Digitalization, Institutional Voids and New Venture Internationalization

Abstract

This study examines the effect of digitalization on the internationalization of new ventures and further investigates the influence of a home country’s presence of institutional voids and digital infrastructure on the extent of internationalization by new ventures, with the prediction that a home country’s institutional voids and a weak digital infrastructure strengthen the positive relationship between new ventures’ digitalization and internationalization. Applying multilevel modeling on a sample of more than 6,000 entrepreneurs from 62 countries the study offers empirical support for these predictions. The findings are robust to alternative specifications. Entrepreneurs using the internet to sell their products and services are more likely to focus on customers in foreign markets when they face institutional voids and a lack of digital infrastructure in their home countries. This study contributes as follows: From a theoretical view, the findings of the study provides a better understanding of the boundary conditions of the digitalization-new venture internationalization linkage. From a practical perspective, our findings suggest the complementary roles of institutional voids and digital infrastructure at home to help entrepreneurs grow domestically and facilitate their internationalization.