E-commerce Policy Environment, Digital Platform, and Internationalization of Chinese New Ventures: The Moderating Effects of Covid-19 Pandemic.
| Verfasser | Lee, Jeoung Yul |
1 Introduction
Cross-border e-commerce refers to cross-border transactions conducted by firms located in different countries through e-commerce, with transactions being made on websites or digital platforms (Qi et al., 2020). This provides new opportunities for small and medium-sized enterprises (hereafter, SMEs) to expand to global markets. In particular, for international new ventures (hereafter, INVs) that are established and begin the internationalization process under consideration of the global market (Oviatt & McDougall, 1994), digital platforms have become a channel for easy international entry (Jin & Hurd, 2018; Jean et al., 2020). In this study, INVs refer to early-stage exporters who start exporting within three years since their foundation and earn at least a quarter of their total income from export (Cavusgil & Knight, 2015; McDougall & Oviatt, 2000; Oviatt & McDougall, 1994).
A digital platform is typically a two-sided market created by sellers, buyers, and platform firms (Liu et al., 2020), consisting of buyers, sellers, trading partners, customers, and government or regulatory agencies. There are several forms of e-commerce, such as business-to-business (B2B), business-to-consumer (B2C), and consumer-to-consumer (C2C). In this study, we focus on B2B digital platforms, referring to "electronic intermediaries that provide matching, information, promotion, and market research functions enabling INVs to identify potential foreign opportunities in terms of new markets and new customers" (Jean et al., 2020, p. 2). eWorldTrade. ThomasNet, Alibaba, and Ganglian Holdings are representative examples of B2B digital platforms (Liu, et al., 2020).
Internationalization through online channels is a viable option for both large and small businesses. However, in the early stages of internationalization, SMEs tend to rely more on digital platforms as they are generally less resourceful than large firms and suffer severe consequences when they fail in their international operations (Pezderka & Sinkovics, 2011). Also, due to their size, SMEs are constrained in terms of investing the necessary resources in a host country to reduce uncertainty (Pezderka & Sinkovics, 2011). However, by using a digital platform, SMEs can internationalize more quickly because it offers a channel to mitigate the liabilities of foreignness and resource constraints while reaching many foreign customers fairly quickly and at a relatively low cost (Jin & Hurd, 2018).
Indeed, many firms are starting international ventures through major e-commerce platforms, which form the main pillar of global e-commerce (Deng & Wang, 2016), and INVs are increasingly using digital platforms as a foreign market entry strategy (Jin & Hurd, 2018; Qi et al., 2020). Hence, digital platforms (in particular B2B electronic platforms) have become important channels for transactions in international trade as well as crucial marketing channels that effectively promote transactions between selling firms and buying firms on a global scale (Jin & Hurd, 2018; Liu et al., 2020; Qi et al., 2020).
Although B2B digital platform research has received considerable scholarly attention, there are still gaps in the literature that need to be addressed. First, the academic literature on the B2B digital platform and its relationship with the internationalization of INVs is still in its infancy and lacks in-depth coverage. In addition, while the benefits of digital platforms for INVs in the context of internationalization have been highlighted in some studies (Deng & Wang, 2016; Oxley & Yeung, 2001; Wang & Lee, 2017), other than Jean et al.'s (2020) study, research on digital platform risk and INVs' internationalization has been scarce. While cross-border e-commerce trading through digital platforms has great potential to promote INVs' business growth (Deng & Wang, 2016), it is more complicated and riskier than traditional offline international trade (Song et al., 2019). Therefore, it is important to investigate the relationship between digital platform risk and the internationalization of INVs.
Second, even though Jean et al.'s (2020) study was among the first to recognize the importance of digital platform risk for the internationalization of INVs, they did not examine the impact of institutional pressure on digital platform risk. Insight from institutional theory suggests that we should examine how institutional pressure, such as e-commerce policy uncertainty in both domestic and foreign markets, is contributing to digital platform risk for INVs as well as its effect on their internationalization (Dimaggio & Powell, 1983; Gibbs et al., 2003; Gibbs & Kraemer. 2004; Meyer & Rowan, 1977; North, 1990; Oxley & Yeung, 2001; Scott, 2008; Zhu et al., 2014).
Third, the recent crisis caused by the Covid-19 pandemic has affected all dimensions on a global scale, so it is expected to have some effects on the relationships between/among domestic and foreign market e-commerce policy uncertainties, digital platform risk, and the internationalization scope of INVs. Specifically, the pandemic has caused chaos in world trade and is having an extensive impact on the supply and demand aspects of the global economy (Gruszczynski, 2020). Recently, many scholars in various academic fields have begun to investigate the effects of the pandemic (Foss, 2020; Giones et al., 2020; Sharma et al., 2020; Verbeke, 2020); however, in the field of international management, research on the impact of these exogenous shocks on global management and firm strategies is still urgently needed. This crisis represents a rare exogenous impact on multinationals, SMEs, and INVs as well as all firms with international commercial links, including supply chain partners (Verbeke, 2020). Therefore, it is crucial to empirically analyze how firms are responding to these large-scale, uncontrollable risks with high levels of uncertainty, particularly in terms of internationalization.
To address the above gaps, this study examines whether the two types of institutional pressure, i.e., domestic market e-commerce policy uncertainty and foreign market e-commerce policy uncertainty, affect the perceived digital platform risk for INVs and its relationship with the scope of internationalization. Specifically, based on institutional theory (Dimaggio & Powell, 1983; Meyer & Rowan, 1977; North, 1990: Scott, 2008) and the previous literature, we aim to conceptualize domestic market e-commerce policy uncertainty and foreign market e-commerce policy uncertainty and test their impact on digital platform risk. Further, we also examine the effect of the Covid-19 pandemic drawing from institutional perspectives on the relationships between/among domestic and foreign market e-commerce policy uncertainties, digital platform risk, and the internationalization scope of INVs.
In this study, we explore the following questions: (1) "Do E-commerce policy environments have an impact on the digital platform risk for the Chinese INVs?"; (2) "Does perceived digital platform risk have an impact on the scope of internationalization of the Chinese INVs?'"; and (3) "How does the Covid-19 pandemic moderate the impact on the relationships between/among domestic and foreign market e-commerce policy uncertainties, digital platform risk, and the internationalization scope of INVs?".
Our study makes several important contributions that advance understanding of the impact of e-commerce policy environments on digital platform risk and internationalization strategy. First, this study uses institutional theory (Dimaggio & Powell, 1983; Meyer & Rowan, 1977; North, 1990; Scott, 2008), applying it to e-commerce digital platform setting, thereby provides a theory-grounded framework to examine the impact of the e-commerce policy uncertainty on digital platform risk and internationalization decision of INVs. Second, in drawing on institutional theory (Dimaggio & Powell, 1983; Meyer & Rowan, 1977; North, 1990; Scott, 2008) and digital platform literatures (Deng & Wang, 2016; Jin & Hurd, 2018; Liu et al., 2020; Qi et al., 2020), this research extends the discussion of institutional pressure and institutional uncertainty to digital environment setting such as e-commerce policy uncertainty environment which impact on firms' strategic decision in the context of INVs' internationalization. Thus, this study broadens and strengthens our understanding of digital environment uncertainty and international business activities. In addition, this study fills the research gap in empirically examining the linkage among digital platform risk, INVs, and internationalization, which has, to the best of our knowledge, thus far remained unexplored apart from Jean et al., (2020) paper. Third, based on institutional theory, we identify the different types of institutional pressure such as domestic market e-commerce policy uncertainty and foreign market e-commerce policy uncertainty that affect the perceived digital platform risk. Therefore, this study provides a strong foundation for further understanding of different types of institutional pressure in e-commerce context which contributes to the literature on e-commerce and international business. Thus, this study provides new insights into the public policy and legal aspects of e-commerce policy and its impact on international business which respond to the recent call for research to explore how the e-commerce related policy affects international business activities. Fourth, we link the institutional theory to the situation of Covid-19 and premise that the Covid-19 pandemic is the cause of institutional uncertainty, and a firm's strategic decisions are made under "overarching uncertainty" that generates multi-dimensional institutional uncertainty (Foss, 2020; Giones et al., 2020; Sharma et al., 2020). Therefore, this study is the one of first kind provides the possibility of applying institutional theory for empirical analysis of the...
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