Completed on July 25, 2017
ROTTERDAM SCHOOL OF MANAGEMENT
ERASMUS UNIVERSITY
The Internationalisation of Young
Internet Companies
An exploratory study
Student:
Jeroen Reunis
437304
MSc in Strategic Entrepreneurship
Supervisor:
Dr. Wim Hulsink
Department of Entrepreneurship and Strategy
Co-Reader:
Alina Andrei, MSc.
Department of Entrepreneurship and Strategy

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PREFACE
International Business and in particular International Entrepreneurship has long been of interest to
me. I have a special interest in how young firms can leverage technologies such as the internet. My
ambition is to start a company with a diverse team in terms of skillset and nationality in the foreseeable
future. The copyright of the master thesis rests with the author. The author is responsible for its
contents. RSM is only responsible for the educational coaching and cannot be held liable for the
content.
ACKNOWLEDGEMENTS
In his role as supervisor I would like to thank Dr. Wim Hulsink for his availability and his support
during this phase of my studies. Dr. Hulsink has provided guidance and advise in a way that was
challenging me to perform to the best of my ability. His feedback was always constructive and of the
best intentions. His role as advisor has helped me to develop my academic skills as well as professional
skills which will certainly benefit me in the years to come.
I would also like to thank the co-reader on this thesis; Alina Andrei. Her enthusiasm regarding the
topic of this thesis and her constructive, encouraging and detailed feedback thesis has had a positive
impact on the final result.
To all the CEOs and Founders who participated in this study I would like to express my gratitude.
Despite leading their firms they have made time for me to interview them. Their openness and honesty
regarding the internationalisation strategy of their firms allowed for a proper analysis.
Finally, I would like to thank the Erasmus University for enabling me to pursue a MSc degree and for
the facilities to work on this thesis. Especially the newly renovated library and the Polak building have
become to feel like a second home after countless weeks of working there. Those times of working
on this thesis and of many fun times together with fellow-student will certainly be remembered.

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EXECUTIVE SUMMARY
International Entrepreneurship has focussed primarily on the creation and rapid internationalisation
of newly formed ventures. The emergence of these type of ventures is supported by social, political
and technological factors worldwide. Trade agreements, converging currencies and widespread
technological advancements have led to a sharp increase in globalisation of business. While many
previous studies have focused on these international new ventures, this thesis is mainly concerned
with technological advancement in the form of the internet. Internet technologies enable more and
more ventures to pursue international business opportunities through increased speed of
communication, transportation and transactions at lesser costs than before.
This study is motivated by the lack of explanation in existing literature concerning International New
Ventures, SMEs and Born Global firms. To address this lack of explanation this study defines and
studies a new type of international new venture, the Internet Enabled International New Venture.
These internet ventures are enabled by the internet to exist, generate most of their revenue via the
internet and often sell digital products to an increasingly global marketplace. These new type of
internet firms are studied in their strategic process of internationalisation. Four key components of
this process are studied. (1) Motivation, (2) Market Selection, (3) Market Entry and (4)
Internationalisation Barriers. This qualitative study aims to reveal how these new type of internet firms
internationalises. A case studies have been conducted for which founders, CEOs and managers of
thirteen young international internet firms were interviewed.
The results of this study suggest that these internet enabled international new ventures show many
similarities with INVs and BGs but are distinct in some ways as well. These firms are primarily
motivated by global envisioned founders that aim to address a large global niche market with their
products and services. In selecting foreign markets these firms often follow a reactive approach in
which the firm makes its product available in a wide variety of countries. After signs of success in
certain countries these firms would actively pursue these countries with native sales and support teams
that are located in the headquarters. Via this approach these firms enter markets virtually, often
without any form of physical presence. While doing so these firms often encounter local regulation
and language differences as greatest barriers.

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TABLE OF CONTENTS
PREFACE __________________________________________________________________ 2
ACKNOWLEDGEMENTS ____________________________________________________ 2
EXECUTIVE SUMMARY _____________________________________________________ 3
LIST OF TABLES ___________________________________________________________ 6
LIST OF FIGURES___________________________________________________________ 6
1 INTRODUCTION _______________________________________________________ 7
1.1 Firm Internationalisation ..............................................................................................................7
1.2 Research Gap................................................................................................................................8
1.3 Objective of Study........................................................................................................................9
1.4 Research Question........................................................................................................................9
1.5 Methodological Approach..........................................................................................................10
1.6 Thesis Structure..........................................................................................................................10
2 LITERATURE REVIEW _________________________________________________ 12
2.1 Traditional Views on Internationalisation..................................................................................12
2.2 Early and Rapid Internationalisation of Young Firms ...............................................................15
2.3 Motives for Internationalisation .................................................................................................19
2.4 International Market Selection ...................................................................................................20
2.5 Foreign Market Entry .................................................................................................................24
2.6 Internationalisation Barriers.......................................................................................................26
2.7 Internet Enabled International New Ventures ............................................................................27
2.8 Summary of Literature ...............................................................................................................31
3 METHODOLOGY ______________________________________________________ 33
3.1 Design.........................................................................................................................................33
3.2 Case Study..................................................................................................................................34
3.3 Case Sampling............................................................................................................................35
3.4 Data Sources...............................................................................................................................35
3.5 Data Collection Methods............................................................................................................37
3.6 Data Analysis .............................................................................................................................37
3.7 Validity and Reliability ..............................................................................................................39

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4 EMPIRICAL FINDINGS _________________________________________________ 42
4.1 Case 1 .........................................................................................................................................42
4.2 Case 2 .........................................................................................................................................45
4.3 Case 3 .........................................................................................................................................47
4.4 Case 4 .........................................................................................................................................50
4.5 Case 5 .........................................................................................................................................53
4.6 Case 6 .........................................................................................................................................55
4.7 Case 7 .........................................................................................................................................57
4.8 Case 8 .........................................................................................................................................60
4.9 Case 9 .........................................................................................................................................62
4.10 Case 10 .......................................................................................................................................65
4.11 Case 11 .......................................................................................................................................67
4.12 Case 12 .......................................................................................................................................69
4.13 Case 13 .......................................................................................................................................73
5 CROSS-CASE ANALYSIS_______________________________________________ 76
5.1 Motives for Internationalisation .................................................................................................76
5.2 Market Selection Approach........................................................................................................79
5.3 International Market Selection ...................................................................................................81
5.4 Entry Modes ...............................................................................................................................81
5.5 Barriers to Internationalisation...................................................................................................82
6 DISCUSSION AND CONCLUSION_______________________________________ 84
6.1 Summary and Discussion of Findings........................................................................................84
6.2 Contributions to Literature .........................................................................................................87
6.3 Managerial Implications.............................................................................................................88
6.4 Limitations..................................................................................................................................88
6.5 Directions for Future Research...................................................................................................88
7 REFERENCES__________________________________________________________ 90
8 APPENDIX ____________________________________________________________ 96
8.1 Interview Questions....................................................................................................................96

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LIST OF TABLES
Table 1 Internet Business Models............................................................................... 29
Table 2 - Literature Summary .................................................................................... 32
Table 3 - Overview selected cases ............................................................................. 41
Table 4 - Cross Case Analysis Matrix ......................................................................... 77
Table 5 - Motives for Internationalisation .................................................................. 79
Table 6 - Foreign Market Selection Approach............................................................. 80
Table 7 - Market Selection Variables.......................................................................... 81
Table 8 - Entry Mode Matrix ...................................................................................... 82
Table 9 - Barriers to Internationalise.......................................................................... 83
Table 10 - Contributions to Literature ....................................................................... 89
LIST OF FIGURES
Figure 1 - Thesis Structure ........................................................................................ 11

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1 INTRODUCTION
1.1 Firm Internationalisation
International Entrepreneurship has gained popularity among researchers in a variety of fields such as
international business, entrepreneurship and marketing. International Entrepreneurship itself has been
a field of academic interest since its emergence in the late 1980s after a publication in which domestic
and international new firms were investigated and compared (McDougall, 1989). This study provided
empirical evidence regarding a new type of firm that internationalized from or soon after its inception.
These new type of ventures were labelled ‘International New Ventures’ (INVs) This publication
ignited International Entrepreneurship as a new field of research on the intersection of International
Business and Entrepreneurship. These newly identified firms were characterized by early and quick
international expansion and seemed to contradict the dominant theories regarding international
expansion that can be found in International Business literature. McDougall and Oviatt (2000, p. 903)
define International Entrepreneurship as “a combination of innovative, proactive, and risk-seeking
behaviour that crosses national borders and is intended to create value in organizations”. This
definition suggested by McDougall and Oviatt is not necessarily limited to firms that expand early and
quickly but includes other organizational forms that manifest entrepreneurial behaviour too. This
definition poses no constraint on the type of activity in which the firm engages internationally, whether
it be sales, manufacturing or sourcing. Similarly, Knight and Cavusgil (2004) coined the term ‘Born
Global’ (BG) to describe young firms that internationalise early and quickly.
Before the discovery of INVs and BGs, the internationalisation process was thought of as a gradual
and incremental process. Johanson and Vahlne (1977) labelled this pattern the ‘establishment chain’.
Firms were assumed to internationalise to markets that were close in terms of psychic distance.
Internationalisation was assumed to take place through a gradual process of four sequential stages
from exporting to ultimately wholly owned subsidiaries. Initial research has been focused on the types
of ventures that compete internationally and their characteristics. As mentioned before, evidence from
the late 1980s showed a new type of venture that internationalises from or soon after inception, often
skipping the formation of a strong domestic presence (McDougall, 1989). Oviatt and McDougall
(1994) argue that the identification of these INVs is not congruent with traditional internationalisation
processes of multinational enterprises (MNEs) and Small and Medium Enterprises (SMEs) such as
stage theory (Johanson & Vahlne, 1977). A major area of International Entrepreneurship literature

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focusses of internationalisation patterns, processes and the influences on it. Prominent within this area
is the theme of dynamic internationalisation. Studies within this theme identified anomalous and rapid
internationalisation and diverse modes of entry. Important findings include that internationalisation
in the early development of a venture can positively affect growth (Autio, Sapienza & Almeida, 2000)
and that the speed of internationalisation is empowered by technology and motivated by the
competition with other firms (Oviatt & McDougall, 2005). This empowerment of technology was
already suggested by the finding of a positive impact of the integration of internet technology into
marketing activities on the performance of export activities (Prasad, Ramamurthy & Naidu, 2001) and
by arguing that virtual marketplaces could provide internationalisation opportunity for both new and
established ventures (Katz, Safranski & Khan, 2003).
1.2 Research Gap
As discussed previously, there has been some research that was focused on the intersection of
Internationalisation, The Internet and Entrepreneurship. Efforts in this direction however seem
limited, especially in the light of the great impact The Internet has on the economy and business.
Major and recent review studies in the field (Servantie, Cabrol, Guieu & Boissin, 2016; Zander,
McDougall-Covin & Rose, 2015; Jones, Coviello & Tang, 2011; Keupp & Gassmann, 2009) address
technology only briefly as being of importance for the field. The Internet as a manifestation of
technological advancements is given very little, to no attention at all. Existing literature has given much
attention to young firms that internationalise at or soon after inception. However, what seems to be
highly under researched is the intersection of young firms that internationalise rapidly via the internet.
What might explain the lack of importance given to the internet in INV and BG theory is the fact that
the boom of The Internet came after the discovery of these new type of firms. Examples that illustrate
the impact of The Internet as an enabler for International Entrepreneurship include Uber and
Deliveroo. After launching in San Francisco (USA) in 2010 Uber, a digital marketplace for ride hauling,
expanded to France within one year, by 2015 Uber had launched operations in more than 25 countries.
Deliveroo, a UK based food Delivery Company, was founded in 2013 and managed to expand to 12
countries within 2 years after its inception. The Internationalisation of young firms that are enabled
by the Internet cannot be explained by existing theories alone. Although examples of firms such as
Uber and Deliveroo might be partially explained by theory on INVs, these firms may be better studied
as a separate and new type of venture. According to Ojala and Tyrväinen (2006) software products
can be exported digitally and therefor argued that for example entry mode did not seem to be relevant

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for firms that offer these kind of products. Furthermore, a new type of born global firm, the ‘born
digital’ firm has recently been identified and scholars have called for more research in the direction of
these digital firms (Knight & Liesch 2016). The strategic process of young internationalising internet
firms seems to be underrepresented in the literature. The lack of literature on these internet firms and
their internet-enabled internationalisation process to uncovers a gap in existing literature.
1.3 Objective of Study
This study is of importance because it explores how young firms that are enabled by The Internet to
exist are motivated to internationalise and how they select and enter foreign markets. This follows
calls from other scholars for further research in this direction (Loanne, 2005; Reuber & Fischer, 2011;
Knight & Liesch, 2016). This study is desired because it contributes to a part of the International
Entrepreneurship that has been insufficiently studied. Hopefully this attempt to explore the
phenomenon of internet firms that internationalise inspires other scholars to follow. From a practical
perspective this study may benefit CEOs and founders of internet firms that aspire international
expansion. By providing them with the results of this study they may learn about key elements with
regards to the strategic process of internationalising their venture.
1.4 Research Question
In the previous paragraph a gap in existing literature has been identified. To define the scope of this
study, its objective is enclosed in the central research question and subsequent sub questions:
“How do young internet firms internationalise?”
• “Why do young internet firms internationalise?”
• “How do young internet firms select foreign markets?”
• “How do young internet firms enter foreign markets?”
• “Which barriers do young internet firms encounter during internationalisation?”

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1.5 Methodological Approach
Because of the state of the literature regarding the internationalisation of internet firms and the
formulation of the research questions, a qualitative research approach is most suitable. A systematic
literature review is conducted to determine what the most important components of firm
internationalisation are. In the literature review a distinction is made between SMEs and INVs/BGs
to compare both type of firms. A semi structured interview has been designed based on the
internationalisation strategy components that can be found in the literature. The interview was used
in a multiple case study of young internet firms that have internationalised recently. The interview was
conducted with founders, CEOs and managers of 15 firms in May 2017. Two out of the fifteen
interviews served as pilot interviews. All interviews were recorded with permission of the informant
and transcribed. The transcripts have been analysed and coded using NVivo software for Mac.
1.6 Thesis Structure
This thesis is structured in ten chapters, excluding the introduction. In chapter two traditional views
on firm internationalisation will be discussed. Traditionally research has been focussed on SME and
MNE internationalisation. Chapter three introduces new ventures such as INVs and BGs, in contrast
to traditional views these firms show rapid internationalisation patterns that occur soon after inception
of the firm. A new type of firm will be suggested that can be found on the intersect of INVs/BGs
and internet firms. This new international internet venture will be described and defined. In chapter
four the components of internationalisation strategy will be reviewed. Internationalisation strategy can
be grouped into four components that include motives for internationalisation, market selection
process, entry modes and barriers to internationalisation. Motives concern the reasons for a firm to
engage in international activity. Market selection concerns the process through which a firm
determines which foreign markets it wants to enter. Entry modes are reviewed to determine which
forms a foreign market entry may take and what distinguishes each mode. Barriers are reviewed to
determine what difficulties a firm has to overcome before or while internationalising its sales. In
chapter five the literature will be summarized and the most important topics across the four
components will be compared between SMEs and INVs/BGs. Chapter six lays out the
methodological approach that has been used in this research including data sources, data analysis
approach and an overview of the sample cases with key characteristics such as type of business and
year of founding. In chapter seven each case will be introduced and results of the analysis will be

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Figure 1 - Thesis Structure
presented ordered for each component of internationalisation strategy. A cross case analysis has been
performed and is presented in chapter eight. The cross case analysis aims to reveal similarities and
commonalities among cases and to form overarching themes that emerged from the case data. In
chapter nine the findings of this study will be critically examined and discussed in light of existing
literature on INVs, BGs and SMEs. The implications of this study will be pointed out for the field of
research and on a practical side for founders and CEOs of internet firms that aspire
internationalisation. Limitations of this study will also be addressed in chapter nine and suggestions
for future research in this direction will be suggested. Chapter ten is a reference list is included that
includes all literature sources that have been used in this study. The final chapter contains an appendix
to which is referred in the body of this thesis. In the figure below the structure of this thesis has been
visualised.

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2 LITERATURE REVIEW
This literature review starts with traditional literature on internationalisation mainly applicable to
MNEs and SMEs. After that International Entrepreneurship research will be addressed including firm
types such as INVs and BGs. These two previously mentioned parts concern internationalisation in a
holistic manner and focus on the internationalisation patterns and reasons for it. After the introduction
of traditional theories and the introduction of new entrepreneurial firms and their characteristics, this
literature view will address the internationalisation process of SMEs, INVs and BGs. This process is
split up in four components; (1) motives, (2) market selection, (3) entry mode and (4) barriers. The
final part of the literature review the significant impact that the internet has had on the economy and
business will be discussed. Business models that are specifically internet based will be reviewed and a
definition is coined to research these new kind of international internet firms.
2.1 Traditional Views on Internationalisation
The world of today is less bound by borders than ever before, globalization causes the world to ‘flatten’
and many firms expand business to foreign markets. The process of internationalisation of MNEs
and SMEs has been researched extensively in empirical and theoretical studies. This
internationalisation of firms has been of interest to scholars in International Business studies. The
internationalisation process of firms was initially theorized as a stage model. Stage theory assumes that
internationalisation processes of firms are required to follow a prescribed sequence of steps in order
to be successful. Two major paradigms can be distinguished in the traditional literature on firm
internationalisation: The Uppsala models and the three-stage in both of the models the central unit of
focus is the degree to which a firm is involved and committed to foreign markets.
Stage Theory Uppsala Model
Prior to the development of the Uppsala model, internationalisation decisions were assumed to be
made based on analysis of costs and risk associated with foreign market characteristics while taking
into account the firm’s resources (Hood & Young, 1979). These views are in line with the resource-
based view of the firm which describes the competiveness of a firm as the ability to apply its tangible
and intangible resources (Penrose, 1959). An empirical study by Johanson and Vahlne (1977) however
provided evidence of Swedish firms that started internationalisation by ad-hoc exports. Following this
study, Johanson and Vahlne (1977) suggested the Uppsala model that views the internationalisation

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process of a firm based on the behavioural theory of the firm (Cyert & March, 1963). The behavioural
approach focusses on international experience, learning, decision making, firm knowledge and
perceived opportunities and problems. The Uppsala model suggest that a firm’s internationalisation
behaviour follows a gradual process in which incremental and sequential steps are made by a firm.
The gradual process is broken down into four steps:
1. Indirect or ad-hoc exports to foreign market;
2. Direct exports to foreign market;
3. Sales subsidiary in foreign market;
4. Manufacturing subsidiary in foreign market.
According to Johanson and Vahlne (1977) the time order of a firm taking steps in this sequence is
related to psychic distance of the foreign market compared to the domestic market. Psychic distance
concerns the level to which certain factors such as language, currency, culture and communication
prevent information to flow from and to a foreign market (Beckerman, 1956). Firms are assumed to
expand to foreign markets that are close to the domestic market in terms of psychic distance and
gradually expand to markets that are further away in terms of psychic distance (Johanson & Vahlne,
1977). This expansion process is also argued to be a consequence of the liability of foreignness which
dictates that a firm operating abroad has to overcome additional costs that a domestic firm has not
(Zaheer, 1995). This means that a domestic firm will have a competitive advantage over a foreign firm
given that all other factors of influence remain equal. The Uppsala model includes two state variables
and two change variables influencing firm behaviour. Thus, resulting in a dynamic model. The state
variables include: (1) market commitment; and (2) market knowledge. Market commitment is
operationalized in terms of the amount of resources a firm commits to a foreign market and the degree
of flexibility of those resources. Market commitment increases when a firm allocates more resources
that possess a low level of liquidity (e.g. building a production line). Market knowledge is experiential
knowledge that requires experiential learning that can almost exclusively be obtained through
operations in a foreign market. The change variables include: (1) current business activities; and (2)
commitment decisions. Assuming that a lag exists between an action taken by a firm and its
consequence, results of international operations may lag behind on business activities. The Uppsala
model considers business activities in the foreign market the main source of experiential knowledge.
Decisions to commit resources, that are based on decision maker’s perceived opportunities and

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problems associated with the foreign market, are assumed to be dependent on experience in that
market. The Uppsala model thus views the internationalisation process as a step-by-step approach in
scaling operations abroad for which experience in foreign markets is required. To speed up this
process a firm requires large resources and/or the firm operates in a relative stable, homogeneous
market, or the firm has vast experience in foreign markets that are similar. Since the operationalization
of this model is designed around strategic decisions and organizational setups that are under influence
by other factors too. Examples of these factors might include powers that enhance or hinder export,
acquisition and necessity of information, selection process of markets and entry modes. The presence
of these influential factors poses a difficulty on the ability to test this model.
Three Stage S-Models
Contractor, Kundu and Hsu (2003) argue that international expansion entails that internationalisation
is a non-linear process in which increased internationalisation is not necessarily good for a firm’s
performance. This is contradicting the general assumption that the greater the extent of international
expansion is, the better the firm performs (Vernon, 1966). Contactor, Kundu and Hsu (2003) suggest
that the internationalisation process follows an S-shaped model that is divided in three subsequent
stages of increased international expansion. The three stages that can be identified are: (1) early
internationalisation; (2) later internationalisation; and (3) excessive internationalisation.
Stage 1 - early internationalisation: the liability of foreignness plays a great part in the firm’s ability to
expand to foreign markets. In this stage the incremental costs of entering a foreign market outweigh
the incremental benefits because of high costs such as learning about a new market and costs
associated with setting up operations. Because these costs can be only spread out over one or a few
countries in this stage the performance of internationalisation efforts is likely to be negatively affected.
Stage 2 - later internationalisation: this is the optimal stage to be in for a firm. In this stage incremental
benefits of entering new foreign markets are higher than the incremental costs. This phase is associated
with six key benefits for the firm:
• The firm is more experienced in internationalisation than its global competitors (Ghoshal &
Bartlett, 1990). This experience may result in faster and more efficient entries into new markets
(Johanson & Vahlne, 1977);

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• The firm has the ability to trade arbitrarily because of its ability to access resources from
different locations such as low cost labour (Hennart, 1994);
• The firm is able to exploit firm-specific assets and knowledge in multiple foreign markets
herby gaining a competitive advantage over domestic firms (Hymer, 1976);
• Achieving global market power which may lead to monopolistic positions that can increase
entry barriers for competitors (Kogut, 1985);
• Geographical diversification may reduce risks due to asynchrony in business cycles across
countries, the collection and possession of multi-currency cash flows and operational flexibility
of manufacturing activities (Contactor, 2007);
• Achieving economies of scale in global markets (Hymer, 1976). Internationalisation may
enable a firm to centralize activities such as research and development. The fixed costs
associated with research and development and other overhead costs can then be spread out
over multiple markets which may give the firm a competitive edge over its competitors.
Stage 3 - excessive internationalisation: although the assumption that increased internationalisation
leads to increased performance as a result of risk reduction by spreading risks over a diverse set of
markets, entering additional markets beyond forty to sixty leads to decreased profits (Contactor,
Kundu & Hsu, 2003). The reasoning is that after this tipping point the extent to which economic and
cultural differences vary increases rapidly. This poses difficulty to the firm in the form of information
overload and increased costs of management. Thus, a firm ideally positions itself in stage two of this
model where it can benefit from its presence in a large variety in foreign markets.
2.2 Early and Rapid Internationalisation of Young Firms
Research on MNEs and the way in which they expand internationally has focused mainly on large and
mature firms or on SMEs that have established a domestic position for many years. Stage theory views
internationalisation as a gradual process for which experiential knowledge is required. To progress
more rapidly through the stages firms, require large resources and/or operates in stable, homogeneous
markets or have a lot of experience in similar markets. However, more recent studies contradict this
theory. Recently, firms were identified that did not meet the requirements that were believed to be a
prerequisite for international expansion. These firms seemed to skip steps in internationalisation
process.

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International New Ventures
An INV is defined as: “business organizations that, from inception, seek to derive significant
competitive advantage from the use of resources and the sale of outputs in multiple countries” (Oviatt
& McDougall, 1994, p. 49). This definition clearly stretches that internationalisation takes place early
in the firm’s life. Contrary to MNE and SME theory, in which large size is a requirement for
international expansions, INVs are defined based on age instead of size. INVs can be distinguished
from Domestic New Ventures (DNVs) in terms of sales originating from abroad. INVs have at least
5% of their sales from foreign markets (McDougall, 1989). What makes INVs unique is the fact that
they are international from inception in terms of resource commitment in the form of human capital,
finance, time or location. This definition, unlike stage theory definitions puts a greater emphasis on
firm age rather than on firm size. A major ambiguity in the definition of an INV is the moment at
which the INV is established. Vesper (1990) argues that no single point in time can be definitely argued
to be the moment on which a new firm is established because a firm’s establishment is “spread over
time”. Because of this ambiguity, inception should be defined as the point at which a firm manifests
an observable commitment to multiple nations in terms of resources allocated to generate saleable
outputs (McDougall & Oviatt, 1994). When INVs and DNVs are compared, they are found to be
different in terms of strategy and industry characteristics (McDougall, 1989). INVs follow more
general strategies, aiming for wide market coverage, and serve many different customer segments
through a diverse set of channels. An important characteristic of INVs is the fact that they generally
rely on outside resources for financing and manufacturing. By leveraging external capital and resources
they are able to enter foreign countries on large scale. INVs, due to a lack of resources that arguably
is common among new firms, focus more on controlling resources rather than owning them. DNVs
on the other hand compete by focusing on a limited amount of geographical markets and forward
integration of their value chain. DNVs are also assumed to produce and sell products that are bought
only irregularly by customers. This irregular purchase of goods implies that the DNV and its customer
are closer connected than the INV and its customer. INVs are argued to be more common in
knowledge-intensive industries such as the technology industry. This follows the reasoning that
knowledge is inherently mobile and therefor easier to bring across boarders than if it were fixed assets
being used in the internationalisation process (McDougall, Shane & Oviatt, 1994). Not only are INVs
more prevalent in knowledge-intensive industries; the greater intensity of knowledge in the firm, the
faster the pace of internationalisation (Autio et al., 2000).

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Based on a sample of twenty-four INVs, four types of INVs can be distinguished based on
the number of countries in which they are engaged and the degree to which they internationalised
value chain activities (Oviatt & McDougall, 1994). New International Market Makers (NIMMs) have
a low degree of internationalisation of their value chain. These firms engage in arbitrary trade by
matching supply of one county to demand of others. Core activities that NIMMs internationalise are
inbound and outbound logistics. They can be grouped into: (1) import/export start-ups that are active
in a few nations, which are familiar to the founder; and (2) multinational traders that are active in many
countries and are continuously searching for opportunities globally to meet demand. NIMMs are often
found to be importing and exporting physical goods. The second type of INVs are geographically
focused start-ups. These are firms that are highly specialized in meeting the needs of a specific region
which therefor also restricts them to that specific region. They gain a competitive advantage by
utilizing foreign resources as part of their value chain activities. So, unlike NIMMs, geographical
focused start-ups internationalise their value chain to a greater extent but, are limited to a region. The
last form INVs can take is that of Global Start-ups. Perhaps this is the most radical manifestation of
IE because its geographical expansion potential is unlimited. These firms actively respond to
globalizing markets by internationalising large parts of their value chain and sell the outputs they
produce wherever the largest return can be achieved.
Entrepreneurs can be defined as typical innovators (Schumpeter, 1934). Innovation is among
the key triggers of evolutionary and revolutionary changes in economic systems. It ends old equilibria
and forms new ones. Trough continuous repetition of this process, economic systems are always
changing. Following Schumpeter and congruent with this view, Kirzner (1973) suggested that
innovation is not the only driver of change in markets but also the identification of profitable
opportunities drives change. Entrepreneurs typically act on those opportunities and exploit them.
Market imperfections may exist because of unequal possession of knowledge (Kirzner, 1985). The
absence of transparent markets in which all knowledge is available to all parties makes
entrepreneurship possible. Entrepreneurship involves information seeking behaviour and the ability
to recognize potential profitable opportunities by being alert to cues (Kaish & Gilad, 1991). Being
alert is found to be influenced by the entrepreneur’s past experiences (Casson, 1982). Experiential
knowledge that influences alertness helps entrepreneurs to process information. When it comes to
meeting demand in any given market it can either be met by a local entrepreneur or an international
entrepreneur. Entrepreneurs that found an INV, because of their earlier experiences, have higher
levels of alertness regarding the identification of opportunities for bringing together resources from

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various countries and selling the outputs in an international market (McDougall, et al., 1994). Those
entrepreneurs are generally educated abroad and well-travelled. Founders that have a wide
international network of contacts also seems to be a major explaining factor in their existence. Many
founders of INVs are immigrants that have large networks abroad. McDougall et al. (1994) argue that
attempting to prevent inertia explains why founders of INVs start competing internationally rather
than domestically. Firms that have a history of operating in the domestic market form routines and
cultures that are prone to inertia. When the ambition for international expansion becomes latent,
inertia becomes problematic because a firm then has to break with its routines in order to align with
the international external environment. Founders of INVs try to avoid inertia by internalizing habits
and routines that are aimed for international operations from inception. Illustrative of this is the case
of Technomed (McFarland, 1991). Technomed is a French firm that uses English as primary language
throughout the firm. This is highly unusual for a French firm. Technomed publishes its external
documents such as annual reports in English and showcase flags of the nations in which they operate
in its offices. When INVs are formed they have less resources and track record than large and mature
firms. Also they tend to be structured differently. INVs often demand a lot of resources during the
start-up phase whilst having very few. Unlike MNEs and SMEs that strive to control assets (Davidson,
1982) INVs often own little resources and rely on hybrid structures instead. In hybrid structures
resource ownership is as much as possible externalized (Cooper & Dunkelberg 1986). These hybrid
structures are often formed through networks of founders and therefor may rely on trust.
Born Globals
Efforts by other scholars defined this phenomenon as Born Global (BG). The term BG was conceived
by Rennie (1993). BGs are firms that view the whole world as their market place, internationalise
within two years from inception with a minimum of 25% of their output and are usually formed as a
result of a breakthrough technology or process (Knight & Cavusgil, 1996). Contrary to traditional
theory that argues psychic distance as a determinant of geographical expansion BGs are expanding to
other geographies based on past experiences of founders and their network (Madsen & Servais, 1997).
BGs are not limited to technology industries but are also to be found in other industries. The base for
BGs might be the existence of niche markets that are geographically dispersed and are too small on a
domestic level. Hennart (2014) argues that the sale of niche products is a necessary condition for BGs
to exists and that the marketing mix of BGs need no local adaptation in different countries. The
uniform marketing approach seems to be in line with the homogenization of buyer preferences around

19
the globe (Knight & Cavusgil, 2004). According to Knight and Cavusgil (2015) BGs are
‘’entrepreneurial start-ups that, from or near their founding, seek to derive a substantial proportion of
their revenue from the sale of products in international markets’’ (p. 4).
Although INVs and BGs have many similarities they should be viewed as being distinctive in some
areas according to Knight and Cavusgil (2015). The former could potentially include companies
launched from within multinational enterprises, includes potentially multiple value chain activities such
as procurement and manufacturing and multiple modes of entry. A commonality amongst BGs and
INVs is that they internationalise whilst lacking substantial resources. According to Knight and
Cavusgil (2015) they therefor tend to favour export as mode of entry. BG firms appear to be a
worldwide phenomenon and are being founded in large numbers. Estimated is that on average 18%
of young firms worldwide can be defined as BG (Mandl, Celikel-Esser & Širok, 2012). Although they
appear in almost every important market, their share of the total population of young enterprises varies
greatly from one county to another. However, small countries have a higher share of BG firms than
large ones. Knight and Cavusgil (2004) have shown that, in addition to being a widespread
phenomenon in terms of geography, BGs can be found in different industries.
2.3 Motives for Internationalisation
SME Motives
Many studies have found motives for SMEs to internationalise. The motives for an SME to expand
to foreign countries are dynamic and among the most crucial elements in a firm’s internationalisation
process (Wiedersheim-Paul, Olson & Welch, 1978). The motives for internationalisation can be
categorized to be either proactive or reactive (Czinkota, 1982) and are driven by internal or external
factors (Leonidou, 1989). Proactive motives are based on firm specific strengths that can be leveraged
to pursue opportunities abroad. An example of a firm specific strength could be the development of
a new technology. Reactive motives concern a firm’s response to pressure in the organisation or in
the firm’s environment. If the firm finds competition in its domestic market to intense or regulations
in its domestic market poses a threat on its business, the firm might respond with internationalisation.
Many barriers can be derived from literature. According to Leonidou (1989) the most prevalent
include: having a unique product offering, having idle production capacity, constraints and regulations
in the domestic market, fierce competition in the domestic market, recognition of overseas
opportunities and encouragement from external parties such as investors or government. In addition

20
to that SME top manager’s perception of internationalisation influences the firm’s strategy to a great
extent (Stuart & Abetti, 1987). Also following important customers and thereby increasing
commitment to a market is argued to be a motive for SMEs internationalisation (Schulz, 2007). Finally,
often motives are lacking and coincidence plays a great part in internationalization according to Schulz.
Through a coincidental meeting of a potential export partner at an exhibition or via the network of an
employee, a firm may accidentally internationalise.
INV & BG Motives
INVs and BGs, compared to SMEs show similar motives to internationalise. For BGs, being
entrepreneurial ventures, the most prominent motive to internationalise is the global vision of its
founders (Jolly, Alahuhta & Jeannet, 1992). Management of BGs view the world as their market place.
McDougall and Oviatt (1994) provide evidence that founders of INVs are often experienced in
international business and are often immigrants. Because of this prior experience they have likely
developed competencies that reflect in a global vision. Jolly et al. further argue that BGs often sell a
high quality and innovative product that are unique in a way that they are disrupting and redefining
entire industries. This innovation often leads to a product that is standardized to a great extent. With
a standardized product BGs can cater to geographically dispersed niche market segments at a faster
pace and in a more agile manner than larger firms. Also Madsen and Servais (1997) stretch the
importance of catering to a niche market as being one of the most important motives for
internationalisation. The domestic market for niche products is often limited. Via international
networks, these niche products can spread quickly in homogeneous markets such as technology.
Finally, influence of investors may motivate a firm to internationalise. Young firms that are backed
financially by venture capital are expected to grow substantially in the early stages of the firm’s
existence. Because of this, investors a push firm to expand internationally rapidly in order to achieve
high investment returns. In some cases, investors may be able to legitimize the firm in a foreign
country. In the worst case however, the risk exist that the investor leads the firm into the ‘wrong’
market (Mäkelä & Maula, 2005).
2.4 International Market Selection
International market selection (IMS) concerns the efficient and effective selection of a foreign target
market where more than one alternatives exist (Papadopoulos & Denis, 1988). It comes prior to the

21
actual decision to enter a market and its following entry mode decision. In contrast, Anderson and
Gatignon (1986) suggest that firms should first decide on the entry mode before selecting the country.
Selection of a target market in a foreign country is an important part in the strategic process
of a firm’s international expansion because it can be a critical component for a firm in succeeding in
its international expansion. In a highly fragmented world that consist of 195 sovereign states (United
Nations) it is impractical for a firm to enter all of those for a number of reasons. Firms need to select
foreign markets with care since they are limited in time and financial resources. Additionally, countries
may vary in terms of the potential they hold, which may differ for any given firm. As compared to
Multinational Enterprises, INVs may also be limited in resources in terms of management experience,
foreign market knowledge and skills related to international business practices. Due to these
limitations INVs it is of great importance to select foreign markets carefully in order to avoid failure.
SME International Market Selection
It can be argued that there exist at least two approaches to IMS. First, a systematic or rational approach
can be taken. In existing literature on IMS there seem to be mixed views regarding the term of market
selection. A distinction in systematic approaches can be made between seeing the country selection
process as a one-stage model and a stage-based process. The former tends to see IMS in isolation
rather than as a component of the rest of the internationalisation process. The methods described as
one-stage are partly based on the taxonomy suggested by Papadopoulos and Denis (1988). The latter,
which can be found in more recent literature (Cavusgil, 1985; Cavusgil, 1997; Koch, 2001), implies a
gradual process consisting of multiple phases. These phases may include exploratory screening of
markets (on a macro-level), extensive screening related to a specific group of products or an industry,
and final choices based on firm related details. A further distinction can be made whether the approach
is qualitative or quantitative. Second, a non-systematic approach can lead to the selection of a foreign
market. This second approach tends to be more irrational and can also be influenced by chance.
The first one stage model concerns market grouping methods that bases a country selection
process for many countries on a broad array of indicators related to the political, economic and social
situation in a country. These methods, that can be defined as macro segmentation approaches, group
countries that show similarities in clusters based. Two IMS methods have been suggested that can be
labelled as marketing grouping method (Liander, Terpstra, Yoshino & Sherbini, 1967). Both of these
methods strive to first classify similar countries and group them in clusters based on their level of
industrial development. Next, the firm should decide on which cluster best matches their products

22
and current markets. Finally, within the best fitting cluster the firm should start expanding to the best
country inside that cluster. It can be argued that for INV’s this method is perhaps outdated and too
general in terms of country indicators. A more refined approach is that of micro-segmentation.
Whereas macro-segmentation lacks specific indicators during country screening and tend to rely
mostly on very general and broad indicators, a micro-segmentation approach is based on qualitative
variables that are unique for each firm and for relevant data is not always available. Qualitative variables
may include factors such as consumer behavior or legal issues and the use of them has been suggested
as a way to assure a more comprehensive country screening (Papadopoulos & Denis 1988).
The second form of one stage methods to select a foreign market is a market estimation
approach. Marketing estimation is more concerned with evaluation of foreign markets based on
criteria and preferences set by the firm. Countries that score high in the selection process may be
chosen for international expansion. Although they may differ per method, criteria that can be used in
market estimation include market growth, size, accessibility and intensity of competition
(Papadopoulos & Denis, 1988). Among market estimation approaches a distinction can be made
between total demand and import demand methods. Total demand methods include multiple factor
indices and econometric methods. In addition to the methods that were mentioned in the previous
paragraph by Liander et al. (1967) suggest a third method that involves a preference ranking of
countries that is based on an index of economic development criteria and an index of a country’s
internal stability criteria. This method is further illustrated by an example in which market potential of
a country was determined and compared by deriving indices regarding ‘market quality’ of countries
(Samli, 1977). Indices were derived from the average of macro-level indicators (e.g. national income
and car ownership). Those indices are to be adjusted for relative size, in terms of population, of a
foreign market versus the firm’s home market. Finally, an index should be multiplied by the size of
the domestic market. Samli (1977) argues that this approach yields the total potential of a foreign
market. It should however be noted that in reference to INVs this method lacks firm and product
specific indicators. Unlike total demand methods that aim to predict total demand, import demand
methods attempt to estimate the proportion of import of the total demand for a product of service in
a given foreign market. Although perhaps not exhaustive, two methods will be described briefly. Trade
statistics commonly form the input for these methods. First, a multiple criteria method can be used
to estimate import demand using including import related statistics regarding growth rate, size,
competitiveness, and trade balance of a market. It can be argued that this method is qualitative and
perhaps even too general since the acceptance and rejection stratum of the outcomes is set by the

23
analyst. Other disadvantages may include the delay in data collection and publication by the providers
of these statistics, and the fact that the classifying of products by the agency that collect the data could
be to general (Papadopoulos & Denis, 1988). Second, a method to calculate shifts in import growth
between multiple countries. An analyst should determine the growth rates of imports regarding a
product(group) for a cluster of countries, the growth rates should be compared to the average growth
rate of the cluster hereby allowing the identification of growing markets within the cluster (Green &
Allaway, 1985).
INV & BG International Market Selection
Compared to SME literature, little has been studied or written concerning the international market
selection process of INVs and BGs. Generally, INVs and BGs are argued to have no predefined set
of criteria when it comes to selecting foreign markets. New countries are evaluated separately and are
not selected based on a specific routine (Sharma & Blomstermo, 2003). Unlike stage theory, which
assumes firms to internationalise to markets that are near in terms of psychic distance, psychic distance
is of less important to BG firms (Freeman & Cavusgil, 2007). One of the reasons for this could be
that as mentioned earlier, these type of firms are often found in high technology industries and are
catering to homogeneous niche markets. The main elements BGs and INVs look for in selecting
foreign markets are market size, their network and language. BGs are often headquartered in small or
saturated domestic markets and therefor look for markets that hold great potential in terms of large
demands (Freeman, Hutchings, Lazaris & Zyngier, 2010). Sharma and Blomstermo (2003) found in
their sample of BGs that the firms would internationalise to markets in which they had a network of
weak-ties. Czinkota and Ursic (1987) argue that having a local network of weak-ties in a foreign market,
combined with communication advancements can reduce psychic distance to great extent. Others also
found that a firm’s internationalization is tied to its network abroad and that choices are less influenced
by psychic distance (Coviello & Munro, 1997). An important factor that helps to build and maintain
a network abroad is the ability to communicate in the same language (Lautanen, 2000). Therefor
psychic distance might be less relevant to BGs and INVs than language when selecting markets. An
important finding according to Sharma and Blomstermo is that BGs neglect researching local
regulations and laws by governments when selecting new markets.

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2.5 Foreign Market Entry
SME Entry Modes
Research on entry modes takes an important place in the field of International Entrepreneurship.
Entry mode decisions are considered to be amongst the most important decisions during the process
of internationalisation (Anderson & Gatignon, 1986). One of the reasons for the great importance of
entry modes decisions could be the great implications on future performances in foreign markets
(Brouthers, 2002). Another reason could be that, once establishes, an entry mode has a relative
definitive character, it is difficult to overcome and change (Brouthers & Hennart, 2007). Entry modes
have been described and researched often in existing literature. The main focus of entry mode research
is the level of control a firm has over its foreign operations. Control could arguably be defined in
terms of ownership or influence. Control is important since it allows a firm to coordinate its activities,
follow its strategy, revise its strategy when needed and be able to solve disputes (Davidson, 1982). The
level of control has traditionally been seen as close linked to the amount of resources committed by
the firm. It could be argued that the more control a firm wants to have; the more resources it has to
commit. Commitment of resources is needed as increasing control could lead to higher overhead
costs, increased financial exposure and also higher costs for switching strategies (Vernon, 1983).
Following the reasoning of Anderson and Gatignon (1986), high-control entry modes need higher
levels of resource commitment but can increase return and risk. Low-control entry modes on the other
hand minimize resource commitment and risk but can also compromise returns. Osland, Taylor and
Zou (2001) argued that entry modes could not only be differentiated based on the level of control and
quantity of resources committed but also the level of technological risk. This means that in entry
modes, excluding wholly owned subsidiaries, a potential risk exists of unintentional transfer of
(in)tangible knowledge.
According to Root (1998) five types of foreign market entry can be distinguished; exporting,
licensing, joint-ventures, contract manufacturing and wholly-owned subsidiaries. Exporting can be
subdivided in indirect export, where the firm’s outputs are being sold into foreign markets through an
independent intermediary, and direct export. Exporting is associated with low commitment and risk,
low control and the absence of learning experiences. Licensing happens when a firm offers proprietary
assets to another firm in the exchange for royalties on sales. A form of licensing is franchising.
Contract manufacturing is an arrangement with a foreign firm in which the foreign firm is responsible
for the manufacturing of the product or parts of it, mainly motivated by cost reduction. Joint-ventures
are constructions in which a firm collaborates with another firm, or other firms, to establish a new

25
entity in the host country. In a joint-venture equity and resource allocation is usually split between
participants. Finally, a mode of entry could be a wholly-owned subsidiary (WOS). A WOS gives a firm
full control over overseas operations but at the same time it poses the greatest risk on the firm in
comparison with other entry modes. WOS can be formed via acquiring local existing firms or through
‘greenfield operations’ in which the WOS is established from scratch.
INV & BG Entry Modes
Little research has been done concerning the type of entry modes that INVs and BGs use when
entering a foreign market. Therefor a comparison between these firms and SMEs is difficult to make.
An important finding however is the suggestion that entry modes for these type of firms differ greatly
for each market and that they are usually based on the opportunities that exist in the network that the
firm has in a specific country (Moen, Gavlen, Endresen, 2004). Bell (1995) suggested on the basis of
a sample of software firms that five types of entry modes can be identified: Indirect exports,
Agent/distributor agreement, Export sales employees, Licensing and Joint Ventures and Local
subsidiaries. Moen, Galven and Endresen (2004) argue that those classifications are more applicable
to firms that sell physical products and do not hold for firms that sell digital products such as software
products. They further identified a new type of entry mode for these firms which they describe as
“virtual entry”. In a virtual entry firms aim to deliver their customers a perception of being in close
proximity. While all the firm’s resources remain in the country in which the firm is headquartered, the
firm sets up local websites and phone numbers for each foreign market. The findings also suggested
that firms show greater commitment to foreign markets where they have relationships, implying that
entry decisions are tightly connected to the firm’s network. It could be argued that especially for INV’s
entry modes can be of great importance mainly due to the potential relatedness of control and
flexibility. Since INV’s internationalise at or short after inception it could be that those firms are still
in a learning and experimental phase and are therefore in need of a flexible entry mode that allows
them to change their plans. From a sample of high-technology start-ups Burgel and Murray (2000)
concluded that an entry mode decision is primarily based on the trade-off between the availability of
resources and the requirements of customers regarding support. A restriction of previously mentioned
concepts is that it is mainly applicable to manufacturing firms and to lesser extent to service firms
(Ekeledo & Sivakumar, 2004). Following this restriction, it can be argued that the intangible makeup
of certain high-technology products, such as software and digital products or services, pose a challenge
to existing internationalisation models and theories that conceptualize products as materialistic

26
objects. According to Ojala and Tyrväinen (2006) software products can be exported digitally and
therefor argued that entry mode did not seem to be relevant for firms that offer these kind of products
in relation with the distribution model of the firm. Entry modes are only relevant for supporting
activities such as customer service and support for sales (Ojala & Tyrväinen, 2006).
These methods of digital exporting, also called “virtual market entry” is associated with
disintermediation in the literature. It is also associated with lower costs of sales and therefor is
beneficial for a firm (Ghosh, 1998). Research has shown that the ability to sell good digitally via the
internet is mostly beneficial for firms that sell highly specialized niche products and services. Firms
with less experience, which is also the case for many young firms such as INVs and BGs, may benefit
more from virtual exporting channels. It is argued that younger firms are more devoted to the internet
and allocate more resources to these kinds of channels (Morgan-Thomas & Bridgewater, 2004). This
argument is confirmed by Geyskens, Gielens and Dekimpe (2002) who suggested that less experienced
exporters tend to favor newer export methods and embrace technological advancements compared
to more experienced exporters.
2.6 Internationalisation Barriers
SME Barriers
Whenever an SME firm desires internationalisation or actively engage in it, the firm might encounter
certain barriers. Barriers are restricting a firm in its ability to initiate, grow or maintain its foreign
operations (Morgan & Katsikeas, 1997). A distinction between two type of barriers can be made. First,
firms may experience barriers that restrict them from pursuing international entrepreneurship and
second, barriers that a firm experiences when the firm already started its foreign operations. The
barriers that an SME may experience include external barriers in the form of market based barriers
and industry specific barriers and internal barriers such as firm specific or financial barriers.
Market based barriers include five types of barriers that can be found in the literature. First,
firms may experience liability of foreignness (Hymer, 1976). This implies that foreign firms are
disadvantaged compared to domestic firms due to unfamiliarity with business conditions. Second,
firms may experience institutional regulations and constraints that are different from the domestic
market (Leonidou, 1995). Third, Leonidou stretches the significance of lacking information to find
and analyse a foreign market as a barrier to internationalise. Fourth, cultural differences as a
manifestation of psychic distance are found to be a barrier (Karagozoglu & Lindell, 1998). Finally,
invoicing and collecting payments from abroad can be difficult (Leonidou, 1995).

27
Among the internal barrier for a firm regarding the firm itself is the liability of outsider ship.
In the paragraph on market selection it became clear that networks are of great importance for a young
firm to select a foreign market. According to Johanson and Vahlne (2009) markets consist of networks
between individuals and firms. While engaging in business activities in a foreign market, building trust
and showing commitment are important. To achieve that, having a local network is crucial and a lack
of that is a barrier for firms. Finally, the internal barrier of resource scarcity might restrict a firm in its
foreign activities (Karagozoglu & Lindell. 1998). Especially firms with high customer acquisition costs
or overhead costs might experience this as they can only allocate their resources to a limited number
of markets. An important note is that barriers to internationalise for SMEs differ across industries.
INV & BG Barriers
Compared to SMEs, very little attention has been given in literature to the barriers experienced prior
to or while internationalising by entrepreneurial firms such as INVs and BGs. Because of the many
differences between entrepreneurial firms and SMEs it might be that entrepreneurial firms experience
barriers in a different way. Most prominent in the literature are barriers that concern financial
restrictions of some kind. Barriers in this area include; resource scarcity, high cost of foreign sales and
customer acquisition, high transportation costs and foreign exchange risks (Shaw & Darroch, 2004).
Because of these financial barriers INVs are advised to build and maintain an extensive international
network (Baum, Schwens & Kabst, 2011). Other barriers specifically found for INVs or BGs include
the unfamiliarity with procedures and bureaucratises, difficulty to communicate with foreign
customers and the inability to produce enough output for foreign sales (Uner, Kocak, Cavusgil &
Cavusgil, 2013).
2.7 Internet Enabled International New Ventures
Literature on internet enabled international new ventures is seemingly non-existent. Most prominent
SME and INV literature originates from before 2000. In the last decade international business and
entrepreneurship has radically transformed. The internet has been a great enabler in this
transformation. In this subchapter the importance of the internet for the economy and firms will be
addressed. Also different types of internet business models will be described and an attempt will be
made to define young internationalising internet firms.

28
The Internet Economy
Estimates for 2016 based on data collected from sources such as the World Bank and the United
Nations indicate that roughly 46% of the world’s population currently has internet access at an annual
growth rate of over 8% (Worldometers, 2017). The total sum of e-commerce related trade worldwide
amounted to eight trillion USD in 2011 (Manyika & Roxburgh, 2011). The Internet is estimated to
make up 5.3% of total GDP in the G-20 countries (Dean, Digrande, Field, Lundmark, O'day, Pineda
& Zwillenber, 2012). To further emphasize the impact, the Internet has on the economy, the costs of
temporary shutdowns may be taken as a proxy. Estimates by Deloitte (2016) indicate that an internet
shutdown in a country with a population of sixty million and a GDP of 45.000 USD per capita may
cost 141 million USD per day that the shutdown occurs. B2B internet penetration is also at an all-time
high. In the Netherlands for example, one-hundred per cent of firms with less than 500 employees
have internet access (CBS, 2012).
Internet Business Models
An internet business model concerns the method of making revenue via the internet. Stewart and
Zhao (2000) define a business model as: “a statement of how a firm will make money and sustain its
profit stream over time”. This definition views financial value as the most important component of a
business model. An internet business model is concerned with information related to costs, price and
revenue. Via an internet business model, a firm may benefit from properties associated with the
internet to conduct business. Following this definition based on financial value a classification can be
made that distinguishes various internet business models based on the way via which a firm makes
money (Afuah & Tucci, 2001). In the table nine different business models can be seen with
corresponding manifestations of each business model.

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Table 1 Internet Business Models
Decreasing costs of transportation and the advancements in digital and communication technologies
such as The Internet are enablers for rapid Internationalisation (Oviatt & McDougall, 2005). These
new technologies allow for faster and better quality of communication and transactions at less costs
than before. It can be argued that those decreased costs, in contradiction to previously held beliefs
that internationalisation requires firms to be resourceful. This may result in a greater potential for
firms to pursue International Entrepreneurship. Due to the enormous increase in usage of internet
technology, entrepreneurship is fundamentally transforming (Brynjolfsson & Kahin, 2002). This is
reflected by quick and drastic changes in marketplaces worldwide. Internet technology has created
new global markets and modified existing ones greatly. In cases such as the ride-hauling or publishing
industry, internet technology has considerably replaced existing markets. The impact of internet as
enabler of business allowed for a new type of entrepreneurship to come into existence, so called
Virtual Instant Global Entrepreneurship (Katz, Safranski & Khan, 2003). Internet capabilities might
be defined as a firm’s ability to leverage internet technology to benefit a firm’s international activities.
Firms that successfully engage in International Entrepreneurship and exhibit high levels of
international innovation and pro-activeness are able to internalize internet capabilities to a great extent
(Galvas & Mathews, 2014). Based on a sample of 8 case studies of travel and tourism companies
Galvas and Mathews (2014) argue that reliance on traditional methods of international business and
Business Model Description Manifestation
Brokerage
Brokerages are marketmakers that connect
supply and demand.
Marketplace - Auction - Transaction - Distributor -
Search Engine - Virtual Marketplace
Advertising
Broadcasters may sell digital real estate to
display advertisements to users
Portal - Classified Ads - PPC1
- CPM2
Infomediary/Data
Gatherig and analysing of customer data and the
sale of this data
Advertising Networks - Incentive Marketing - Web
Analytics - Market Research - User Data
Commerce
Sale of goods via retail or wholesale via
webshops
Virtual Store - Click and Mortar - Bit Vendor
Manufacturer
Disintermediation by manufacturers in order to
sell directly to end-customers via webshops
Purchase - Lease - License
Affiliate
Digital real estate that drives converting traffic
to partners. In return an affiliate receives
comission
Banner Exchange - PPC - Commission
Community Online gathering of user data
Open Source - Social Network - Open Content -
Broadcasting
Subscription
Peridoically charging of a fee for usage of a
service or product
SaaS - PaaS - IaaS - Content - Freemium - Services
Utility
Let's users pay based on the amount they
consume of a service
On-Demand Metered Subscriptions/Usage
1
Pay per Click; 2
Cost per Mile

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networking activities dilute a firm’s development of internet capabilities. It is further argued that
Internet capabilities improve a firm’s ability to obtain and transfer knowledge, enhances efficient
transactions in a global marketplace and improves the development and maintenance of networks
beyond the firm’s domestic borders. Other studies found that exporting firms in the UK with a high
degree of entrepreneurial orientation are more devoted to the internet and have better export
achievements (Mostafa, Wheeler & Jones, 2005) and internet marketing capabilities may lead to
international growth in firms that are internationally oriented (Mathews, Bianchi, Perks, Healy &
Wickramasekera, 2016).
Facilitated by digital technology firms can always be available, treat and target customers on a personal
level and deliver standardized offers to large markets at smaller costs and less risk. Digital technologies
like the Internet may provide firms with full-time availability, personalized offerings for their
customers and access to large potential markets at reduced risk and lower cost than traditional entry
modes. Another advantage of internet-enabled internationalisation is the fact that, as a sales channel,
it is found to be faster than more traditional methods of export such as agents or intermediaries
(Arenius, Sasi & Gabrielsson, 2006). A case study by Loane (2005) confirms the faster pace trough
which internationalisation can take place by providing evidence that the use of internet by firms can
enhance the speed of internationalisation.
Definition of Internet Enabled International New Ventures
In current literature a clear definition of new firms with internet based business models that show a
rapid internationalisation pattern at a young age seems absent. Therefore, a new definition of these
type of firms is desired to be able to study them. The definition will be derived by combining literature
on INVs/BGs and (internet) business models. Based on the definitions by Oviatt and McDougall
(1994) and Stewart and Zhao (2000) with the addition of the internet to the business model the
following definition is suggested:
“an Internet Enabled International New Venture is a business organization that generates its
revenue and profit streams via the internet that, from inception, seeks to derive significant competitive
advantage from the use of resources and sale of outputs in multiple countries”

31
2.8 Summary of Literature
Stage model theory as explanation of international expansion behaviour of firms assume a gradual
approach towards internationalisation in which a firm incrementally increases its commitment and
involvement in foreign markets. A common denominator among these models is the fact that they
originate in the era preceding the widespread use of information technology such as the Internet.
While organizational behaviour has perhaps not changed, the environment in which firms operate and
compete has dramatically changed (Johanson & Vahlne, 2007). Psychic distance, which has been
thought of as a major influencer of a firm’s international expansion has been found to show no
correlation with the order of internationalisation (Servais & Madsen, 1997). In an increasingly global
economy and increasingly homogenous global market, psychic distance might have become less
important in the recent past. Due to globalization, information flow between markets may have
decreased tremendously. The ability of people to hold a conversation in English has increased
worldwide from around 700 million in the mid-1980s (Crystal, 2008) to approximately 2 billion. Also
the formation of the Economic and Monetary Union of the European Union in 1999 that enabled
single-currency free trade and the entry of China in the World Trade Organization may have increased
the ability of firms to internationalise. In a recent reflection on the Uppsala model Johanson and
Vahlne (2007) suggest that psychic distance at a firm-level has become less relevant and should rather
be indirectly measured by means of management and people in the firm. Also the way firms engage
in international business has drastically changed since the above mentioned models were proposed.
Strategic internationalisation components for SMEs are very similar to those found for MNEs. An
exception is the greater reliance on networks for SMEs. Regarding INVs and BGs main motives to
internationalise are the influence of founders as compared to managers in SMEs, having a unique
product/resource, targeting a global niche market and influence of investors. INVs and BGs have less
routine than SMEs in selecting markets. Being found often in high technology markets, INVs/BGs
do not target markets with close psychic distance as SMEs. They often select markets that are big,
where they have a network and that have similar languages as existing markets. Entry modes for INVs
and BGs are often found to be based on the network of the firm and vary for different countries.
Entry modes are less relevant for digital products and virtual entries occur. Barriers for INVs and BGs
include financial barriers (resource scarcity, forex risk and cost of sales). Communication is a major
hurdle while interacting with customers. A final barrier is the inability to deal with bureaucratic in the
foreign market. In the table below a table that summarises the literature can be fou

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Stage Theory International Entrepreneurship Theory
International Internet
Entrepreneurship
(SME / MNE) (INV / BG) (IEINVs)
• Strong domestic position • Unique product / resource • 24/7 availability
• Gradual & incremental • Control of assets • Personal treatment of customers
• Psychich distance • High technology sector • Standardized offers to large markets
• Experiental learning • Rapid interationalisation
• Proactive & Reactive • Founder's global vision • Entrepreneurial orientation
• Overseas opportunity • Small domestic market • Decreased transportation costs
• Domestic competition • Influence of network • Internet capabilities
• Idle production capacity • Influence of investors
• Systematic or non-systematic • Less routines
• Psychic distance • Same language markets
• Macro level indicators • Market size
• Network of firm
• Related to degree of control • Often network related • Internet as sales channel
• Starts with exporting • Export, local sales & virtual
• Gradual process
• Liability of foreigness • Resource scarcity • Internet availability in host country
• Rules & regulations • Communication with customers
• Lacking knowledge • Unfamilliarity with procedures
• Cultural differences
Barriers
Characteristics
Motives
Market Selection -
Entry Mode
• Balancing resources and customer need of support
Table 2 - Literature Summary

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3 METHODOLOGY
In this chapter the methodology that has been used in the research will be discussed. First, the
approach to research will be presented after which the research design will be presented. Subsequently,
the data collection and analysis process will be discussed. Finally, limitations to the methodological
process will be pointed out.
This study’s objective is to provide scholars and founders and CEOs of young internet firms beneficial
insights regarding internationalisation strategy by following a qualitative approach. Qualitative
research is an inductive method used for theory building which starts with a solid grounding in existing
literature, the identification of a gap in literature and a research question addressing this gap
(Eisenhardt & Graebner, 2007). Although, according to Eisenhardt and Greabner, this method of
inductive research as compared to quantitative research is less precise, more subjective and less
accurate than large scale testing of hypothesis, it is appropriate to use qualitative research if existing
literature fails to address the research question or it does so in an inadequate manner. This study seeks
to build theory that is grounded in empirical evidence of relevant cases. Given the scarce amount of
literature on the internationalisation process young internet firms qualitative research is the most
suitable type of research for this study. This is mainly because grounded theory research with regards
to the phenomenon of internet-based INVs seems to be underrepresented in the literature. The
qualitative approach of this study is similar to many attempts by previous scholars to identify and
describe young internationalising firms. Very few scholars have attempted to investigate the
phenomenon in quantitative approach.
3.1 Design
According to Eisenhardt (1989) case study research is of particular appropriateness in new research
areas. Many social scientists may believe that specific research methods are more appropriate given a
particular phase in the investigation of a phenomenon. According to Yin (2013) five research methods
can be used in either exploratory, descriptive or explanatory research. Those types of research should
be distinguished based on a set of three conditions rather than based on a hierarchy. The conditions
that Yin proposes are:

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• The nature of the research question (how, why, who, what or where?);
• The extent to which a researcher is able to control behavioral events;
• The degree of contemporariness of an event that is being studied.
Following those three conditions a researcher should consider five methods namely: experiments,
surveys, archival analysis, history and case studies. The exploratory nature of this study suggest that
the preferred method should either be an experiment, a history or a case study. This study concerns
internationalisation strategy that is evolving over time and happens not with incidences. The unit of
analysis in this study is the Internet Enabled International New Venture. During this research the
researcher has and will not have, any influence or ownership in any of the firms being studied or their
internationalisation processes. It can therefore be argued that there exists no control over the events
that are being studied. Regarding the final condition that Yin suggests it can be argued that the
internationalisation process of young internet based firms is contemporary because of i) the recent
emergence of information communications technology and ii) the fact that INVs were only first
identified in literature in the late 1980s (McDougall, 1989).
3.2 Case Study
Case studies can be conducted as a single-case design or a multiple-case design. These differ since the
latter includes more than one case in the research. According to Yin (2013) a multiple-case study is
generally more robust in terms of results and therefore preferably. Following Yin (1994) a single-case
case design is appropriate when the case seems to represent a single anomaly in the light of existing
literature, which seems not to be appropriate in this thesis. Multiple-case design is suggested to be
relevant if a ‘replication logic’ is assumed to reveal support for theoretically similar results or
contrasting results (Yin, 1994). In this study it will be explored how Internet Enabled International
New Ventures internationalise. A special reference is made to those firms which exclusively sell digital
products. Because of this a replication logic is wished. Within-case analysis is required to be able to
construct an internationalisation profile of the firms. In addition to within-case analysis, cross-case
analysis is needed to reveal if any commonalities and/or differences exist in the motives of the firms,
the strategic process of market selection and market entry and if the firms have encountered any
barriers to internationalise. Young and rapid internationalising firms that leverage the internet do not
seem to be an anomaly and replication is desired to find contrasting results in order to provide more

35
robust overall findings. Because of the previous arguments a multiple case study is the preferred
method in this study.
3.3 Case Sampling
Due to the difficulty of finding an exact number of cases that should be researched for this study a
suggestion made by Eisenhardt (1989) is followed. According to Eisenhardt there does not exist such
a thing as a ‘perfect amount of cases’. Ideally the number should be between four and ten. The logic
in this is that less than four cases result in a conclusion that has little empirical grounds. More than
ten cases would mean a saturation of information that would result in the gain of very few new insights
with each additional case and therefor arguably not worth the time and effort. The aim of this study
is to represent cases that are distributed across different types of internet ventures. The actual number
of cases depends on information saturation and the availability and willingness of founders, CEOs
and managers to participate in the study. Following Yin (2013) firms and institutes may be
characterized and selected on the basis of industry sector, size, location, number of locations and
percentage of workforce employed. The conditions for cases to be selected in the sample include:
• The firm is headquartered in Europe, preferably in The Netherlands;
• The firm should generate at least 75% of its revenue via online transactions;
• Information should be gathered from the person within the organization that is tasked with
internationalisation strategy. Preferably the founder or CEO;
• The firm should have internationalized at or soon after its inception;
• The firm is preferably less than five years old.
3.4 Data Sources
The collection of data has taken place in May 2017. To find cases that meet the criteria above several
sources have been used along with multiple approaches. Company details and personal details of
potential cases was collected and stored in a spreadsheet that was enriched with more data as the
search proceeded. The information was collected in March and April 2017 prior to data collection.
Sources from which potential cases were found include:

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• IAmsterdam, the portal of the city of Amsterdam has published a map on which all start-ups
in the city are listed and actively updated. It includes a wide variety of young firms in various
industries;
• The Erasmus Centre for Entrepreneurship is an incubator based in the city of Rotterdam;
• Deloitte Fast 50 challenge: a ranking by Deloitte of technology companies based on revenue
growth;
• FD Gazellen; a ranking by Het Financieel Dagblad (a major Dutch publisher) that ranks fast
growing young firms;
• Cruchbase: a leading platform and database of young firms;
• LinkedIn: a professional social networking site. The SalesNavigator tool by LinkedIn has been
used with advanced search criteria to filter on geography, firm age, industry (technology &
internet) and job description (founder or CEO).
With the exception of LinkedIn all websites were scraped using Python scripts and crawling tools such
as Datascraping.co. Relevant information of all companies was collected via web scraping. Variables
that were included in the spreadsheet were: firm name, country, city, website, founder or CEO first
and surname, LinkedIn profile URL of the founder or CEO and the language which the founder or
CEO most likely speaks. After scraping the following steps were carried out:
1. Manually enrich data to fill empty variable fields in the spreadsheet;
2. Enter the language the contact person speaks in the spreadsheet (based on evaluation of the
person’s name;
3. Visit the firm’s website and search for publications to determine whether the firm has
internationalized or not and to determine the age of the firm;
4. Clean data from all records that do not meet the criteria for sample selection;
5. Compile the spreadsheet in CSV format and upload it to web applications such as Hunter.io
and Clearbit.com to retrieve personal email addresses of contact persons;
6. Verify email addresses via Neverbounce.com;
7. Send email to each contact person explaining the topic and requesting an interview;
8. Automatically follow up on non-response to increase response via PersistIQ.io;
9. Add contact persons on LinkedIn and send them a message through In mail.

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In total 172 founders and CEOs were contacted to inform about the research and to request
participation. Of the 172 emails send, 12% could not be delivered. 64% of the founders and CEOs
persons responded of which 21 were interested in participating in the study. 3 of the 21 firms did not
meet the requirements because the firms were either too old or were headquartered outside of Europe.
With the remaining 18 firm’s appointments have been made with the founder or CEO to conduct a
Skype interview in May 2017. Due to cancelations 15 interviews have taken place of which 2 were
pilot interviews. Prior to each interview the informant has been provided with an overview that
included the topics and scope of the interview. To prevent a bias on the side of the informant the
actual interview questions were not shared with the informant before the interview. An overview of
the cases including their key characteristics can be found at the end of this chapter.
3.5 Data Collection Methods
Data for this study has been collected from firms via semi-structured interviews. Interviews are
considered to be one of the most important sources of evidence in a case study (Yin, 2013). Semi-
structured interviews allow for the coverage of certain important topics of interest but simultaneously
allow for extra information to be gathered. The data in the next chapter has been collected by
conducting 15 interviews with founders, CEOs and managers of internet firms of which 2 interviews
served as pilot interviews. Pilot interviews were conducted in the interview preparation process to test
the interviews for flaws and limitations. This enabled revision of the final interview questions. A crucial
element in selecting cases for pilot interviews is that the cases should have similar characteristics as
the final sample (Turner, 2010). The pilot cases; Fastned and 12Build were therefor selected on similar
criteria as the other cases. Both pilot interviews are excluded from analysis. To get data that reflected
the reality about the firm’s internationalisation as good as possible the aim of this study was to
interview the highest authority within the firm regarding internationalisation strategy. Most of the
informants were founder or CEO except for Case 9.
3.6 Data Analysis
During each interview notes were taken and at the end of each interview these were summarized for
later analysis. The audio of each interview has been recorded to allow accurate transcription. The
transcription of interviews in great detail and clean verbatim is an important element for later analysis
(Rowley, 2012). The interviews were transcribed in clean verbatim to enable for better analysability.

38
After transcription and before coding the data each interview has been read at least two times while
simultaneously making notes to get acquainted with the data. Because of the semi-structured nature
of the interviews it often occurred that the interview questions did not follow a chronological order.
For this reason, it was important to perform qualitative analysis of the data by means of open and
axial coding to be better able to make sense of its meaning. During the data analysis in this study
several steps have been taken. Rowley (2012) suggests that the researcher should “organize the data,
get acquainted with it, classify it, code it, interpret it, present it and write it down”.
Step 1 –
After transcribing the data, it was stored in a database including classification regarding the firm’s
characteristics. All transcripts have been first written out in actual verbatim. Subsequently the
transcripts were cleaned of filler words for better readability and analysability. Whenever the audio file
contained inaudible words it has been noted in the transcript with a timestamp for later retrieval during
triangulation. Also events in which connection was lost during the interview are noted in the transcript
and timestamped.
Step 2 –
Through the process of coding data, a researcher aims to discover what the theoretical and underlying
concepts meanings might be (Yin, 2013). To be able to perform a more sophisticated analysis of case
transcripts NVivo 11.4 for Mac has been used. In the process of coding the case data a three-stage
approach has been used (Gioia, Corley & Hamilton, 2012). First, the data has been ‘open-coded’,
based on informant terms data has been categorized in a broad sense. Second, by means of axial-
coding similarities have been sought to group codes together in more comprehendible themes that
correspond with existing theory. The process of coding has been an iterative one, meaning that some
codes have been re-coded during the process. The purpose of this was to reveal relationships between
codes. Finally, based on the axial coded data structure, visualizations of the data have been made to
better understand it. Furthermore, aggregate dimensions have been formed that emerged from the
data.
Step 3 –
Each individual code may have one or multiple themes and may therefor belong to more than one
construct. To give more abstract meaning to the data codes were combined in over-arching themes.

39
Similar codes that could be associated with the same concept were merged and codes that were
repetitive or identical have been removed from the coding structure. Text in codes that could be linked
to relevant theory derived from literature has been placed in italic font between quotation marks in
the next chapter of this study.
Step 4 –
To ensure that collected data is valid Yin (2013) suggest the appliance of triangulation techniques.
Although many techniques might exist the methods chosen for this study were chosen by taking into
account practicalities such as the time and resources that were available for this study. To triangulate
data facts and spellings were checked on company websites and through press releases. Also databases
such as Crunchbase were inquired to get additional background information such as funding
information. Also informants were provided with transcripts in order to check the corrects of the
transcript. Quotes that are used in the next chapter were also provided to the informants to verify
whether the statements reflect the true meaning of what the informant intended to say. To ensure
reliability all transcripts and correspondence has been archived.
Step 5 –
Finally, the findings of this study are compared and reviewed in the light of existing literature on the
topic of internationalisation. Data has been analysed and presented in the next chapter. Limitations of
this study have been identified and explained. Also directions for future research have been suggested
to further strengthen and deepen the body of academic knowledge on the topic of internationalisation
strategy of young internet firms. Findings and conclusions of the study will be provided to informants
upon publishing the study.
3.7 Validity and Reliability
In order achieve and be able to guarantee certain quality standards regarding empirical research in
social sciences Yin (2013) suggests the use of four test. Those tests are also relevant to case study
research. The tests that are suggested by Yin include 1) construct validity, 2) internal validity, 3)
external validity and 4) reliability. Construct validity concerns the identification of operational
measures for the concepts of market selection and market entry and the extent to which these
measurements are a true reflection of those concepts. To make sure construct validity is guaranteed,
multiple sources of evidence such as documents, interviews and direct observation will be used in the

40
research phase. This will be further discussed in more detail in the paragraph regarding sources of
evidence. To strengthen the construct validity further, a chain of evidence will be maintained to help
readers or supervisors to trace the steps being made over the course of this study. Finally, to ensure
construct validity, a draft of the case study will be offered to key informants for review. If any relevant
and valuable data happens to be forgotten during the initial data collection it may be added later on.
Internal validity, is concerned with the extent to which a causal claim in a study can be made and
guaranteed. Since causality is related to testing the relationship between variables and therefore
associated with quantitative research it is not applicable to this study. External validity deals with
generalizability of the outcomes of a study. Due to the qualitative nature of the case studies in this
study, external validity relies on analytical generalization rather than statistical generalization. To
ensure external validity, multiple case study design is used, implying multiple firms will be researched.
The final test is that of reliability, if another researcher were to replicate this study it should ideally
yield a similar result and conclusion. To increase reliability of this study and to reduce errors a case
study protocol will be developed and employed. In this protocol the procedures to collect evidence
will be formally reported.