International Market Entry by U.S. Internet Firms: An Empirical Analysis of Country Risk, National Culture, and Market Size

Abstract:     
We study international market entry in the context of the Internet, and ask: On what basis do U.S. Internet firms choose the markets that they enter? Our baseline hypothesis is that international market entry decisions are based on balancing perceived risks and returns inherent in a foreign target market. In addition, firms in the Internet sector face somewhat unique challenges when expanding abroad. Drawing on a sample of close to 7,000 country entry decisions undertaken by 179 U.S. Internet firms, we find that country risk, cultural distance, and uncertainty avoidance reduce the likelihood international market entry, while individualism and masculinity increase the probability of market entry. In general, the size of the international market moderates these relationships by weakening the negative effects, while strengthening the positive effects.

Keywords: International market entry, country risk, national culture, market size, e-commerce

JEL Classification: F21, F23, M1, M13, O3, O33

Accepted Paper Series