Home-Country Networks and Foreign Expansion

Abstract

We propose that home-country network advantages shape the pattern of foreign expansion of firms. We argue that social status advantage is transferable from one market to another as a signal of quality, while brokerage advantage is more context-specific and difficult to transfer. Furthermore, the value of network advantages changes as networks evolve. Using data on the foreign market entries of 1,010 U.S. venture capital firms, we find robust support for the effects on foreign market entry of social status. We also find that brokerage reduces foreign entry in the absence of partners in the new market, and increases it when partners are already operating in the new market.