Fast international expansion post initial entry (post entry speed - PES) has been found to have an overall negative influence on profitability, survival chances, and sales growth. These negative performance implications seem to arise because of complexities associated with fast internationalization. Higher complexity results in “inefficiencies that occur when things are done faster” (Jiang et al., 2014, p. 115). As firms’ capacity to cope with complexity is limited negative performance implications arise.
However, extant research suggests that complexity might not uniformly lead to deteriorated performance as firms respond to complexity by forming capabilities. Research on international new ventures (INVs) supports this view in suggesting that young internationalizing ventures enjoy “learning advantages of newness” that enable them to quickly learn in international markets and form capabilities according to market feedback.
Hence, fast-pace international expansion poses a major threat to INVs, but young ventures are characterized by a particularly strong ability to learn and form capabilities. Thus, it appears that some ventures are able to realize capability formation as a response to complexity whereas others are not able to handle complexities in a way such that they do not have negative performance implications.
Domurath, Anne; Schneck, Benjamin; and Patzelt, Holger
"POST-ENTRY SPEED AND THE PERFORMANCE OF INTERNATIONAL NEW VENTURES – THE ROLE OF COMPLEXITY MANAGEMENT (INTERACTIVE PAPER),"
Frontiers of Entrepreneurship Research: Vol. 34
, Article 8.
Available at: https://digitalknowledge.babson.edu/fer/vol34/iss15/8