Do new technology ventures need to adapt when they serve international markets?

This article examines how the goal orientations of managers are linked to whether new technology firms adapt as they internationalize. The authors study the way firms enter foreign markets, whether they make changes to the way they serve those markets and the internal organization of the firms.

What You Need to Know

Technology-based new ventures are likely to internationalize relatively soon after founding. Some will be led by managers who adapt their firm’s approach to the markets they select, the mode of entry and organization, as the firm and its operations expand. Others will be led by managers that resist adaptation. These ‘adaptive’ and ‘resistant’ behaviours appear to be linked to ‘goal orientation’, i.e. whether managers are guided by a mindset focused on: 1) learning, 2) demonstrating competence and how well they perform, or 3) avoiding situations where they might fail or be criticized. ‘Adaptive’ firms seem to be led by managers with mindsets (1) and (2) while ‘resistant’ firms are characterized by mindsets (2) and (3). Is this bad? Not necessarily because the researchers find that both types of firm can survive early internationalization. This is an unexpected finding.

MORE DETAILS

What did the Researchers Do?

Anne Domurath, Nicole Coviello, Holger Patzelt and Benjamin Ganal studied six young firms in Germany, all operating with a type of digital business model: two SaaS firms, two marketplace firms, and two e-Commerce firms (selling tangible products online). They interviewed multiple members of each firm’s executive team to unpack how the firm internationalized and how/why/when adaptation occurred (or not). The narratives were coded and interpreted relative to three types of goal orientation, based on a theory from psychology. This theory has received very limited attention in international entrepreneurship research despite it’s importance in understanding decisions in ‘achievement settings’ (such as internationalization).

What did the Researchers Find?

The research team found two distinct goal orientation profiles. One leads managers to seek and interpret information regarding adaptation. For these firms, adaptive behaviours were clearly apparent. The other goal orientation profile leads managers to not adapt, despite receiving information that this would be appropriate. The behaviours within these firms were clearly resistant.

However, the researchers also found that both ‘adaptive’ and ‘resistant’ firms survived the firm’s entry into foreign markets soon after founding. Furthermore, the ‘resistant’ firms internationalized more quickly and broadly than the others. This unexpected result opens up many questions for future research.

HOW CAN YOU USE THIS RESEARCH?

Managers’ goal orientations don’t change; they are a stable trait. As a result, they should be acknowledged and supported, recognizing that there is no ‘bad’ goal orientation. When forming a new venture team (or adding to one), it would be wise to assess each candidate’s goal orientation for complementarity with the existing team (the founder(s) for example). This is because common goal orientations improve organizational efficiency. Investors should also be aware of goal orientations and the potential for (mis)fit with the firms they support.

WANT TO KNOW MORE?

Contact: Anne Domurath or Nicole Coviello

Article citation: Domurath, A., Coviello, N., Patzelt, H., & Gamal, B. 2020. New venture adaptation in international markets: A goal orientation theory perspective. Journal of World Business, 55(1): https://doi.org/10.1016/j.jwb.2019.101019.