The Internationalization Behavior of German HighTech Startups: An ...

FEATURE ARTICLE

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The Internationalization Behavior of German High-Tech Start-ups: An Empirical Analysis of Key Resources By Andreas Pinkwart Dorian Proksch

Although there were a lot of new studies about the phenomenon of internationalization in the past several years, the field of newly founded technology-based firms (NTBFs) internationalization was less considered in literature. We contributed in filling this research gap using a longitudinal study to discover the determinants of internationalization in Germany. Our sample was based on 116 venture capital–financed NTBFs; 44 of them went international. Given the high dependence on exports of the German economy, the internationalization behavior of its NTBFs is of great importance for the future macroeconomic development of the country. In comparison, there are still very few empirical studies on the key determinants and initial drivers for the rapid internationalization of German start-ups. We showed that technological and financial factors are positively related to going global. The characteristics of the human capital, however, have no significance for going international in our sample. © 2013 Wiley Periodicals, Inc.

Correspondence to: Dorian Proksch, HHL—Leipzig Graduate School of Management, Jahnallee 59, 04109 Leipzig, Germany, 49 341 9851 640 (phone), [email protected], [email protected].

Published online in Wiley Online Library (wileyonlinelibrary.com) © 2013 Wiley Periodicals, Inc. • DOI: 10.1002/tie.21595

44 FEATURE ARTICLE

Introduction

O

viatt and McDougall (1994) introduced the research area of international start-up companies. Since then a variety of research was done in the field (see, e.g., Cieslik & Kaciak, 2009; Evers, 2011; Zou, Liu, & Ghauri, 2010). However, there is a lack of research in the field of internationalization of new technology-based firms (NTBFs) (Kiederich & Kraus, 2009). In addition, Rialp, Rialp, & Knight (2005) proposed that further empirical research is needed using longitudinal data. This article is a contribution to fill the gap by conducting an empirical long-term study with 125 venture capital (VC)-backed start-up companies in Germany. Germany developed from its history and tradition many patents and inventions and brought forth leading companies in the high-tech field like Bayer AG, SAP AG, and Siemens AG. In addition, Germany is known to be among the top three exporting countries in the world. Paradoxically, the internationalization growth rate of German NTBFs is low compared to other European countries like the United Kingdom (Bürgel, Fier, Licht, & Murray, 2000). Determining the individual and firm-level drivers for internationalization of German NTBFs can give an explanation to these phenomena. In the literature, the early internationalization of NTBFs is said to be one of the determining factors of becoming a global leader. Schwens and Kabst (2011), for example, found out that the earlier NTBFs go into foreign markets, the higher the foreign-venture performance of the firm. In addition, Kiederich and Kraus (2009) state that internationally active NTBFs are more profitable than purely domestic NTBFs. However, the internationalization of NTBFs may be more complex compared to nonhigh-tech start-ups. Usually, NTBFs need more resources to develop their product. In addition, they often need more time to enter the market, and therefore require a higher amount of investment. Often, an NTBF needs three or more years to make its first profits. This period must be covered with venture capital or another form of financing. If an NTBF goes international, additional costs are created. NTBFs develop complex products, and therefore experienced sales people must be hired. That also adds up to the cost of internationalization. That’s why an NTBF that plans to go international needs to raise a higher amount of money. In addition, the products of an NTBF might be more difficult to market because they are complex to explain. In-depth market knowledge may be needed to address the right customers. The conditions for the internationalization of NTBFs are therefore different than for other new ventures.

Thunderbird International Business Review Vol. 56, No. 1 January/February 2014

Often, an NTBF needs three or more years to make its first profits. This period must be covered with venture capital or another form of financing. Furthermore, most studies about the internationalization of new ventures were conducted in the United States (Holtbrügge & Enßlinger, 2005). US companies are in general more prone to found international companies from the beginning, which is attributed to having the mind-set of becoming the global leader (Johnson, 2004). In Germany, becoming a medium-sized company, the so-called Mittelstand, is a common goal. These are, on the one hand, small and medium-sized domestic companies that focus on the regional or national market and often produce a small portfolio of products. On the other hand, there are the “hidden champions” (Simon, 2009) that gradually develop into global market leaders in a niche market. The export orientation of firms is largely determined by the size of the company measured by number of employees. While the export rate for large German companies is over 55%, it is not even 10% for SMEs with up to 500 employees (IFM, 2007). The idea of becoming an early global leader might not be in the head of every founder, or there is a lack of sufficient resources in the seed phase (Schmidt-Buchholz, 2001). In this article, we focus on the resource-based determinants of the internationalization of German NTBFs.

Theoretical Framework There are various studies about the determinants for internationalization in new ventures. They emphasize either market conditions or the resources available to start-ups, or they apply both approaches in their investigation (for a comparative overview see Holtbrügge & Enßlinger, 2005). As a conceptual framework, the

DOI: 10.1002/tie

The Internationalization Behavior of German High-Tech Start-ups: An Empirical Analysis of Key Resources

resource-based view will be adopted. This approach assumes that a firm’s internationalization behavior is considerably determined by internal conditions. Rialp et al. (2005) reviewed the findings in internationalization in the years between 1993 and 2003 and proposed a new framework of early internationalizing firms: the firm’s intangible resources, consisting of the structural capital (technological, organizational, relational) and human capital (entrepreneur-manager’s/entrepreneurial team’s characteristics, ties, and roles) influences the firm’s international capabilities. These capabilities and the environmental factors influence the internationalization strategy of the new venture. The framework states that a firm’s intangible resource base may be of great importance in generating a critical level of internationalization capability and therefore may lead to internationalization. We use this framework and further look at the area of technological capital as an example of structural capital and the entrepreneurial team’s characteristics as the determinants of the firm’s international capabilities. The technology is the main asset of the NTBF and shapes whether it will become successful. The entrepreneurial team was identified as one of the main success factors in many studies (see, e.g., Gompers, Kovner, Lerner, & Scharfstein, 2010). The entrepreneurial team is responsible, together with the investors and the board, for making the decision to go global. In addition, we take the financing of the new venture into account. In one of the few currently available studies on the internationalization of German high-tech companies, Schmidt-Buchholz (2001) shows, based on 16 case studies, that access to capital as a tangible resource may be an important determinant for the internationalization behavior. An internationalization of an NTBF can be a costly process because new staff members and resources will be needed. Therefore, the costs of the internationalization process have a significant influence on the decision of going global (Eriksson & Johanson, 1997), especially, the need for high amounts of venture capital investment to further develop their technology until they can enter a market (Colombo & Grilli, 2005). That’s why it may be more difficult for an NTBF to go international if it’s not backed with sufficient capital. In the following, we look at how the technology, the financing, and the human capital may influence whether an NTBF goes international.

Technology as a Determinant for Internationalization Obviously, the technology is one of the major success factors of an NTBF. To enter a market the product has to be new and innovative. However, other companies might try to copy the products. Not having to invest as much in the

DOI: 10.1002/tie

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research and development as an NTBF normally has to makes it possible to sell the products cheaper. Therefore, there are two mechanisms to protect the technology of an NTBF. First, it can use patents to protect its intellectual property (IP) on the national or/and international market. Second, it can stay ahead of the technology (time to market is the import success factor for this group), so if its technology is copied, it already has a more advanced version of its product. Using patents enables NTBFs to sue companies that copy their technology without permission. However, they have to openly reveal their technology as a patent. That might enable possible competitors to develop similar technologies that do not infringe the patents. Also, an NTBF may not have the money to protect its technologies through expensive lawsuits. That might be how Hayton (2005), while analyzing a sample of new technology ventures in the United States, discovered that IP protection has no significant relevance. Autio, Sapienza, and Almeida (2000) tested the effect of technology in new ventures in Finland. They found that an imitable technology positively influences international growth. A reason for that can be that the company wants to enter the international markets as quickly as possible before new competitors arise, whereas patents may create a feeling of safety. We tested whether this is the case in Germany, an international leader in the number of filed patents: Hypothesis 1: Going international is positively related to the fact that a company has filed one or more patents. Having an advanced technology may make it easier to go international. The risk of being imitated is lower,

Having an advanced technology may make it easier to go international. The risk of being imitated is lower, and the company will have a clear differentiation in the new market.


46 FEATURE ARTICLE

and the company will have a clear differentiation in the new market. Zou et al. (2010) analyzed the internationalization of new ventures in China. They found that new ventures with greater technological capability are more likely to choose internationalization strategies. We tested whether the technology level also has an influence on the internationalization of German NTBFs. This is rated by external research institutes. Hypothesis 2: Going international is positively related to the fact that a company has an advanced technology.

Financing as a Determinant for Internationalization Having enough financial resources is one of the major success factors of a new venture (see, e.g., Cooper, Gimeno-Gascon, & Woo, 1994; Song, Podoynitsyna, Van Der Bij, & Halman, 2008). That may be especially true for NTBFs. Developing a new technology often requires intensive resources like human capital, material, and laboratories. In addition, the development of a new technology takes several years. Consequently, the market entry of the new product or service usually takes place a few years after the founding of the company. In this phase, the NTBF is not able to generate revenues. That’s why NTBFs are most likely to suffer from capital market imperfections (Bertoni, Colombo, Grilli, & Milano, 2005). They have to rely on venture capital, as this is one of the key drivers of growth for NTBFs (Colombo & Grilli, 2005). An NTBF’s need for capital is already high, but internationalization requires additional money. That could include costs for international marketing, sales, and for tailoring the product for the specific market (e.g., translating the user manual). The NTBF must therefore make sure that it can cover these costs and get new capital. Fernhaber, McDougall, and Oviatt (2007) found that the greater the level of venture capital within an industry, the more likely it is that new ventures operating within the industry will internationalize. Luostarinen and Gabrielsson (2006) state that a shortage of financing is an important challenge for an early internationalization. We tested whether the initial VC investment sum also has an influence in the internationalization of German NTBFs: Hypothesis 3: Going international is positively related to the investment sum of the seed round. Moreover, the number of investors might have an influence on the internationalization of an NTBF. Tian (2012) analyzed the influence of investment syndication in venture capital and found that new ventures with a large number of investors can access capital more easily. With a greater number of investors, it might be easier to succeed in getting further financial rounds, as each


investor will be able to invest a lower amount. Also, the existence of a group of investors might signal trust—a number of people believing that the venture will succeed might signal a lower-risk investment, which could make it easier to attract new investors. A great number of investors, and therefore easier access to new capital, can defray the cost of an international strategy. Therefore, we tested whether the number of investors has an influence on the internationalization of German NTBFs: Hypothesis 4: Going international is positively related to the number of investors.

Human Capital as a Determinant for Internationalization The entrepreneurial team is often described as the main success factor of a new venture (see, e.g., Kakati, 2003; Song et al., 2007). The vision and experience of the founders shape the new venture and their direction, and they make the decision to go global. The influence of the entrepreneurial team on the process of internationalization was widely studied in the literature. We tested whether human capital has an influence on the internationalization of German NTBFs: Hypothesis 5: Going international is positively related to the human capital. The size of a new venture was described in the literature as an influential factor for success (see, e.g., Ensley, Pearson, & Amason, 2002; Song et al., 2007). If a new venture has a bigger team, it is easier to handle the workload of developing a new product and bringing it to the market. Also, a bigger team may include more diverse competences and therefore has a better fit for the various tasks. For internationalization, a big team might be even more important. In addition to handling the domestic market human resources are needed to sell the product internationally. Shaw and Darroch (2004) analyzed nonexporters and found that firm size is perceived as being the biggest barrier to internationalization, followed by a lack of market knowledge and experience. Bürgel (2000) did an empirical study in the United Kingdom and found that the size of a new venture has an influence on the ability to internationalize because more resources are available. We tested whether the size of the founder team also has an influence on the internationalization of German NTBFs: Hypothesis 5a: Going international is positively related to the size of the founder’s team. Industry experience was described as a main success factor of a new venture in the literature (see, e.g.,

DOI: 10.1002/tie


Industry experience may be a relevant factor in the decision of internationalization. Song et al. 2007; Stuart & Abetti, 1990). Entrepreneurs with knowledge of the industry may better assess if there is demand for their product on the market and therefore have a better ability to develop a suitable product. Also, they may already have a network of suppliers and possible customers. Industry experience may be a relevant factor in the decision of internationalization. For being optimistic about going to a new market, a wide knowledge of the industry is helpful to assess the chances and risks. Evers (2010) tested the influence of industry experience in the Irish aquaculture industry and identified it as one of the main factors of internationalization. We tested whether the industry experience of the founder team also has an influence on the internationalization of German NTBFs:

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foreign countries. In addition, language skills and cultural experience may greatly lower the barriers of going international. Therefore, the international experience makes them more prone to go international. This was proved by many empirical studies. Bloodgood, Sapienza, and Almeida (1996) used a sample from the US market and showed that internationalization is directly related to the international work experience of the board of directors. Reuber & Fischer (1997) came to the same result by analyzing the internationalization of small and mediumsized companies in Canada. Madsen and Servais (1997, p. 576) postulate that “the antecedent of a Born Global is one or several strong entrepreneur(s) with strong international experience, and perhaps in addition a strong product.” We tested whether the international experience of the founder team also has an influence on the internationalization of German NTBFs: Hypothesis 5b3: Going international is positively related to the international experience of the team.

Methodology Sample

Oviatt and McDougall (1995) identified internationalization experience as one of the three main success factors in internationalization. International experienced teams have knowledge and experience in dealing with foreign markets and positioning their product. Also, a variety of resources may be needed in the other countries. This can range from facilities to staff members. International experienced teams may better know how to get them in the

Neergaard & Ulhoi (2006) declared that too many analyses are based on conveniently accessible and readily available secondary data sets, especially in the field of entrepreneurship and venture capital research. Bygrave (2006) declared that longitudinal studies with original field-derived data are missing. Therefore, we carried out a survey with 125 NTBFs at 8 different public venture capital funds (VCFs) in Germany aiming at collecting longitudinal data. These companies received financing within 18 months after founding and can be regarded as highly innovative. The data collection took place at the VCF, and we had access to the original deal documents. That distinguishes our study significantly from previous ones in this area. We focused our examination on the decision files (business plan, due diligence, investment committee paper) and the continuous reporting (qualitative and quantitative reporting, milestones, board meeting). This enabled us to analyze the whole course of the development of the NTBF. We thereby collected quantitative data (e.g., the financial figures and the years of working experience of the founders) and qualitative data (e.g., if the company went international). Table 1 shows which variable we were able to derive from each document and with which method of data collection. A pretest of the NTBF in four different funds showed the feasibility of

DOI: 10.1002/tie


Hypothesis 5b1: Going international is positively related to the industry experience of the team. The leadership experience was described as a success factor in the literature (see, e.g., Stuart & Abetti, 1990). It may be easier for experienced leaders to manage a team and to handle the various challenges in the founding phase. The internationalization process needs additional management effort. An international sales team has to be built and supervised, and different markets have to be observed. That’s why teams with more leadership experience may be more likely to internationalize. We tested whether the leadership experience of the founder team also has an influence on the internationalization of German NTBFs: Hypothesis 5b2: Going international is positively related to the leadership experience of the team.

48 FEATURE ARTICLE

TABLE

1 Sources of Data Collection

Variable

Source of Data Collection

Scale

Method

Internationalization

Business plan, investment committee paper, monthly reporting

Nominal

Qualitative

Patent filed international

Business plan, investment committee paper, monthly reporting

Nominal

Qualitative

Technology rating

Technology evaluation report

Nominal

Quantitative

Investment sum

Term sheet

Ordinal

Quantitative

Number of investors

Term sheet

Ordinal

Quantitative

Investment committee paper

Ordinal

Quantitative

Team size Working experience

Curriculum vitae (CV) of founder

Ordinal

Quantitative

Leadership experience

CV of founder

Ordinal

Quantitative

International experience

CV of founder

Ordinal

Quantitative

2 Sample Size

Number of international cases

47

Number of national cases

78

We use the term internationalization if a company enters an international market or opens a branch in a foreign country. This includes, for example, building an international sales force or moving the research and development department to another country.

Total number of cases

125

Measures and Variables

Internationalization ratio

37.6 %

TABLE

Variable

Value

In our study, we define an NTBF, similar to Bürgel et al. (2000), as a legally independent company that was founded no longer than 10 years ago and is operating in one or more high-technology sectors. We include spinoffs from companies or universities in our definition as long as they are legally independent and completely managed by the founder’s team.

To test our hypotheses in the area of technology we look at the patents of the NTBF. From the investment committee papers and the continuous reporting, we know if the NTBF has submitted a patent. We also can see if the patent was filed and whether it’s a national or an international patent. We collected data if an international patent was filed. To assess whether the NTBF uses an advanced technology, we look at the expert evaluation report of the NTBF. The VCF orders this report from an external institution prior to the investment to evaluate the technology risk. The advancement of the risk is measured on a Likert scale from 1 (low risk) to 5 (high risk) and was introduced by the external institutions that ordered the evaluation. To verify our hypotheses in the area of finances we look at the investment sum of the seed phase. We can derive the exact sum from the term sheets. Similarly, we can count the number of investors participating in the seed phase. For testing our hypotheses in the area of the human capital, we look at the curriculum vitae (CV) of the founders. We derived the international working experience in years (study semesters abroad and internships were excluded). For the working experience we looked only at the years in industry, and excluded research experience (e.g., working as a research associate). In addition, we took the leadership experience of the founders into account. For testing our hypotheses we used the average international experience in years, the average leadership


DOI: 10.1002/tie

Average age of firms

5.1 years

our approach. We used a codebook to be able to transfer qualitative to quantitative data. The codes were derived from the current assessment of the variables in literature. Every variable was coded by three different researchers and the average was taken. This ensured the reliability of the approach. In our sample, we looked at funding rounds between 2005 and 2011. The NTBFs are from different industries, ranging from biotechnology to the development of energy-saving systems. Examples are the development of hardware and software for higher-quality diagnostic radiology or systems to save the industrial waste heat in production plants and to redirect them to retail customers. The age of the companies was on average 5.1 years. We had 47 cases of NTBFs that went international. Therefore, we had a degree of internationalization of 37.6%. General data about our sample is shown in Table 2.

Definition of Important Terms

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TABLE

3 Average Values of the Variables for the International and National Groups of the NTBF

Variable

International Group

National Group

Total

Mean/Share

Std.Dev.

Mean/Share

Std.Dev.

Mean/Share

Std.Dev.

5.3

2.5

4.9

2.5

5.1

2.5

Patent filed international

34%

—

14%

—

22%

—

Technology rating

3.8

1.0

3.7

0.79

3.8

0.9

906,981 Euro

770,044 Euro

607,246 Euro

293,931 Euro

715,483 Euro

535,176 Euro

6.4

3.2

5.4

2.5

5.8

2.7

Avg. team size

2.8

1.0

2.8

1.2

2.8

1.1

Avg. working experience

12.2

6.9

11.2

7.4

11.6

7.2

Avg. leadership experience

2.0

2.7

2.8

3.6

2.5

3.3

Avg. international experience

1.2

2.8

1.5

6.2

1.4

5.2

General Age of firm Technology

Financing Avg. investment sum Avg. numbers of investors Human capital

experience, and the average working experience in years of all founders as the variables. For assessing the team size, we took the number of founders in the seed phase. Table 3 includes the average values for our variables for both the national and the international group and for our whole sample.

4 Results of the One-Way ANOVA for Each Tested Variable TABLE

Variable

Degrees of Freedom

F-value

p-value

Sig.

123

7.171

0.08

S

62

0.006

0.936

NS

Investment sum

106

8.353

0.005

S

Number of investors

119

2.951

0.088

NS

121

0.008

0.931

NS

90

0.420

0.519

NS

Leadership experience

123

1.632

0.204

NS

International experience

123

0.138

0.711

NS

Technology Patent filed international

Results

Technology rating Financing

We used one-way analysis of variance (ANOVA) to test whether the identified variables are positively related to going international. Our choice of ANOVA attributed to the fact that our independent variable (internationalization) was measured binary (yes or no) and that we experienced strong multicollinearity in our data set (e.g., “working experience” and “leadership experience”). Therefore, regression analysis was not a feasible approach. Using ANOVA, we were able to determine whether the tested variables have significantly different values in the national and international groups. The results are summarized in Table 3. We provide the F-value and p-value to test whether the results are significant in Table 4. Looking at the area of technology, we found that it can be seen as a determinant of internationalization. We can state that going international is significantly related to the patents of a company, so we can accept Hypothesis 1. The technology rating of the companies does not differ significantly between the two groups. Consequently, we have to reject Hypothesis 2.

We discovered that financial resources can be seen as a determinant of internationalization. We can state that going international is significantly related to the investment sum in the seed phase. Therefore, we can accept Hypothesis 3. There is no significant difference regarding the number of investors, so we have to reject Hypothesis 4. In view of the founder’s team, the evaluation shows that the team has no impact on the propensity of NTBFs to internationalize. Neither the international experience of the team nor the working experience, or even

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Human capital Team size Working experience

50 FEATURE ARTICLE

the leadership experience of the team, is critical to their internationalization behavior. The same applies to the size of the team. Therefore, Hypotheses H5a, H5b1, H5b2, and H5b3, concerning the human capital, must be rejected. These results are new compared with the current literature.

Discussion We first analyzed the role of technology as a determinant for the internationalization of new ventures. We found that the technology can be seen as a determinant attributed by the role of patents. Whether the company has filed a patent or not makes a significant difference. A patent may signal that the technology is an innovation and may give the founder’s team and the investor the confidence to go international. Also, a patent can protect a company from competitors, which saves some time and resources in making sure that their technology is ahead of the market. That may give them the opportunity to derive some resources for developing an international strategy. Based on the evaluation of an external institution, the advancement of the technology has no influence on going international. A reason for that could be that VCFs invest only in NTBFs with a positive evaluation. The range in our samples was between 3 and 5, where 5 is the best rating and 0 the worst. Another reason can be that the founders perceive the advancement of the technology differently than the evaluating institution. They may be strongly biased toward the advancement of their technology; otherwise, they won’t take the risk of founding their company. Second, we analyzed the role of financing as a determinant for the internationalization of new ventures.

A patent may signal that the technology is an innovation and may give the founder’s team and the investor the confidence to go international.


We found that financing can be seen as a determinant based on the investment sum. An NTBF with a higher amount of capital is more likely to go international. This result is not surprising, as the internationalization process creates costs. This result may be influenced by the behavior of the NTBF. If it already plans to go international, it will try to raise a higher investment sum. Consequently, the investors would be more willing to invest more money to support the internationalization of the company. They would know that a higher amount of capital is needed. We can see similar results when we look at the US market, where the internationalization rate is higher. Delerue & Lejeune (2011), for example, found that 51% of biotechnology start-ups in the United States went international. Consequently, the risk-bearing ability in the United States is much higher because business angels and venture capitalists are easier to acquire. Although the availability of venture capital in the United States in the past decade has decreased considerably, the venture capital market is still well above that found in Germany (Pinkwart, 2012). In 2011, 29 billion US dollars were invested in the US (Reuters, 2012) compared to 3.8 billion US dollars (3 billion euros) in Germany (Deutscher Bundesverband Kapitalbeteiligungsgesellschaften, 2012). This comparison might prove the dependency between capital and the internationalization rate. In contrast, the number of investors has no influence on going international. A reason for that could be that investors associate higher risk with going global and therefore have higher barriers to investing. However, investments in international companies can get better performance, as we described earlier. That might be why investors in international companies want to reinvest themselves in further financing rounds and keep their shares and therefore also their profits high—they do not want other investors to take a piece of the cake. Finally, we analyzed the role of human capital as a determinant for the internationalization of new ventures. Surprisingly, we found that it can’t be seen as a determinant for going international. A general reason for that could be that VCFs gain a lot of experience in selecting the entrepreneurial team, which enables them to select only highly capable teams. We therefore can’t measure any significant differences between the funded NTBFs. All the selected teams have enough experience to go international, and therefore the internationalization depends on other factors. Another reason could be that the founding of an NTBF requires high experience in a technology field, and it takes years to develop these. That may lead to homogenous characteristics of the NTBF

DOI: 10.1002/tie


founder’s team. For each tested characteristic, we found the following: 1.

2.

3.

4.

Size of the founder’s team. We assumed that bigger founder teams are more likely to internationalize. They can handle the different tasks of the internationalization process more easily. However, we had to reject this hypothesis. Working experience in general. This is high in the field of NTBFs compared with, for example, e-commerce ventures. We had to reject our hypothesis that working experience has an influence on the internationalization of NTBF. We assumed that more working experience makes the team more likely to internationalize. However, the founders of the NTBF usually have a relatively long working experience, and we could not find significant differences in our sample. Leadership experience. An NTBF might need more leadership in general because NTBF produce complex products. Staff must be trained to understand and sell the products. The management team must have, on the one hand, enough technology skills to understand the product. On the other hand, they must be able to handle the general management competence and understand the market and the finances. Internationalization may need even more leadership skills. International staff must be managed, and different markets must be understood. However, we had to reject the hypothesis that leadership experience influences the internationalization of NTBFs. International experience of the founders. We can see that the international experience in our sample is moderate (1.5 years on average). Moreover, the national companies even have a slightly longer international working experience. That means that the national-oriented NTBFs have a sufficient level of human capital to go international. As a result, it can be summarized that two resources—technology and finance—are among the key determinants of internationalization.

Limitations, Implications, and Outlook Our study has the following limitations: • Our data set consists of only German companies, so we can make conclusions only for Germany. A comparable study would be interesting to see if the determinants for internationalization are similar in European countries and to compare them with the determinants of new ventures from Asia and the United States. •

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be too young to go international and we would see a higher rate of internationalization if we look from a later point in time. In addition, we have not made any distinction between the NTBFs that operate internationally already in the first two or three years after their founding (the so-called born global firms [Rennie, 1993]) and those that have chosen a few years later for internationalization. However, we discovered that most of the internationalized companies of our sample had the general idea to go global already in their first business plan. •

Another factor contributing to the chance of going international is having a foreigner on the founder team. We found this to be the case in only three NTBFs and therefore couldn’t statistically test it.

In addition, we propose the inclusion of variables concerning the influence of the investors and the board. The advice of the investors and the board of the company might have a significant influence on a company’s going global. An investor with outstanding international experience could use this knowledge and lead the NTBF to an early internationalization. Accordingly, his readiness to provide additional money would increase. However, an investor without international experience or even negative experience in supporting companies going international could possibly undermine an early internationalization and hinder the NTBF in acquiring the needed resources. To test the hypothesis we propose to conduct a survey with the investment managers and assess their opinion on early internationalization of new ventures. With our study we were able to gain general implications in the area of internationalization of German NTBFs with empirical data on a broader basis. Kiederich & Kraus (2009) stated that there was a lack of research in this area. We hereby contribute to filling this gap.

The advice of the investors and the board of the company might have a significant influence on a company’s going global.

Our data set included companies that were founded between 2003 and 2011. Therefore, ventures may

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52 FEATURE ARTICLE

This article shows that the technology in general and the protection of it in particular plays a major role in determining whether a company will go international. International patents make it much more likely that a company will expand to foreign markets. Also, financing can be seen as an important determinant. NTBFs need more resources to cover the additional cost of an international strategy. Surprisingly, our results showed that the human capital has no significant influence on the internationalization of the NTBF. One reason for that could be that the examined VCFs were especially strict and systematic in selecting the business ideas with a competent team, and therefore the differences between the two groups were too weak. It might be that the level of human capital is high enough for a possible internationalization and therefore the decision depends on other factors in our sample.

If an investor is interested in supporting new NTBFs that will internationalize early ,he should focus his attention on a technology that can be protected in the target markets. Also, he should take into account that higher or more financing rounds are needed. Entrepreneurial teams of NTBFs that plan an early internationalization should be aware that they need to raise more money to expand their company into foreign markets. The study will be extended also to the market-oriented view. Therefore, we will collect data about the international network, the international supply chain, the international market entry strategy, and the international competition. Further, we will survey the investment managers of the examined VCFs and the NTBF itself to prove our conjectures. Finally, possible differences within the group of international-oriented NTBFs will be further analyzed.

Dr. Andreas Pinkwart is dean of HHL and the Chairholder of the Stiftungsfonds Deutsche Bank Chair of Innovation Management and Entrepreneurship at HHL Leipzig Graduate School of Management. After becoming a banker at Dresdner Bank, he studied business economics at the University of Münster, and economics at the University of Bonn, where he also earned his doctorate (summa cum laude) in 1991. In 1998, he accepted a full professorship of business economics at University of Siegen, with special focus on small and medium enterprises. As a member of the German Bundestag (from 2002 to 2005) and of the German Bundesrat (from 2005 to 2010), he got a sabbatical. He served as the minister for innovation, science, research, and technology, and deputy prime minister of the state of North Rhine-Westphalia from 2005 to 2010. He has been active for years in various supervisory boards and advisory committees. Dorian Proksch completed his master’s degree in business information systems at the Technical University of Munich as top student in 2008. He received the TUM Exchange Scholarship and spent a semester at Oklahoma State University. In addition to his studies, he was cofounder of a start-up company and president of an international public speaking club in Munich known as Toastmasters International. After ending his studies, he joined amiando GmbH to work as a sales manager responsible for US customers. In September 2011, he joined HHL Leipzig Graduate School of Management as a research associate at the Chair of Innovation Management and Entrepreneurship, where he is currently writing his doctoral thesis in the area of early-stage venture capital funds. His research interests include internationalization of start-up companies and risk management in new venture financing. He also works part-time as a trainer for speed-reading techniques.

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