Effects of Internationalization Rhythm and Speed on E-Commerce Firms' Growth and the Role of Institutional Distances.
| Verfasser | Swoboda, Bernhard |
1 Introduction
E-commerce firms, i.e., providers of online shops and platforms for physical consumer goods, already account for more than 20% of total global retail sales (Young, 2021). They benefit from internet-based technologies that reduce expansion barriers and offer opportunities for internationalization (Shaheer & Li, 2020). Firms such as Zalando take advantage of these opportunities through specific time-based internationalization decisions (Coviello et al., 2017). Zalando is among the ten fastest growing e-commerce firms in Europe (Digital Commerce360, 2018). It launched its first country-specific online shop abroad in 2009 (a year after its foundation); soon thereafter, it launched shops in twelve more countries (2010-2012) and, years later, in two other countries (Zalando, 2021). The German firm seems to employ a fast and irregular internationalization process, but whether and how this process affects firm growth is an important unanswered question. Moreover, Zalando's internationalization has been restricted to Europe, i.e., institutionally relatively close countries. It seems to be important for Zalando to control the dynamic aspects of its institutional context (Kostova et al., 2020), while the role of distance as a contextual factor is generally assumed to lose relevance in the realm of e-business (e.g., Chen et al., 2019; Yamin & Sinkovics, 2006). Therefore, the focus of this study is to examine how the rhythm and speed of the internationalization of e-commerce firms--different from those of the internationalization of manufacturing firms and born globals --affect firm growth and whether institutional distance is an important factor in this relationship.
Many scholars have studied time-based internationalization decisions (see Fig. 1). Most such studies have analyzed the drivers of the internationalization rhythm or speed of manufacturing firms (e.g., Acedo & Jones, 2007; Elosge et al., 2018; both Lin, 2012, 2014) and, more seldomly, their effects (e.g., Chetty et al., 2014). For commerce firms, only internationalization speed has been analyzed, predominantly as a dependent variable (e.g., Batsakis & Mohr, 2017; for e-commerce, Luo et al., 2005). Three studies considered the effects of the internationalization speed of offline commerce firms and provided partly contradictory results (positive effects on performance and divestments, (Chan et al., 2011; Mohr et al., 2018); a U-shaped effect on performance, Mohr & Batsakis, 2017). Studies addressing similar issues for e-commerce firms or their internationalization rhythm are lacking. Moreover, studies partly undervalued the role of institutional distance or found contradictory results as well. Focusing on e-firms, Luo et al. (2005) found no effect of cultural distance on internationalization speed, while other studies have shown a decreasing role of cultural or CAGE distances (Schu et al., 2016; Shaheer & Li, 2020). The latter findings address distances but not in the context of the effects of e-commerce firms' internationalization rhythm or speed.
In summary, research has focused on internationalization speed, seldom rhythm and not their effects on e-commerce firms' growth. Scholars called for studies on their respective effects (Chen et al., 2019; Tolstoy et al., 2021). Specific insights are valuable for managers of e-commerce firms to design internationalization processes designed to increase firm growth (Jean & Tan, 2019) and for suppliers interested in new e-sales channels. Moreover, scholars have recently called for research focusing on insights into the role of cross-national distance in internationalization processes (Samiee, 2020; Shaheer & Li, 2020), while others perceive that the importance of such processes is decreasing in digitalizing economies (e.g., Yamin & Sinkovics, 2006). We assume that e-commerce firms still face challenges regarding the management of institutional contexts, as they affect not only internationalization processes but also their role in firms' sales growth (Zaheer et al., 2012). An understanding of the relative importance of major types of distance for the effects of internationalization processes can help firms successfully operate e-businesses internationally.
This study aims to address these research gaps by analyzing two research questions. First, how can e-commerce firms benefit from internationalization process rhythm and speed in terms of firm growth? Second, whether and how do institutional distances moderate these effects? We thereby offer two important contributions to theory and practice.
First, examining the effect of e-commerce firms' internationalization rhythm and speed on their growth provides novel insights into the success of time-based internationalization decisions (e.g., Vermeulen & Barkema, 2002). We contribute to contradictory findings on the effects of commerce firms' internationalization speed and initially show the effects of internationalization rhythm on e-commerce firms' growth. Analyzing internationalization processes is of paramount importance, as these are known to be major strategic decisions in multinational corporations (MNCs, which differently affect the overall firm performance, Hilmersson et al., 2017). In line with previous studies, we refer to internationalization process theory, which states that firms internationalize gradually (Johanson & Vahlne, 1977). However, we contribute to the application of the further development of this theory in a digitalizing economy by empirically capturing e-commerce firms' time-based internationalization processes (responding to the calls of Coviello et al., (2017)). Therefore, the internationalization processes of e-commerce firms are still expected to be path dependent but not necessarily incremental and slow (e.g., Luo et al., 2005).
Second, we contribute to the research by following calls to examine institutional distance as a steady moderator, i.e., degrees of cross-country contextual differences (Kostova et al., 2020). Following the extant research, we assume that an e-commerce firm's institutional context does not affect its growth only directly and independently but interacts with its important internationalization processes (Brouthers & Hennart, 2007; Schwens et al., 2011). Multilevel modeling with cross-level interactions shows the explained variances of important institutional distances and identifies the strongest levers (Hox et al., 2018, pp. 4-5). Moreover, we contribute to the application of internationalization process theory and the suggested role of country distances in this theory (Johanson & Vahlne, 2009). In digital economies, some scholars expect these distances to have reduced or no importance (e.g., not affecting internationalization, Yamin & Sinkovics, 2006), while others expect the opposite (e.g., Shaheer & Li, 2020). Even e-commerce firms that operate country-specific websites have to find appropriate local business partners and build up customer bases (Brouthers et al., 2016). As such, the management of international expansion and distance has been equated (Kostova et al., 2020), and we assume that institutional distances affect the impact of e-commerce firms' internationalization process. Thus, we contribute to the literature by initially clarifying the role of institutions in the context of e-commerce. According to the broad body of research on international business (IB), we study the distance of regulative, normative, and cultural-cognitive institutions (Kostova et al., 2020; Scott, 1991) and extend the studies on each of those dimensions, for example, by showing the explained variance and relative importance of each moderator.
The remainder of this study proceeds as follows. Drawing on theory, we derive and test hypotheses based on 1702 market entries over 21 years corresponding to 228 leading e-commerce firms in Europe. After presenting the results, we provide implications and directions for further research.
2 Conceptual Framework and Hypothesis
In the conceptual framework of this study, e-commerce firms' internationalization rhythm and speed are related to annual firm growth over time (see Fig. 2). These effects are conceptualized as dependent on institutional country distances as continuous moderators.
Annual growth is an important performance indicator of commerce firms (e.g., Chan et al., 2011), and internationalization rhythm and speed are important time-based indicators that capture firms' internationalization processes (Lin & Cheng, 2013). Vermeulen and Barkema (2002) were among the first researchers to discover internationalization rhythms and define them as irregular firm expansion processes. Whereas these authors analyze the processes of MNCs, we adapt their conceptualization and apply it to e-commerce firms by referring to foreign market entries, i.e., launches of online shops that are country-specific in terms of domain, language, and currency (e.g., Schu & Morschett, 2017; Shneor & Flaten, 2008). E-commerce firms that follow rhythmic, regular expansion processes may, for example, launch one country-specific online shop every third year (see the two plots on the left-hand side of Fig. 3). In contrast, firms that follow an arrhythmic, irregular expansion process may launch several online shops within three years and then remain inactive for several years (two right-hand plots). Internationalization speed is defined as a time-based indicator of how many country-specific online shops a firm launches within a time period (Vermeulen & Barkema, 2002), but it is conceptualized differently in IB studies (Hilmersson et al., 2017; Hsieh et al., 2019). First, this research exhibits a static focus on preinternationalization, as the time between a firm's foundation and its first international activity is viewed as its internationalization speed (Hilmersson, 2014). Second, this literature contains an overall conceptualization of speed as the average number of foreign entries conducted by a...
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