2: How do we precisely define an international start-up? 2.1 Relevance When investigating the effect internationalization has on new ventures it is crucial to first clarify what exactly is being examined, therefore I will start this thesis by defining these terms. Only before defining these terms I will first describe the two dimensions this research primarily exists of; entrepreneurship, and international economics. 2.2 Defining entrepreneurship Entrepreneurship has been subject of much economic research over the past decades. However, a universal definition of this subject is missing. The terms entrepreneurship or entrepreneur can be interpreted in various ways depending on the interest and background of the reader. Historically entrepreneurship has been associated with innovation, market entrants, small businesses, flexibility and creativity. According to Schumpeter’s theories, entrepreneurial firms are responsible for changing the shape and scope of markets with the introduction of revolutionary new products. (Schumpeter, 1912) The neo-classical school stresses entrepreneurial firms’ capabilities to efficiently exploit market opportunities created by the changing of markets. Thus where Schumpeter explained the role of entrepreneurs as creators of change in markets, the neo-classical school emphasized the entrepreneur’s capabilities of recognizing and perceiving opportunities created by these changes in the market. More recently, economists and other social-science academics have broadened the term entrepreneurship by including: ‘the process of creating or seizing an opportunity and pursuing it regardless of the recourses currently controlled’ (Timmons, 1994). From this broadened definition an increasing number of economic agents have started to refer themselves as entrepreneurs. Examples are terms such as the social- or corporate entrepreneur.
In their paper (McDougal et al. 2003), examine the differences between international and domestic new ventures in more detail. In this study, international and domestic new ventures are compared by 16 firm characteristics; (international experience, marketing experience, industry experience, technical experience, and start-up experience) concern the characteristics of the entrepreneurs. The three 8 strategic characteristics are: (Strategic aggressiveness, focus on low costs, focus on innovative differentiation, focus on quality, focus on service, marketing focus, number of distributions channels, focus strategies) finally the 3 variables that describe the different industry structures are: (global integration, technological change, competitive intensity). Starting with the entrepreneurs’ characteristics, it is claimed that one would expect an INV to have a more internationally oriented management team than domestic new ventures do. First, international knowledge and experiences of management are crucial in the process of internationalization. An experienced management team is better equipped to recognize and respond to changes and growth opportunities in international markets more efficiently than managers which are only experienced in domestic markets. Therefore they will pursue opportunities beyond borders more often and more actively when they do, compared to managers without such extended international experiences. Secondly, a firm with international ambitions is more likely to actively hire internationally experienced managers or entrepreneurs as they need the knowledge and experience such managers have gained in their careers. New ventures cannot have acquired international experience in their past operations since they have just started business. Therefore they need to rely on the international experience of their entrepreneurs or managers instead. Just as with international experience, it is assumed that INVs also cope with the additional complexity of being an INV by relying on an entrepreneurial team that is more experienced in all facets of the business, such as marketing or industry experience. In case managers have previously been active in the industry, they do not need to familiarize as much with the products or services nor with the customers as inexperienced managers do. As a result, opportunities will be indentified more efficiently and more energy is available to focus on foreign market entry.