Industry life cycle, geographic diversification and performance of international new ventures

Abstract

Purpose The purpose of this paper is to examine how geographic diversification affects the performance of international new ventures. Design/methodology/approach This study develops hypotheses about the individual and joint effects of geographic diversification and industry life cycle on the performance of international new ventures. This paper also introduces industry technology characteristics as a contingent factor for the above relationships and tests the hypotheses on a large panel data set. Findings Based on the analyses of the strategies and performance of 699 listed Chinese international new ventures between 1991 and 2014, this study finds that the impact of geographic diversification on performance is contingent on the stage of the industry life cycle and that the moderating effect differs across high-technology and low-technology industries. The results suggest that it is fruitful for international new ventures in high-technology industries to undertake geographic diversification in earlier stages of the industry life cycle, but international new ventures in low-technology industries are better off undertaking geographic diversification during the later stages of the industry life cycle. Originality/value The study contributes to the literature on international entrepreneurship by identifying the industry life cycle conditions under which the learning advantages of international new ventures are effective and facilitate the achievement of better performance. This paper also shows that industry technology type matters for geographic diversification strategies of international new ventures.

Should SMEs diversify their global destinations? The role of market insights and digital transformation

“…data collection targeted at observing the phenomenon’s evolution through time is recommended to supplement this literature with more significant insights (Certo et al ., 2016). In addition, the internationalisation process of SMEs can progress through multiple stages (Pangarkar and Yuan, 2022; Thomas and Eden, 2004), but recognising which stage they are in is a difficult task that influences the nature of the GD-EP connection. We suggest conducting an additional study to examine alternative GD-EP relationship curves.…”

“…Sectorial relevance (industry characteristics) determines EP (Pangarkar and Yuan, 2022; Rugman and Oh, 2013). The kind of industry was identified by asking respondents if their businesses were service-based or manufacturing-based.…”