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Response
Approximately 4,000 surveys were distributed for this study, indicating a total response rate of around 25 percent. One thousand two hundred surveys were mailed to Entrepreneur Of The Year[R] finalists in the United States, and 361 useable responses were received by the authors. Thus, the response rate for the U.S. portion of the survey was 30.1 percent. Because of the way in which the data were collected, it is impossible to determine the exact response rate for any of the countries except the United States.
A total of 1,045 Entrepreneur Of The Year[R] finalists responded to this survey. However, only 872 of these respondents provided data for our entry barriers survey items, so our sample is comprised of these firms. A breakdown of respondents by country and by industry is provided in Table 1. Statistical comparisons to non-respondents to the entire survey with regard to firm size and age did not reveal any significant differences. However, comparisons of those who completed the entire survey to those who omitted the barriers revealed no differences in firm size, hut that, on average, those who responded to the entire survey represented newer firms (17.85 vs. 23.51 years). Table 2 shows the descriptive statistics of the study's variables.
Table 3 shows the regression results of the selected variables on firm internationalization. Considering that neither sales growth nor change in net worth were significant predictors, Hypothesis 1 was not supported. Conversely, knowledge differences, cultural differences, and perceived risk each were significantly negative predictors of internationalization. Therefore, Hypothesis 2 was supported. The other noteworthy findings from the regression analysis were that location and ownership structure also were predictors of internationalization. Being headquartered in North America was a significantly negative predictor ([beta] = -.18, p < .001) and being publicly held was a significantly positive ([beta] = .18, p < .001) predictor of firm internationalization. These findings will receive further attention in our discussion section.
DISCUSSION
The results of our study suggest that knowledge and cultural factors are more significant than present success in domestic markets in predicting the non-internationalization of entrepreneurial firms. These findings are consistent with conclusions from previous research that industry and market knowledge are predictors of internationalization (Baird et al., 1994; Eriksson et al., 1997; Westhead et al., 2001). A relatively easy suggestion for addressing this issue would be to encourage the management teams of these firms to educate themselves by bringing managers with international experience into the management team, recruiting partners, or otherwise educating themselves about international opportunities (Reuber and Fischer, 1997; Shrader et al., 2000). However, our data suggest that many are not applying such counsel, and may not even be interested in doing so. Considering that an average sales growth rate of nearly 30 percent over a three-year period was not a significant predictor of internationalization, a substantial number of firms in the sample still may have ample domestic opportunities. However, considering the emerging body of research on the importance of these behaviors for the survival and growth of the entrepreneurial firm (Gilbert et al., 2006; Lechner et al., 2006; Sapienza et al., 2006), it appears that managers of these firms should reconsider the importance of these behaviors.
Another significant finding of the study relates to location factors. Our analysis showed that North American firms generally were not pursuing internationalization. One possible explanation for this may be geographical distance. Relative to North American firms, European firms have much smaller geographical distances to navigate in order to establish a substantive international presence, thereby making the internationalization decision a more pressing one for them (George et al., 2005). Also, the relative market size of North America may provide ample opportunities for these firms to grow and perform well within their original markets (Preece et al., 1999). But, even with geographical distance as a possible explanation, the lowered trade barriers provided by NAFTA have not encouraged North American firms in this sample to pursue internationalization even within their own continent. This is particularly noteworthy because in spite of North America being the target of much of the criticism regarding the effects of globalization, our findings suggest that these activities are being conducted by a relatively small percentage of firms headquartered there.
Our findings that publicly-held firms were more likely to internationalize support recent studies on the importance of outside owners for entrepreneurial firm internationalization (Arbaugh et al., 2005; George et al., 2005). The fact that these studies prominently examined European firms further strengthens our study's generalizability. What these studies have yet to address fully is the motivation for outsider involvement. Are these firms pursuing internationalization primarily because they're being encouraged to do so by these investors, because they're seeking to secure additional future investments, or because they're seeking additional growth to provide returns for the outside investors (Sapienza et al., 2006)? Regardless of the causes of this relationship, our findings do suggest that the management team of firms planning to expand internationally should consider strongly the need to cultivate relationships with outside investors to support their efforts (Daily et al., 2002; George et al., 2005).
Limitations
As with all studies, this one has several limitations that should be considered when interpreting our findings. The primary limitation of the study is the nature of the sample. While we argued earlier that the sample was theoretically relevant rather than necessarily statistically representative (Davidsson, 2005) and is not necessarily a sample of "high-performing" firms, the selection criteria likely have resulted in a sample comprised of firms that are relatively well regarded within their respective country, and therefore may not be fully generalizable to their country's general population of firms. The implications of these sample limitations may be somewhat dependent upon characteristics such as the level of entrepreneurial activity within each country and how entrepreneurship is perceived (Davidsson, 2005). For countries with relatively low levels of entrepreneurial activity, such as Belgium, The Netherlands, and Sweden (Reynolds et al., 2000), firms from those countries in this sample are more likely to be outliers in the general population. Conversely, for countries with relatively high entrepreneurial activity, such as New Zealand, Ireland, and the United States, the sample more likely reflects the general population. The other significant limitation is that no Mexican firms were included in the sample. This means that we cannot definitively infer that non-internationalization is a North American phenomenon. Finally, because of the present relative lack of multi-country entrepreneurship research, it is quite difficult theoretically to infer the extent to which our findings have been influenced by country-specific factors. Therefore, we encourage future researchers to adopt Davidsson's (2005) recommended strategy of replication to support or refute our findings.
Implications and Future Research
Ill spite of these limitations, our findings carry significant potential implications for both entrepreneurial firms and policy makers based upon the regional and industry compositions of our sample. Since being headquartered in North America was a negative predictor of internationalization, we identify several issues for North American firms. Industry observers suggest that the global demand for U.S. products will be the sole determinant of whether future manufacturing jobs will be created or lost in America (Huether, 2006). Therefore, the fact that a substantial number of North American entrepreneurial firms have little to no international presence should be particularly disconcerting tot those interested in continued economic development. However, public policy makers certainly can play a role in bridging the cultural gaps between the firms in their districts and international markets. It has been suggested that lack of market knowledge is an inhibitor of new venture internationalization (Barkema et al., 1996; Peng, 2001; Zahra et al., 2000). Therefore, policy makers might consider playing a boundary spanning role between firms in their regions and international markets. If the use of outside sources of assistance is a significant predictor of successful domestic geographic expansion (Barringer and Greening, 1998), how much more important will such assistance be when trying to navigate the cultural barriers associated with internationalization? Policy makers could work with firms in their regions to help determine unique capabilities and simultaneously examine foreign markets to identify those that might be interested and benefit most from their region's products and services.
Pursuing relationally-oriented initiatives would have at least two benefits given the relative lack of government resources to invest directly in equipment or education in North America (Friedman, 2005). Besides the fact that they would be less costly than financial investments, these efforts could help broaden the networks of entrepreneurs in their regions and could help smooth traditionally rocky relations between government and business, thereby allowing at least the possibility for targeted economic development. Such efforts also would require some initiative on the part of the firms, since closely-held SMEs tend to avoid internationalization initiatives (George et al., 2005). Granted, analysis of this nature likely would require input from experts such as management academics, but with increasing sentiment that management academics should become involved in dialogue on public policy issues (Rynes and Shapiro, 2005), it may be the right time for soliciting such involvement.
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