Caution ahead! The long-term effects of initial export intensity and geographic dispersion on INV development

Abstract

Three indicators are typically used to signal international entrepreneurial activity: 1) how quickly a new venture enters foreign markets, 2) its extent of internationalization, and 3) the scope of markets or regions served. Many studies emphasize the first indicator, aka early internationalization, and how it influences firm behaviour over time. We argue that the initial levels of export intensity and geographic dispersion also have long-term effects, and these will be negative. To study this, we build on arguments regarding learning advantages of newness, absorptive capacity, and time compression diseconomies. We use latent growth curve modelling to assess 485 observations from 97 new ventures over the 1990-2015 period. The higher the firm's initial level of export intensity, the lower its rate of change, i.e., it slows and then declines. There is a much shorter effect for geographic dispersion and some evidence of a concentration strategy. Earlier internationalization is related to a higher initial geographic dispersion but does not impact initial export intensity or the long-term trajectory of either dimension. Implications are discussed.