Effects of Internationalization Rhythm and Speed on E-Commerce Firms’ Growth and the Role of Institutional Distances

Abstract

In an increasingly digitalizing economy, e-commerce firms are known to internationalize faster and more irregularly than offline firms. However, it is important to analyze how e-commerce firms benefit from time-based internationalization decisions and whether they are still limited by institutional distances that are said to lose relevance, which we do not believe. We propose a theory-based framework to analyze the effects of e-commerce firms’ internationalization rhythm and speed on their sales growth. Importantly, we apply multilevel modeling with cross-level interactions to provide insights into the role of institutional moderators, i.e., regulative, normative, and cultural-cognitive distances. We use data from 228 e-commerce firms that are operating Europe’s leading online shops and 1702 market entries over 21 years. The results show that e-commerce firms exhibit stronger growth due to their irregular and fast internationalization process. However, this relationship changes depending on certain institutional distances, and different explanations regarding country-specific variances are provided. The findings have direct implications for managers interested in how online internationalization processes affect firm growth in light of the differing degrees of cross-country contextual differences among common institutions.

Reshaping Internationalization Strategy and Control for Global E-Commerce and Digital Transactions: A Hayekian Perspective

“…Fourth, digital platform-based transactions are quite different from the others. Key attributions of e-commerce firms' growth are their fast internationalization speed and the extensive breadth of operations across different areas (Batsakis & Theoharakis, 2021;Swoboda & Sinning, 2022). Especially, sharing economy firms set the protocols and algorithms with the formal programming language for specific digital platforms (e.g., Airbnb apps, Uber apps, etc.)…”

E-Commerce Policy and International Business

“…Some of these firms (e.g., Zalando) have initially expanded into close proximate markets (cf. Swoboda & Sinning, 2022). This suggests that e-commerce firms also face significant institutional challenges stemming from the policy and contextual differences found across different markets.…”

“…In the presence of policy and regulatory distance, e-commerce firms experience challenges to the transfer of firm-specific advantages to the global stage (Ang et al, 2015). Expanding to such countries becomes even more difficult given the complexity involved in setting up reliable contracts with local logistics service providers and channel partners (Swoboda & Sinning, 2022). This also hinders firms from efficiently interacting with customers based in the more rural areas of developing markets; this makes it necessary for firms to create new types of business models suited to interact with those customers or buyers/sellers through digital platforms.…”

“…This also hinders firms from efficiently interacting with customers based in the more rural areas of developing markets; this makes it necessary for firms to create new types of business models suited to interact with those customers or buyers/sellers through digital platforms. Further, the Internet policies enacted in some countries hamper the learning of e-commerce firms and increase their need to integrate prior knowledge, forcing them to internationalize to similar markets, as was the case with Zalando (Johanson & Vahlne, 1977;Swoboda & Sinning, 2022). Hence, policy differences can cause e-commerce firms to be negatively affected by a liability of outsidership, thereby discouraging their internationalization process.…”

“…Institutional theory provides valuable theoretical insights into the cross-border activities of e-commerce firms. Specifically, institutional distances -in terms of regulations, norms, and cultures -act as important boundary conditions for international e-commerce firms, accordingly affecting their internationalization process decisions (Swoboda & Sinning, 2022). While digitalization is connecting the world and providing customers, resources, and information with global reach (Shi et al, 2020;Qi et al, 2020), the institutional environment -e.g., the policies pertaining to online businesses and customer attitudes toward online reputation -varies across countries (cf.…”