Internationalization Speed and Entry Mode Choice of Chinese New Ventures

Abstract

A universal phenomenon exists. Due to recent technological advances, the business environment has seen a rapid progression towards internationalization with industries among developed countries understanding the benefits of international trade. Though, this approach is not just confined to large companies, with many small to medium sized companies (SMEs) also involved. Therefore, it comes of no surprise that Chinese companies are beginning to venture into the global market and looking for a spice of the pie. The methods used for new ventures by Chinese SMEs are causing analysts to revise their theories on internationalization. The most popular traditional theory for internationalization of SMEs is the Uppsala Internationalization Process (UIP). This perspective contends that firms become international in a slow and incremental manner which may be due to lack of knowledge about foreign markets, high risk aversion, high perceived uncertainty, or similar factors. The most popular new theoretical perspective is the International New Ventures (INV), it points out that more and more new ventures start their companies internationally without incremental stages, and the INV perspective claims that the UIP perspective lacks the ability to explain these types of new ventures. The purpose of this paper is to find out which theory can be applied to the internationalization phenomena of Chinese New Ventures (CNV). Is it the traditional theatrical perspective - UIP - or the new theatrical perspective - INV? The thesis examines both theories and offers a conclusion based on research which was separated into two parts In the first part, I identified and confirmed the difference explanation power on the internationalization speed of CNV by the factors of international experience and entrepreneurship that comes from the UIP and INV perspectives. In the second half, I investigated when a CNV chooses the foreign market entry mode, whether they will follow the forecast of the UIP or INV perspective. The methodology study is as follows: First, I established a theoretical research framework of internationalization speed and entry mode choice of a CNV through archival analysis, and then I identified and confirmed this framework with empirical analysis. Then I created a survey and case observation. Finally, I compared explanation power of internationalization of CNVs between the two perspectives. The main findings of this study are: 1) The traditional (UIP) perspective is still applicable in a CNV case. The international experience of members of a Top Management Team (TMT) had a key role in the process of internationalization of CNV, this is an essential tenet of the UIP perspective. When CNVs select foreign market entry modes, they followed the UIP viewpoint in a certain sense. 2) The new (INV) perspective is necessary; the start-up time for an international business by a CNV is short. Entrepreneurship is an important factor in the internationalization of a CNV. However, based on the study, the two perspectives should undergo modification. Action-oriented members of TMTs should be considered by the UIP perspective, and INV perspective should explain how to overcome international barriers during the initial period. This research is an initial study. There are some limitations, for example, the sample is not enough, there maybe some bias about the procedure and instrument. In future study, it is necessary to extend the study by conducting a further empirical test, more research should be done to examine any additional factors that might have an influence on the internationalization of SMEs. Furthermore, the investigation might be extended to domestic and international SMEs in order to compare the behavior of domestic and international firms