalgi, G., Griffith D. & White S. (2003). An empirical examination of factors influencing

the internationalization of service firms. Journal of Services Marketing, 17(2), 185–

201.

Johanson, J., & Vahlne, J.-E. (1977). The Internationalization Process of the Firm-A Model of

Knowledge Development and Increasing Foreign Market Commitments. Journal of


Johanson, J., & Vahlne, J.-E. (2009). The Uppsala internationalization process model

revisited: From liability of foreignness to liability of outsidership. Journal of



51

Kiss, A. N., Danis, W. M., & Cavusgil, S. T. (2012). International entrepreneurship research

in emerging economies: A critical review and research agenda. Journal of Business

Venturing, 27(2), 266–290.

Knight, G. (2000). Entrepreneurship and marketing strategy: The SME under globalization.

Journal of International Marketing, 8(2), 12–32.

Knight, G. A., & Cavusgil, S. T. (2004). Innovation, organizational capabilities, and the born-

global firm. Journal of International Business Studies, 35(2), 124–141.

Lopez, L. E., Kundu, S. K., & Ciravegna, L. (2008). Born global or born regional? Evidence

from an exploratory study in the Costa Rican software industry. Journal of


Lu, J. W., & Beamish, P. W. (2001). The internationalization and performance of SMEs.

Strategic Management Journal, 22(6-7), 565–586.

Lu, J. W., & Beamish, P. W. (2004). Internationa Diversification and Firm Performance: The

S-Curve Hypothesis. Academy of Management Journal, 47(4), 598–609.

Lu, J. W., & Beamish, P. W. (2006). SME internationalization and performance: Growth vs.

profitability. Journal of International Entrepreneurship, 4(1), 27–48.

Madsen, T. K., & Servais, P. (1997). The internationalization of Born Globals: An

evolutionary process? International Business Review, 6(6), 561–583.

McDougall, P. P., & Oviatt, B. M. (2000a). International Entrepreneurship: The Intersection

Of Two Research Paths. Academy of Management Journal, 43(5), 902–906.

McDougall, P. P., & Oviatt, B. M. (2000b). International entrepreneurship: the intersection of

two research paths. Academy of Management Journal, 43(5), 902–906.

McKinsey. (2013). Disruptive technologies: Advances that will transform life, business, and

the global economy. McKinsey Global Institute.

Miozzo, M., & Soete, L. (2001). Internationalization of Services. Technological Forecasting

and Social Change, 67(2-3), 159–185.

Moen, Ø., & Servais, P. (2002). Born Global or Gradual Global? Examining the Export

Behavior of Small and Medium-Sized Enterprises. Journal of International Marketing,

10(3), 49–72.

Orbis | Detailed global private company information. (n.d.). Retrieved March 21, 2016, from

http://www.bvdinfo.com/en-gb/our-products/company-information/international-

products/orbis


52

Oviatt, B. M., & McDougall, P. P. (1994). Toward a theory of international new ventures.

Journal of International Business Studies, 45–64.

Oviatt, B. M., & McDougall, P. P. (2005a). Defining International Entrepreneurship and

Modeling the Speed of Internationalization. Entrepreneurship Theory and Practice,

29(5), 537–554.

Oviatt, B. M., & McDougall, P. P. (2005b). Toward a theory of international new ventures.

Journal of International Business Studies, 45–64.

Pangarkar, N. (2008). Internationalization and performance of small- and medium-sized

enterprises. Journal of World Business, 43(4), 475–485.

Peiris, I. K., Akoorie, M. E. M., & Sinha, P. (2012). International entrepreneurship: A critical

analysis of studies in the past two decades and future directions for research. Journal

of International Entrepreneurship, 10(4), 279–324.

Peng, M. W. (2001). The resource-based view and international business. Journal of

Management, 27(1), 803–829.

Porter, M. E. (1990). The Competitive Advantage of Nations. (cover story). Harvard Business

Review, 68(2), 73–93.

Ramaswamy, K., Kroeck, K. G., & Renforth, W. (1996). Measuring the degree of

internationalization of a firm: A comment. Journal of International Business Studies,

167–177.

Ritzer, G., & Jurgenson, N. (2010). Production, Consumption, Prosumption The nature of

capitalism in the age of the digital “prosumer.” Journal of Consumer Culture, 10(1),

13–36.

Rugman, A. M., & Verbeke, A. (2007). Liabilities of regional foreignness and the use of firm-

level versus country-level data: A response to Dunning et al.(2007). Journal of


Rugman, A. M., Verbeke, A., & Nguyen, Q. T. K. (2011). Fifty Years of International

Business Theory and Beyond. MIR: Management International Review, 51(6), 755–

786.

Ruigrok, W., Amann, W., & Wagner, H. (2007). The internationalization-performance

relationship at Swiss firms: A test of the S-shape and extreme degrees of

internationalization. Management International Review, 47(3), 349–368.


53

Ruigrok, W., & Wagner, H. (2003). Internationalization and performance: An organizational

learning perspective. MIR: Management International Review, 63–83.

Saunders, M., & Lewis, P. (2012). Doing research in business and management: an essential

guide to planning your project. Financial Times Prentice Hall.

Schmid. (2001). What’s new about the digital economy? Electronic Markets, 1(11), 44–51.

SICCODE.com - The Leader in SIC and NAICS Codes, Company Search, Business Lists.

(n.d.). Retrieved May 17, 2016, from http://siccode.com/en

Tapscott, D., Lowy, A., & Ticoll, D. (2000). Digital Capital: Harnessing the Power of

Business Webs. Harvard Business Press.

Teece, D. J. (1998). Capturing Value from Knowledge Assets: The New Economy, Markets

for Know-How, and Intangible Assets. California Management Review, 40(3), 55–79.

Vermeulen, F., & Barkema, H. (2002). Pace, rhythm, and scope: process dependence in

building a profitable multinational corporation. Strategic Management Journal, 23(7),

637–653.

Zahra, S. A. (2005). A theory of international new ventures: a decade of research. Journal of

International Business Studies, 20–28.

Zander, I., McDougall-Covin, P., & L Rose, E. (2015). Born globals and international

business: Evolution of a field of research. Journal of International Business Studies,

46(1), 27–35.

Zhang, Y., & Shaw, J. D. (2012). Publishing in Amj-Part 5: Crafting the Methods and

Results. Academy of Management Journal, 55(1), 8–12.

Zimmerman, D. W. (2004). A note on preliminary tests of equality of variances. British

Journal of Mathematical and Statistical Psychology, 57(1), 173–181.


54

Appendix Appendix A: Descriptive statistics of dependent variables

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation Variance

LN2014Employees 383 1,61 6,87 4,2894 1,25978 1,587

LN2013Employees 380 1,61 6,67 4,2040 1,25002 1,563

LN2012Employees 385 1,39 6,83 4,1502 1,33839 1,791

LN2011Employees 369 1,39 6,84 4,1077 1,34321 1,804

LN2010Employees 367 1,10 6,79 3,9757 1,37050 1,878

LN2014Turnover 451 11,76 20,59 16,2211 1,84080 3,389

LN2013Turnover 469 11,14 20,60 16,0317 1,89200 3,580

LN2012Turnover 460 11,26 20,21 16,0046 1,84221 3,394

LN2011Turnover 450 11,30 20,61 15,9131 1,89016 3,573

LN2010Turnover 425 11,10 19,96 15,7868 1,85475 3,440

LN2014Assets 363 13,61 18,38 16,1019 1,17059 1,370

LN2013Assets 370 13,60 18,35 15,9475 1,18991 1,416

LN2012Assets 371 13,50 18,24 15,8769 1,19459 1,427

LN2011Assets 351 13,57 18,19 15,8309 1,18309 1,400

LN2010Assets 341 13,24 18,16 15,7181 1,20702 1,457

Source: SPSS


55

Appendix B: Normality tests for 15 variables with 3 categories

Normality tests IndustryType Kolmogorov-Smirnova Shapiro-Wilk

Statistic

df Sig. Statistic

df Sig.

LN2014Employees

Digital ,095 28 .200* ,977 28 0,782 GeneralService

,055 106 .200* ,983 106 0,177

Manufacturing ,070 289 ,002 ,984 289 0,003 LN2013Employees


,072 101 .200* ,978 101 0,094



,059 100 .200* ,983 100 0,209



,098 86 ,039 ,976 86 0,113



,107 82 ,021 ,968 82 0,041

Manufacturing ,055 289 ,032 ,990 289 0,045 Digital ,078 36 .200* ,973 36 0,507

LN2014Turnover GeneralService

,078 127 ,053 ,974 127 0,015

Manufacturing ,076 290 ,000 ,983 290 0,001 Digital ,075 47 .200* ,983 47 0,717 GeneralService

,078 134 ,045 ,982 134 0,077

LN2013Turnover Manufacturing ,074 290 ,001 ,985 290 0,005 Digital ,087 46 .200* ,981 46 0,652 GeneralService

,062 131 .200* ,983 131 0,108

LN2012Turnover Manufacturing ,072 290 ,001 ,985 290 0,004 Digital ,068 44 .200* ,985 44 0,832


56

GeneralService

,061 118 .200* ,984 118 0,191

LN2011Turnover Manufacturing ,069 292 ,002 ,988 292 0,014 Digital ,083 36 .200* ,981 36 0,766 GeneralService

,056 107 .200* ,983 107 0,174

LN2010Turnover Manufacturing ,062 290 ,009 ,987 290 0,009 Digital ,128 39 ,106 ,971 39 0,394 GeneralService

,049 125 .200* ,986 125 0,238

LN2014Assets Manufacturing ,042 289 .200* ,991 289 0,077 Digital ,073 45 .200* ,981 45 0,668 GeneralService

,061 138 .200* ,989 138 0,349

LN2013Assets Manufacturing ,042 285 .200* ,987 285 0,009 Digital ,119 44 ,134 ,951 44 0,061 GeneralService

,056 139 .200* ,988 139 0,263


,063 127 .200* ,982 127 0,093


,061 117 .200* ,984 117 0,165

LN2010Assets Manufacturing ,050 291 ,078 ,993 291 0,162 Manufacturing ,050 291 ,078 ,993 291 0,162 Manufacturing ,050 291 ,078 ,993 291 0,162

*. This is a lower bound of the true significance.

Source: SPSS


57

Appendix C: Skewness and Kurtosis scores for 15 variables with 3 categories

LN2014Employees Statistic Std. Error

Digital Skewness -,222 ,441 Kurtosis ,021 ,858 GeneralService Skewness -,010 ,235 Kurtosis -,747 ,465 Manufacturing Skewness -,303 ,143 Kurtosis -,120 ,286

LN2013Employees Statistic St.Error

Digital Skewness -,079 ,414 Kurtosis ,224 ,809 GeneralService Skewness ,038 ,240 Kurtosis -,866 ,476 Manufacturing Skewness -,324 ,144 Kurtosis -,148 ,287


Digital Skewness ,340 ,409 Kurtosis -,108 ,798 GeneralService Skewness ,070 ,241 Kurtosis -,755 ,478 Manufacturing Skewness -,262 ,143 Kurtosis -,138 ,285



58



Digital Skewness -,272 ,448 Kurtosis -,473 ,872 GeneralService Skewness ,389 ,266 Kurtosis -,609 ,526 Manufacturing Skewness -,176 ,143 Kurtosis -,249 ,286

LN2014Turnover Statistic St.Error

Digital Skewness ,283 ,393 Kurtosis -,071 ,768 GeneralService Skewness -,331 ,217 Kurtosis -,690 ,430 Manufacturing Skewness -,352 ,143 Kurtosis -,287 ,285

LN2013Turnover Statistic Std. Error Digital

Skewness ,033 ,347 Kurtosis -,006 ,681


59

GeneralService Skewness -,186 ,211 Kurtosis -,800 ,419 Manufacturing Skewness -,302 ,143 Kurtosis -,267 ,285

LN2012Turnover Statistic Std. Error





Digital Skewness ,117 ,398 Kurtosis -,742 ,778


60

GeneralService Skewness -,082 ,241 Kurtosis -,894 ,478 Manufacturing Skewness -,256 ,143 Kurtosis -,199 ,285

LN2014Assets Statistic Std. Error





Digital Skewness ,736 ,357 Kurtosis ,061 ,702 GeneralService Skewness ,141 ,206


61

Kurtosis -,413 ,408 Manufacturing Skewness -,215 ,144 Kurtosis -,337 ,287




Digital Skewness ,389 ,388 Kurtosis -,341 ,759 GeneralService Skewness ,143 ,224 Kurtosis -,544 ,444 Manufacturing Skewness -,190 ,143

Kurtosis -,107 ,285

Source: SPSS


62

Appendix D: Descriptive statistics of dummy variables home countries

DE FR GB GR HU IE

N Valid 497 497 497 497 497 497

Missing 0 0 0 0 0 0

Mean ,03 ,17 ,54 ,07 ,18 ,01

Std. Deviation ,166 ,379 ,499 ,263 ,382 ,100

Variance ,027 ,143 ,249 ,069 ,146 ,010

Source: SPSS


63

Appendix E: Matrices of variance ratios

Matrix of Variance Ratios

Variances

LN2014

Turnover

LN2013

Turnover

LN2012

Turnover

LN2011

Turnover

LN2010

Turnover

1,684 1,783 1,695 1,761 1,691

1,684

1,783 1,695

1,761 1,691

1,00 1,06 1,01 1,05 1,00 1,783

1,783 1,695

1,761 1,6

91

1,00 0,95 0,99 0,95 1,695

1,00 1,04 1,00

1,761

1,00 0,96 1,691 1,00


LN2014 Assets

LN2013 Assets

LN2012 Assets

LN2011 Assets

LN2010 Assets

Variances 1,370 1,416 1,427 1,400 1,457 1,370 1,00 1,03 1,04 1,02 1,06 1,416 1,00 1,01 0,99 1,03 1,427 1,00 0,98 1,02 1,400 1,00 1,04 1,457 1,00


LN2014 Employees

LN2013 Employees

LN2012 Employees

LN2011 Employees

LN2010 Employees

Variances 1,587 1,563 1,791 1,804 1,878 1,587 1,00 0,98 1,13 1,14 1,18 1,563 1,00 1,15 1,15 1,20 1,791 1,00 1,01 1,05 1,804 1,00 1,04 1,878 1,00

Source: SPSS


64

Appendix F: Pairwise comparison of years for turnover categorized by industry


65

Appendix G: Pairwise comparison of years for assets categorized by industry


66

Appendix H: Pairwise comparison of years for employees categorized by industry

Documents

Pathway to international growth in the digital age