An exploratory study of international commitment by nascent and existing firms.

Clercq, Dirk De ; Bosma, Niels

Introduction

Literature in the domain of international entrepreneurship assumes certain aspects unique to the internationalization process of new ventures and considers it of interest to examine how entrepreneurial firms with high international commitment differ from those with low international commitment (McDougall and Oviatt, 2000). For example, extant research focuses on the "born-global" phenomenon to examine international new ventures (McDougall et al., 1994; Oviatt and McDougall, 1994) or committed internationalists (Bonaccorsi, 1992). According to this research, a complete understanding of firms' early internationalization must include multiple theoretical perspectives, integrated in both a holistic and pluralistic manner (Jones and Caviello, 2005). That is, because internationalization by entrepreneurial firms can best be understood by integrating different theoretical frameworks, an emerging field such as international entrepreneurship should benefit from conceptual models that are sufficiently flexible to accommodate the range of conditions that might influence and explain internationalization decisions by specific types of firms (Coviello and McAuley, 1999; Jones and Coviello, 2005). Similarly, Buckley and Chapman (1996) suggest that the study of international entrepreneurship could benefit from flexibility in the conceptual frameworks used, as long as these frameworks are suitably grounded by the phenomena under study. In short, for international entrepreneurship to move forward as a field of study, it must build on the prior achievements of international business, entrepreneurship, and other fields (Buckley, 2002).

In this study, we address two related research questions. First, how are firms that internationalize different from those that do not? Second, among the firms that internationalize, how are firms that choose high-risk entry modes different from those that choose lowrisk entry modes? Our conceptual contribution pertains to examining these research questions with regard to two separate sets of firms, that is, nascent firms (which remain in the set-up process and are not yet operational) and existing firms (which have recently been set up), which enables us to apply two complementary theoretical frameworks (Jones and Caviello, 2005). To explore the internationalization of nascent firms, we draw on the theory of planned behavior (Ajzen, 1991); to explore the internationalization of existing firms, we draw on the new venture theory of internationalization (McDougall and Oviatt, 2000; McDougall et al., 1994). Thus, we examine whether factors related to firms' level of international commitment act in the same way before and after the companies become established.

First, the theory of planned behavior (Ajzen, 1991) attempts to explain choices for future behavior and has been applied in various contexts including health (Armitage and Conner, 2001) and exercise (Hagger et al., 2002), as well as areas more related to entrepreneurship literature, such as growth intentions (Wiklund, 2001, 2006) and micro-angel investing (Maula et al., 2005). We add to internationalization literature by applying the theory of planned behavior to the context of nascent firm internationalization. Because this theory posits that the intention to undertake a behavior depends on factors such as attitudes toward the behavior (i.e., favorable evaluations) and perceived behavioral control (i.e., ease of execution), we focus on two categories of factors related to nascent firms' international intentions: firm attitude (i.e., entrepreneurial attitude) and perceived behavioral control over international activities (based on firm resources and individual entrepreneur characteristics). More specifically, we explore how nascent firms that plan to exhibit high versus low international commitment differ in terms of their growth orientation, their team size and level of innovation, and the educational level and age of the individual entrepreneurs. (1)

Second, the new venture theory of internationalization (McDougall and Oviatt, 2000; McDougall et al., 1994) argues that a firm may internationalize early in its existence, if it has the necessary competencies to engage in international activities and can pursue new combinations of key resources across national borders. Such literature also emphasizes the importance of an individual entrepreneur's skills and resources during the internationalization process (Manolova et al., 2002; McDougall and Oviatt, 2000; Williams and Chaston, 2004) and determines the firm's entrepreneurial character on the basis of its decision to enter the international arena and devote substantial resources to foreign markets (Child, 1972; Fillis, 2004; McDougall and Oviatt, 2000). Similar to our examination of nascent firms, we use the new venture theory of internationalization to explore how existing firms with high versus low international commitment differ in the following categories: their entrepreneurial attitude, their resources, and the individual entrepreneur's characteristics.

We compare the level of international commitment by both nascent and existing firms on the basis of (1) their decision to internationalize (Bloodgood et al., 1996; McDougall et al., 1994) and (2) the type of foreign entry mode chosen when the decision to internationalize has been made (Bell, 1995; Johanson and Vahlne, 1990; Zacharakis, 1997). In examining the decision to internationalize, research traditionally pays more attention to the international activities of established firms rather than emerging firms (Aharoni, 1966; Zaheer and Mosakowski, 1997), perhaps because international activities appear less common among young ventures that focus instead on the local domestic market (Acs et al., 1997). The lack of financial, human, and informational resources indeed might restrict a new venture's decision to enter international markets (Johanson and Vahlne, 1990), but increasing global competition, falling barriers to trade, and improved networks push many new ventures to compete in international markets (Chetty and Campbell-Hunt, 2003; McDougall et al., 1994; McDougall and Oviatt, 2000). Furthermore, for firms in countries with relatively small domestic markets, entry into international markets might be essential, not just desirable, for the firm's survival and success (Autio et al., 2000).

After firms make the decision to enter the international arena, the entry mode they choose may reflect their potential for new opportunities and viability (Acs et al., 1997; Burpitt and Rondinelli, 2000). In general, firms can limit their foreign activities to exporting and importing or embrace entry modes that involve more committed activities, such as joint ventures or foreign direct investment in wholly owned subsidiaries (Eriksson et al., 1997; Johanson and Vahlne, 1977, 1990). These divergent entry modes reflect different levels of resource commitment or surrender of control and therefore different levels of risk (Johanson and Vahlne, 1990). Prior research indicates that the least risky entry modes, such as export and import, provide the predominant alternatives for many young entrepreneurial firms (Bell, 1995; Burpitt and Rondinelli, 2000; Lindqvist, 1991).

Hypotheses

We develop several hypotheses pertaining to these two aspects of international commitment, namely the decision to internationalize and the choice of high- versus low-risk foreign entry modes. For both, we argue that the observed differences between firms result from differences in their entrepreneurial attitudes, resources, and the characteristics of the individual entrepreneurs.

Firm Entrepreneurial Attitude: Growth Orientation

An important facet of firms' growth orientation pertains to their capacity to create jobs. By associating internationalization with this particular aspect of entrepreneurial attitude, we align with the prevailing view in the literature that job creation represents a key dimension by which entrepreneurial activity contributes to economic growth (e.g., Acs, 1998; Autio, 2005; Davidsson and Henrekson, 2002; Storey, 1994; Westhead and Cowling, 1995). We reason that firms' plans to grow and gain in critical job mass may indicate their propensity to undertake a continuous search for opportunities, especially opportunities that do not pertain to the firms' current activities--such as new foreign opportunities (Lumpkin and Dess, 1996). Furthermore, all else being equal, growth-oriented firms likely believe they can benefit more from foreign opportunities because of their expanded base of human capital (Cooper et al., 1994; Manolova et al., 2002). As a result, we associate firms' attitude toward growth with their international activities, for both nascent and existing firms.

In particular, the theory of planned behavior suggests that nascent firms that plan to internationalize embrace the favorable appraisals of activities and new opportunities that involve risk and therefore have more positive attitudes toward growth (Ajzen, 1991). Similarly, nascent firms that plan to choose high-risk entry modes, after they internationalize, probably will be more growth oriented than their counterparts that prefer low-risk entry modes.

Hypothesis 1a: Among nascent firms, plans to internationalize are positively associated with growth orientations.

Hypothesis 1b: Among nascent firms that plan to internationalize, the choice of highrisk entry modes is positively associated with growth orientations.

Among existing firms, according to the theory of new venture internationalization, some will be more willing than others to search for opportunities outside the realm of their current markets (Fillis, 2004; Lumpkin and Dess 1996; McDougall et al., 1994). This theory builds on the strategic choice view of organizational decision making, in that it focuses on the firm's pursuit of specific goals as an important factor associated with the nature and pace of internationalization (Child, 1972). We reason that firms oriented toward growth are more willing to undertake risky decisions and therefore more readily accept the uncertainty inherent to cross-border activity (Lumpkin and Dess, 1996). Evidence also suggests that entrepreneurs' motivations for employment growth reflect an overall attitude, rooted in non-economic concerns, about their firm's strategic posture (Wiklund et al., 2003). Consequently, we hypothesize that firms' decision to internationalize and choose high-risk entry modes relates positively to their growth orientation.

Hypothesis 1c: Among existing firms, internationalization is positively associated with growth orientations.

Hypothesis 1d: Among existing firms that internationalize, the choice of high-risk entry modes is positively associated with growth orientations.

Firm Resources

International commitment across firms may differ according to two knowledge-related firm resources, namely management team size and level of innovation. Whereas prior research considers various aspects of resources associated with early internationalization, such as firms' dynamic capabilities and the extent to which their resources can be deployed for alternative uses (Sapienza et al., 2006), we focus on team size and innovation as two key factors behind international commitment (Autio et al., 2000; Chetty and Campbell-Hunt, 2003).

Team size. The skills and competencies of the management team can be considered determinants of firms' decision making and success (Chandler and Hanks, 1994). Compared with single-founder firms, firms with more initial partners can draw on wider social and business networks (Chetty and Campbell-Hunt, 2003; Lipparini and Sobrero, 1994) and accumulate a wider variety of knowledge (Grant, 1996). Consequently, firms with larger teams probably gain more access to resources and knowledge relevant to their internationalization, relative to firms with smaller teams.

In nascent firms, the members of the founding team play pivotal roles in terms of future strategic plans (Davidsson and Honig, 2003), and many decisions related to international business activities are centralized with these persons. Because planning international activities demands significant amounts of knowledge and resources, small emerging teams may be constrained in their intentions to become international players. According to the theory of planned behavior, nascent firms with larger teams should feel that their high international commitment will pay off in the long run (Ajzen, 1991), both in terms of whether the firm internationalizes and which entry mode it chooses. That is, large teams may provide better resources to manage the plans for internationalization successfully and therefore increase perceived behavioral control over international activities. We hypothesize:

Hypothesis 2a: Among nascent firms, plans to internationalize are positively associated with team size.

Hypothesis 2b: Among nascent firms that plan to internationalize, the choice of high-risk entry modes is positively associated with team size.

Similarly, for existing firms, the members of the established management team may provide a primary source of the knowledge necessary to decrease the uncertainty related to foreign entry and subsequent international commitments (Cohen and Levinthal, 1990; Grant, 1996). For example, Reuber and Fischer (1997) find that the knowledge and experience of the management team of a small business represents a critical resource for the firm's early exporting and internationalization activities.

Hypothesis 2c: Among existing firms, internationalization is positively associated with team size.

Hypothesis 2d: Among existing firms that internationalize, the choice of high-risk entry modes is positively associated with team size.

Level of innovation. We also examine the relationship between innovation and international commitment. The theory of planned behavior suggests that the likelihood of international activities increases for nascent firms that perceive higher levels of behavioral control, including a dominant belief about their capability to benefit from international activities (Ajzen, 1991). Nascent firms that plan to bring highly innovative products or services to market may recognize the high potential for innovative changes to existing technology in an international market arena (Oakey, 1993). Furthermore, because innovation implies that the firm undertakes more knowledge-intensive preliminary activities (Cohen and Levinthal, 1990), the intense processing of knowledge may improve the expected efficiency of information retrieval in new environments, which should encourage (high-risk) cross-border activity (Autio et al., 2000; Bell et al., 2004).

Hypothesis 3a: Among nascent firms, plans to internationalize are positively associated with the level of innovation.

Hypothesis 3b: Among nascent firms that plan to internationalize, the choice of high-risk entry modes is positively associated with the level of innovation.

Similarly, innovative, existing firms may possess a technology-based global market advantage and benefit from making substantial international commitments. A firm that attempts to gain a competitive advantage through knowledge renewal and innovation often must maneuver rapidly to avoid competitive moves and imitation (Autio et al., 2000; Bell et al., 2004). To anticipate such potential imitation, firms may engage in substantial international activity (Franko, 1989). In this sense, existing firms that focus on innovation may be highly motivated to make international commitments, because those commitments enhance their ability to anticipate competitive responses and build market share across different countries.

Hypothesis 3c: Among existing firms, internationalization is positively associated with level of innovation.

Hypothesis 3d: Among existing firms that internationalize, the choice of high-risk entry modes is positively associated with level of innovation.

Individual Entrepreneur Characteristics

Prior research shows that individual entrepreneurs play a pivotal role in the internationalization of their firms and in determining the strategic direction of their companies (Chandler and Hanks, 1994; Manolova et al., 2002; McDougall et al., 1994). Various individual factors may relate to internationalization, such as entrepreneurs' general managerial or international working experience (Sapienza et al., 2006), but we focus on two important demographic characteristics--entrepreneurs' educational level and age--that are instrumental for early-stage companies (e.g., Davidsson and Honig, 2003; Reynolds et al., 2005; Van Gelderen et al., 2005).

Educational level. Prior research directly relates entrepreneurs' educational level to internationalization by their companies. Cavusgil and Naor (1987) examine determinants of entrepreneurs' export behavior and find that owners of export-oriented companies have more education than owners of non-exporting companies. This finding also is consistent with previous research by Simpson and Kujawa (1974), which indicates a positive association between entrepreneurs' educational level and their firms' export orientation. However, limited attention centers on whether educational background relates to the international commitment of nascent and established companies.

Following the theory of planned behavior, we posit that nascent entrepreneurs' behavioral intentions relate to their perception of control over their activities (Ajzen, 1991). Consequently, all else being equal, highly educated entrepreneurs should feel more in control of their planned international activities, because they likely believe their educational background will help them achieve success in these activities.

Hypothesis 4a: Among nascent firms, plans to internationalize are positively associated with entrepreneurs' educational level.

Hypothesis 4b: Among nascent firms that plan to internationalize, the choice of highrisk entry modes is positively associated with entrepreneurs' educational level.

For existing firms, the reasoning is similar to that pertaining to nascent entrepreneurs. Westhead (1995) suggests that firms owned by founders who have earned a higher educational degree tend to have higher expectations about potential returns from international activities and to be more aware of business opportunities in foreign markets.

Hypothesis 4c: Among existing firms, internationalization is positively associated with entrepreneurs' educational level.

Hypothesis 4d: Among existing firms that internationalize, the choice of high-risk entry modes is positively associated with entrepreneurs' educational level.

Age. Finally, we develop hypotheses pertaining to the relationship between entrepreneurs' age and the international commitment of their venture. Extant literature is somewhat ambiguous; higher age may reflect a lower risk propensity and therefore lower tendency to engage in international activities (Davis and Harveston, 2000), but entrepreneurs' age also represents an important personal characteristic positively associated with firms' export behavior (Westhead, 1995). We argue that the theories of planned behavior and new venture internationalization actually indicate a positive association between entrepreneurs' age and international commitment. The theory of planned behavior suggests that nascent entrepreneurs who are older maintain higher international commitment because they have had more opportunity to build confidence in their ability to undertake international activities successfully (Ajzen, 1991).

Hypothesis 5a: Among nascent firms, plans to internationalize are positively associated with entrepreneurs' age.

Hypothesis 5b: Among nascent firms that plan to internationalize, the choice of high-risk entry modes is positively associated with entrepreneurs' age.

In existing firms, the entrepreneur's age may provide a crude proxy for the overall competencies necessary to pursue new combinations of key resources across national borders (McDougall et al., 1994). In this sense, older entrepreneurs would be in a better position to benefit from high levels of international commitment, compared with their younger counterparts (Westhead, 1995).

Hypothesis 5c: Among existing firms, internationalization is positively associated with entrepreneurs' age.

Hypothesis 5d: Among existing firms that internationalize, the choice of high-risk entry modes is positively associated with entrepreneurs' age.

Methods

Sample

We base our analysis on a representative sample of the adult populations of two countries, Belgium and the Netherlands, and thus study internationalization in two similar countries--that is, geographically small countries located in the heart of the populous Western European subcontinent. Although prior research uses a different context--primarily focused on the United States (e.g., McDougall and Oviatt, 1996) or Scandinavia (e.g., Eriksson et al., 1997)--we believe that our research setting is appropriate and extends prior research by examining the extent of variation of international commitment among ventures, even when those ventures are located in countries with a small domestic market size--that is, a setting in which internationalization is more common. In other words, our specific country selection provides a more conservative test of our hypotheses, because entrepreneurs in small countries may view crossing country borders as simply a matter of survival. Yet even in these circumstances, we argue that variations in the factors we examine may lead to variations in firms' decision to internationalize and their choice of foreign entry modes.

The data collected are part of the 2003 Global Entrepreneurship Monitor (GEM); we focus particularly on those respondents identified as owner-managers of a nascent or existing firm (for an extensive assessment of GEM and its methodology, see Reynolds et al., 2005). The respondents belong to a nascent firm if they are involved in concrete activities to establish a new business, without having paid salaries to themselves or others for more than three months. Respondents that belong to an existing firm own and manage a business that is at least three months old. Our final sample consists of 106 nascent firms and 234 existing firms.

Measures

To assess firms' international commitment, the survey asked respondents whether they were planning to internationalize (nascent firms) or had already internationalized (existing firms). Next, respondents who answered affirmatively to that question indicated which entry modes they were planning to choose (nascent) or had chosen (existing) when entering foreign markets. The respondents could choose from the following categories (in order of increasing commitment): import/export, licenses abroad, detachment of personnel abroad, international joint ventures, and international branch office (Eriksson et al., 1997; Hisrich and Peters, 2002; Johanson and Vahlne, 1977, 1990). The respondents also could mark more than one foreign entry mode. On the basis of their choices, we assign respondents to either the high-risk entry mode category or the low-risk entry mode category. Respondents in the former marked at least one entry mode other than import/export. Those that only marked the import/export entry mode enter the low-risk entry mode category. (2) Among the nascent firms, 50 of 106 (47%) indicated they planned to internationalize, and among the existing firms, 88 of 234 firms (38%) already had internationalized. (3)

To assess growth orientation, we compare the firms' future employment base with their employment base at the time of the data collection. Although alternative measures for entrepreneurs' growth orientation exist, such as sales growth, we choose job growth on the basis of Birch's (1987) seminal finding that new firms account for a substantial amount of new job creation in the United States, a finding subsequently confirmed for other countries as well (e.g., Acs, 1998; Davidsson and Henrekson, 2002; Storey, 1994; Westhead and Cowling, 1995).

Team size refers to how many people, including the respondents, would own and manage the business (nascent firms) or currently owned and managed the business (existing firms). The measure of innovation asks respondents how many of their (potential) customers consider their firms' product or service new and unfamiliar. The respondents could choose among three categories, ranging from "not new to any customers" to "new to all customers."

Education indicates the respondents' highest educational degree using a three-level response choice; we also ask for the respondents' age.

To determine whether factors other than those we formally hypothesize also are associated with international commitment, we include additional control variables in our models. First, we consider entrepreneurs' gender. Second, we include two external variables that capture respondents' perceptions of the level of competition in their environment and whether their firm is active in a technology-based sector, regardless of the level of innovation by their specific firm (Bell and Young, 1998; Coviello and McAuley, 1999). Third, we add a country dummy variable to assess country differences between Belgium and the Netherlands.

Analyses

In terms of the methodology used, our study is exploratory, because we test our research hypotheses with relatively small subsamples. More specifically, the small size of the subsamples, especially for the nascent firms (N = 56 for non-international, N = 50 for international, N = 31 for international with high-risk entry modes, and N = 19 for international with low-risk entry modes), means the condition of normality is not fulfilled for most of our variables. (4) Therefore, we test our hypotheses using nonparametric comparative analyses, which forgo traditional assumptions of normality. Furthermore, prior research shows that nonparametric procedures are more efficient and accurate for testing statistical differences in small samples (Hollander and Wolfe, 1999). Therefore, to test for significant differences between firms that are high versus low in international commitment, we perform a Mann-Whitney test to compare the observations from two groups on the basis of relative ranks (Hollander and Wolfe, 1999).

Results

Tables 1 and 2 provide the results for the nascent and existing firms, respectively. The left-hand part of Table 1 compares nascent firms that plan to internationalize with those that do not and reveals that firms that plan to internationalize have a higher growth orientation (in support of Hypothesis 1a) and a higher level of innovation (in support of Hypothesis 3a). However, we find no difference between the two groups in terms of the size of the management team or the entrepreneur's educational level or age. The right-hand portion of Table 1 compares high-risk international nascent entrepreneurs with low risk firms. We find no significant differences between these two groups in terms of any of the variables included in our study. In other words, nascent firms' decisions about how they plan to internationalize do not appear related to their entrepreneurial attitudes or resources, nor to their entrepreneurs' characteristics.

Table 2 first compares existing firms who have internationalized with those that have not; those that have internationalized indicate a higher growth orientation (in support of Hypothesis 1c) and a larger management team (in support of Hypothesis 2c).We also find that Belgian firms are more likely to go international than their Dutch counterparts, which may correspond to the slightly smaller size of the Belgian domestic market. Finally, the right-hand part of Table 2 compares international existing firms that choose high-risk entry modes with those that choose low-risk entry modes. Contrary to our findings for the nascent firms, significant differences emerge between the two groups. Existing firms that choose high-risk entry modes are somewhat more growth oriented (in support of Hypothesis 1d), and they differ in terms of their individual-level factors. Specifically, consistent with Hypotheses 4d and 5d, we find that firms that choose high-risk entry modes tend to be run by older entrepreneurs with higher educational degrees, compared with firms that choose low-risk entry modes. We also observe that high-risk entry models are more likely to be chosen by male entrepreneurs than by their female counterparts.

Discussion

We use an integrative approach to explain the internationalization of entrepreneurial firms. Consistent with prior recommendations for holistic conceptual frameworks that apply different complementary theories to the study of international entrepreneurship (Buckley and Chapman, 1996; Coviello and McAuley, 1999; Jones and Caviello, 2005), we include two different theories that we believe are appropriate for examining internationalization by different types of firms. Thus, we use arguments from the theory of planned behavior to explain differences in terms of the international intentions of nascent firms, whereas we draw from the new venture theory of internationalization to explain differences in the current internationalization of newly established firms. Furthermore, we extend extant research by examining two important aspects of firms' international commitment in a single study, that is, the decision to enter the international arena (Bloodgood et al., 1996) and the subsequent decision of which foreign entry mode to use (Zacharakis, 1997). We base our analysis on a set of nascent and existing owner-managed firms located in Belgium or the Netherlands.

The limited sample size, which dictates the exploratory nature of our results, means great caution is needed when interpreting these results. However, we posit that our findings offer further insights into the internationalization of entrepreneurial companies. Perhaps the biggest contribution of this study is that, in terms of firms' decision to internationalize, the results for nascent versus existing firms, though similar, are not identical.

First, for both nascent and existing firms, those that are active in the international arena or plan to do so reveal a strong entrepreneurial attitude in their growth orientation. Therefore, our findings support the notion that firms' entrepreneurial attitudes represent an important aspect that relates to their international activities (Calof and Beamisch, 1995; McDougall et al., 1994). Despite the numerous hurdles related to pursuing international activities, firms' attitude toward the creation of new jobs appears to be related to their international commitment. Prior research even suggests that if this attitude is not established early on, the path-dependent nature of business decisions may make it difficult to develop international capabilities (Autio et al., 2000; McDougall et al., 1994). In other words, our study identifies the willingness to create jobs as a key factor associated with whether entrepreneurs, both nascent and existing, engage in cross-border activities.

Second, we find some differences between nascent and existing firms with respect to the type of resources associated with their decision to internationalize. Whereas access to innovation resources helps discriminate between nascent firms that plan to internationalize and those that do not, among existing firms, the size of the management team differentiates international versus non-international firms. The finding that nascent firms that plan to internationalize also have--or plan to have--relatively high levels of innovation may indicate that the knowledge intensity embedded in innovative activities may increase the expectation, perhaps too optimistically, that future international activities will provide short-term payoffs (Forbes, 2005; Van Gelderen et al., 2005). The lack of a similar finding for existing firms may indicate that these firms are more realistic in terms of whether their international activities always benefit from high levels of innovation. However, our research design does not allow us to test whether these expectations among nascent firms are realized in practice; future longitudinal research is necessary in this regard. Furthermore, the finding that the management team generally is larger among existing firms that have internationalized but not among nascent firms that plan to internationalize (compared with their respective non-international counterparts) may indicate an ongoing relationship between firms' incremental progress through the internationalization cycle on the one hand and the capabilities available in their management team on the other.

In terms of the decision to choose high- versus low-risk entry modes, we find very few differences along the dimensions we hypothesized. One speculative explanation for these non-findings among nascent firms, other than the relatively small size of the subsamples, may relate to their position in the set-up process, which means they have no clear insight yet into exactly how they plan to internationalize, including which entry mode(s) they will use to enter the foreign markets. For example, plans about specific entry modes may rely more on "gut feelings" rather than sound reasoning about their current capabilities or strategic goals (Van Gelderen et al., 2005). However, for existing firms, we find some differences between the high-risk and low-risk entry mode categories, mainly in terms of entrepreneurs' individual characteristics. Specifically, entrepreneurs who have higher educational degrees, who are older, and who are male tend to be more likely to choose high-risk entry modes.

We acknowledge that our research design is exploratory in nature and therefore that great caution is needed when interpreting our findings. As a result, the study limitations open extensive avenues for further research. First, the small sample size prevents us from simultaneously relating firms' international commitment to the combined set of the studied variables. Additional studies that use a larger data set might examine, for instance, the extent to which internal factors (e.g., firm resources) versus external factors (e.g., perceived competition) prevail in influencing international commitment. Second, though in some cases the rationale for our hypotheses implicitly assumes causal relationships, the cross-sectional design of our study does not allow us to test for such causality. For example, the relationship between innovation and internationalization may work in two directions. Our initial argumentation suggests that the knowledge-intensive character of innovative activity is more likely to occur in firms that are committed to international markets; implicitly, we reason that more innovation leads to more international commitment. However, we also could argue that firms' level of innovation may change after they enter international arenas, or in other words, that the level of international commitment affects subsequent innovation. Therefore, interpretations regarding the directionality of our results remain tentative, and researchers should collect data about, for example, knowledge-based factors and commitment to international activities at different points in time.

Furthermore, one of the goals of this study is to examine whether different factors underlie the internationalization of nascent versus existing firms. Further research should follow up on these nascent firms to determine whether they remained persistent in their efforts and possibly overambitious intentions to engage in international activity (Forbes, 2005). Finally, additional research could include a wider set of countries to examine how cultural factors (e.g., acceptance of uncertainty) or economic factors (e.g., level of foreign direct investment in the domestic market) relate to the extent to which a country's firms make international commitments. Although our choice of two countries with small domestic markets offers a conservative test of our hypotheses--as variations in the levels of international commitment across entrepreneurs likely are more limited in our research setting--the inclusion of a myriad of countries could provide a more complete picture of how firm- and individual-level factors relate to entrepreneurs' commitment to internationalize their activities.

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(1.) Although the theory of planned behavior originally was developed to examine individuals' characteristics and behavioral intentions, we extend its application to the firm level, with the reasoning that, given the limited size of nascent firms, the nature of the planned activities will be determined largely by the individual characteristics of the critical lead entrepreneur (Chandler and Hanks, 1984; McDougall and Oviatt, 2000).

(2.) This categorization is consistent with literature that suggests import/export entry modes entail substantially less risk than other entry modes, because they allow for relatively high control over foreign activities (Eriksson et al., 1997; Hisrich and Peters, 2002). For example, licensing may be a useful internationalization tool when entrepreneurs lack foreign production capabilities, but the entrepreneur must give up control to a foreign partner that gains the right to use a technology or production process in return for a royalty payment. Similarly, with a joint venture, the entrepreneur gives up control by allowing a third party to make an equity investment in a foreign entity. Ample research supports the notion that import/export is the predominant entry mode among young entrepreneurial firms (Burpitt and Rondinelli, 2000; Campbell, 1996; Moini, 1995; Ogbuehi, and Longfellow, 1994; Seringaus, 1993). Finally, our definition of import/export as the low-risk entry mode category is consistent with the recommendation to include both outward and inward patterns when studying internationalization (Welch and Luostarinen, 2000).

(3.) Our sample comprises the entire economic sector.

(4.) We apply a Kolmogorov-Smirnov test based on the largest difference (in absolute value) between the observed and theoretical cumulative distribution functions. The null hypothesis that our explanatory variables emerge from a normal distribution is rejected for all variables except age.

Contact Information

For further information on this article, contact:

Dirk De Clercq, Brock University, Faculty of Business, 500 Glenridge Avenue, St. Catharines,

Ontario L2S 3A1

Telephone: (905) 688-5550

E-mail: ddeclercq@brocku.ca

Niels Bosma, Utrecht University, Faculty of Geosciences, P.O. Box 80115, 3508 TC Utrecht, The

Netherlands

Telephone: +31 30 253 1995

E-mail: n.bosma@geo.uu.nl

Dirk De Clercq, Brock University, St. Catharines, Ontario

Niels Bosma, Utrecht University, Utrecht, The Netherlands

Table 1. Mann-Whitney Test for Nascent Firms

                            Nascent Entrepreneurs: Planning to
                                    Internationalize

                                                     Significance
                        YES (N = 50)   NO (N = 56)      level
                         Mean rank      Mean rank    (two-tailed)

H1a-b: Growth               65.7          42.6           0.00 ***
  orientation
H2a-b: Team size            54.8          48.7           0.27
H3a-b: Innovation           58.3          49.2           0.09 +
H4a-b: Educational          54.2          48.7           0.65
  level
H5a-b: Age                  54.3          51.9           0.61
Gender (male = 0,           48.2          58.3           0.04 *
  female = 1)
Perceived competition       55.4          51.8           0.52
Technology sector           55.4          51.8           0.25
Country (BE = 0,            49.8          56.8           0.17
  NL = 1)

                           International Nascent Firms:
                                 Planned Entry Modes

                        High risk   Low risk    Significance
                        (N = 31)    (N = 19)       level
                        Mean rank   Mean rank   (two-tailed)

H1a-b: Growth             27.2        22.8          0.30
  orientation
H2a-b: Team size          24.8        22.8          0.60
H3a-b: Innovation         27.9        21.6          0.11
H4a-b: Educational        25.3        25.8          0.91
  level
H5a-b: Age                25.2        26.0          0.84
Gender (male = 0,         24.0        27.9          0.21
  female = 1)
Perceived competition     25.8        25.0          0.85
Technology sector         25.2        25.9          0.78
Country (BE = 0,          24.7        26.8          0.55
  NL = 1)

*** Significant at p [less than or equal to] .001; ** Significant
at p [less than or equal to] .01; * Significant at p [less than
or equal to] .05; + Significant at p [less than or equal to] .10.

Table 2. Mann-Whitney Test for Existing Firms

                            Existing Entrepreneurs: Currently
                                      International

                                                      Significance
                        YES (N = 88)   NO (N = 146)      level
                         Mean rank      Mean rank     (two-tailed)

H1c-d: Growth              132.4          108.5           0.01 **
  Orientation
H2c-d: Team size           131.4          108.9           0.01 **
H3c-d: Innovation          123.5          113.9           0.17
H4c-d: Educational         121.3          115.2           0.46
  level
H5c-d: Age                 120.0          116.0           0.66
Gender (male = 0,          107.6          123.5           0.04 *
  female = 1)
Perceived competition      125.3          116.0           0.24
Technology sector          120.7          118.8           0.57
Country (BE = 0,           109.1          122.5           0.07 +
  NL= 1)

                          International Existing Firms:
                           Current International Modes

                                               Significance
                        High risk   Low risk      level
                        (N = 37)    (N = 51)   (two-tailed)

H1c-d: Growth             49.9        40.6        0.08 +
  orientation
H2c-d: Team size          48.1        41.1        0.18
H3c-d: Innovation         46.5        43.0        0.43
H4c-d: Educational        49.3        41.0        0.09 +
  level
H5c-d: Age                50.7        40.0        0.05 *
Gender (male = 0,         39.8        47.9        0.06 +
  female = 1)
Perceived competition     48.1        42.8        0.29
Technology sector         43.7        45.9        0.32
Country (BE = 0,          42.0        46.3        0.35
  NL= 1)

*** Significant at p [less than or equal to] .001; ** Significant at
p [less than or equal to] .01; * Significant at p [less than or equal
to] .05; + Significant at p [less than or equal to] .10.