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1 WARWICK SCHOOL BUSINESS WARWICK BUSINESS SCHOOL NO. 347 THE IMPACT OF INTERNET ON INTERNATIONALIZATION: MANAGERS PERCEPTIONS, AN INTEGRATION OF THE LITERATURE AND IMPLICATONS BY Susan Bridgewater and David Arnott OCTOBER 2001 RESEARCH PAPERS at the cutting edge of theory and practice

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3 The impact of Internet on Internationalization: Managers Perceptions, an Integration of the literature and Implications Susan Bridgewater and David Arnott, Warwick Business School Correspondence Details: Tel: Fax: E Mail: S.H.Bridgewater@ warwick.ac.uk Keywords: Internet, International, Barriers and Opportunities Abstract The similarities and differences in perceptions of barriers and opportunities resulting from Internet are explored for product and service firms, small and larger firms and those with previous international experience compared with Internet internationalists. Small firms, those internationalising via the Internet and service firms consider speed and ease of access important benefits of the Internet and perceive few barriers. Larger firms, those with previous international experience and product marketers want to explore the interactive potential of Internet and show greater awareness of the performance implications of the new technology. The findings suggest two separable groups of firms with similar needs in accessing international markets. 1

4 1. Introduction Considerable hype surrounds the impact of the Internet on global marketing. Lazer and Shaw (2000) argue that there will be a global marketing revolution. Bennett (1997) suggests that, with the expansion of Internet: fundamental reasons for the slow, gradual and evolutionary internationalization of companies are no longer relevant. p. 328 To date, however, few studies study the real impacts of Internet on internationalisation. Where they do, the focus tends to be on a single type of firm - such as small firms (Bennett 1997, Hamill and Gregory 1998, Dandridge and Levenburg 2000) or service firms (Berthon, Pitt, Katsikeas and Berthon 1999, Lituchy and Rail 1999). In consequence, it is unclear whether research findings reflect distinctive characteristics of the types of firm studied or have wider ramifications for Internet and internationalisation. Moreover, the findings of research to date tend to be contradictory and therefore the managerial implications are not clear. Psychic distance 1, for example, may increase (Samiee 1998) or decrease (Hamill and Gregory 1998), the need for channel intermediaries may increase (Samiee 1998) or decrease (Benjamin and Wigland 1995). These apparent contradictions argue for further study of the impact of Internet on internationalization across a broader set of firms and that, further, the findings of the study should be explored in the context of the broader internationalization debate. 2. Key arguments in Internationalization Literature 2.1 Sequential Models of Internationalization Although a number of different models of the internationalization process have been proposed, the Uppsala or Stages model of internationalization is remains the most frequently cited. Closely associated with the work of Johanson and Wiedersheim- Paul (1975) and Johanson and Vahlne (1977), the Uppsala model describes a gradual, or sequential, expansion of international operation both within and across national markets The conceptual basis of the Uppsala model highlights a number of key debates in internationalization literature. Firms are generally accepted as facing higher levels of 2

5 uncertainty internationally than domestically (Mascarenhas 1982, Miller 1992). These uncertainties complicate interaction between partners of different nationalities. One of the most frequently debated uncertainties is psychic distance (See Vahlne and Nordström 1992 for a valuable overview), which the Uppsala model proposes as a key inhibitor of the internationalization process. In the Uppsala model, Johanson and Vahlne (1977) suggest that psychic distance can only be overcome by direct experience within each country. Critics propose, however, that this type of knowledge can be complemented by general knowledge from operating internationally (Millington and Bayliss 1990, Clark, Pugh and Mallory 1997) and result in increased international commitment. This ability to overcome uncertainties, such as psychic distance, remotely are central to discussion of Internet and internationalisation. 2.2 Simultaneous Models of Internationalization Until the 1990s, literature tended to argue that resource constraints and risk averseness would favour a sequential process of internationalization in small firms (Forsgren 1989, Buckley, Newbould and Thurwell 1988). From the 1990s, however, a growing body of work focuses on rapid internationalization, especially among small, high-technology firms (Oviatt and McDougall 1994, Coviello and Martin 1999, Young 1999, Etemad and Wright 1999). Arguments for rapid, or simultaneous internationalization are based upon: Gloablisation of the economy Globalisation of the economy creates international imperatives for firms of all sizes (Bonaccorsi 1992, Chang and Grub 1992). For small firms: competitive advantage may be vested in their ability to develop and exploit new innovations, carve out narrowly defined and defensible niches, and adapt rapidly to change. (pg. 19) Lowering of the resources needed for internationalization The possibilities of raising capital externally, or else co-operating with other firms to gain access to scarce resources (Bonaccorsi 1992, Hansen et al 1994, Kaufmann 1995), mean that internationalization is no longer the exclusive preserve of large, resource rich firms. Small firms may capitalise on lower resource requirements to internationalize as rapidly as larger rivals. 1 Psychic distance comprises cultural, geographic and technological factors that are perceived as 3

6 Less uncertainty in international business Arguments for simultaneous internationalization point to improvements in information technology (Oviatt and McDougall 1994, Knight and Cavusgil 1996, Liesch and Knight 1999). This suggests that a key debate in internationalization literature is whether the increased availability of information via new technology can overcome the uncertainty of international operation. 2.3 Internet and Internationalization To date few studies integrate Internet internationalization with the broader debate. It is apparent though that a number of the issues are an extension of the sequential or simultaneous internationalization literature highlighted above. This section considers Internet s impact on internationalization as an exension of this debate: Lowering of resources needed for Internationalization A key benefit of Internet is that it will lower costs (Quelch and Klein 1996, Hoffman and Novak 1996). Specific areas of savings are market research (Hamill and Gregory 1998), simplified order processing (Bennett 1997, Hamill and Gregory 1998) and lower marketing costs achieving visibility and promoting the corporate image will cost less using the Internet rather than other media (Sterne 1995). Lowering resource requirements should favour the more rapid patterns of internationalization proposed by simultaneous models (Oviatt and McDougall 1994, Coviello and Martin 1999, Young 1999). More firms will pursue global niches Quelch and Klein (1996) point also to the existence of global niche opportunities as favouring small firm opportunities via the Internet. In born international studies (Young 1999), global niches are seen as valuable routes for small firm internationalization. Although these are undoubtedly important for small Internet firms, the extent to which firms can capitalise on these may depend on the extent to which markets for the particular product or service of the firm are homogeneous. Whilst Levitt s polemical article (1983) suggest that consumer convergence is a necessary consequence of technological advances, critics suggest that the ability to serve markets with standardised marketing strategies may be limited to one or two inhibiting the flow of information between firms in different countries 4

7 sectors, such as high-technology and high-touch (luxury) goods (Douglas and Wind 1987). On this basis, sector influences the ability to exploit global niches. Internet allows firms to interact with customers and tailor products and services to customer requirements. If the segment is not globally homogeneous, this might typically make the cost and complexity of serving it too great for a small firm to handle. In his book Future Shock, Toffler (1970) says that rather than ending up with a small number of global segments, global markets will actually be based on a large number of individual preferences. The advent of the Internet has potentially brought it within the realm of feasibility that firms, even small ones, may be able to target this segment of one (Furash 1999, Walsh and Godfrey 2000). An important contribution of Internet for international marketing may be, therefore, that it increases the ability of firms to interact with their customers on a one-to-one basis on a global scale without prohibitive expense. Information provided on the Internet will overcome distances including psychic distance - between the marketer and customer. Studies of Internet and international marketing emphasise the benefits of on-line information (Hamill 1997, Bennett 1997). A key underlying question, however, is the extent to which this will really break down distances between the marketer and customers in international markets. The contention of Hamill and Gregory (1998) that Internet will break down technological, geographic and psychic distances is explored further below: Technological barriers: Superficially this appears an obvious advantage of Internet. Quelch and Klein note (1996), however, a number of technology barriers that may remain. Firstly, Internet penetration is far from global. Until recently, North America has accounted for a significant proportion of Internet users. The year 2000 will be the first in which there is a higher proportion of non-native English speaking Internet users. In addition, restrictions on Internet usage may remain in some markets with repressive regimes. Geographic distances: Whilst communication with potential customers becomes easier, Berthon et al (1999) stress that only symbolic, informational or knowledge products and services can be delivered on-line. The need to organise physical delivery on a global scale, is a recognised limitation to Internet s international 5

8 efficacy. Moreover, as the expectations of customers are built up by real-time orderprocessing, marketers may face more complaints on delivery times that they experience using other channels to international markets. Psychic Distance: Arguments that this will reduce are largely based on improved provision of market information to marketers (Hamill 1997, Bennett 1997, Hamill and Gregory 1998). Samiee (1998), however, points out that this information suffers the same weaknesses as paper-based market research in that it is not free and not necessarily tailor-made. Provision of information alone will not overcome the uncertainty of international markets. Drucker (1999) explains the limited impact of information technology on strategic decision-making as follows: The people in Management Information Systems (MIS) and in Information Technology (IT) tend to blame this failure on what they call reactionary executives of the old school. It is the wrong explanation. Top executive have not used the new technology because it has not provided the information they need for their own tasks p. 99 The argument that Internet will overcome psychic distance assumes that general knowledge can overcome psychic distance (Millington and Bayliss 1990, Clark et al 1997). It further assumes that information obtained via the Internet and remote interaction with customers are sufficient to provide marketers and customer with understanding of each other. 2.4 Research Propositions Based on the review of literature above, a number of research propositions can be identified. Internet may provide opportunities to internationalise rapidly by: 1. Lowering resource requirements of internationalization 2. Offering improved access to global niche markets 3. Use the technology to adapt products or services for internationally-diverse customer requirements 4. Interact with segments of one on a global basis 5. Overcome distances resulting from technology, geography or psychic distance between marketer and customer. These propositions and the variables upon which they are based can be shown visually (See Figure 1): 6

9 ( Insert Figure 1 here) This paper studies the extent to which these and other propositions from Internet and international marketing literature are perceived as important by managers. Further, it examines patterns of similarity and differences in the responses of firms that have previous international experience with Internet internationalists, small and large firms and product and service marketers to explore the generalisability of these opportunities and barriers to use of the Internet in internationalization. 3. Methodology 3.1 Research Sample A sample of firms using Internet in international markets was accessed via MBA alumni and part-time students. Whilst the education levels and selection criteria used by the MBA programme may create a bias, the sample included a high proportion of Internet users, was internationally spread, encompassed small and larger firms and diverse sectors and was, therefore, considered to offer useful insights into the market as a whole. 447 respondents were targeted and 77 useable responses were obtained representing an 18 per cent response rate. Given that non-response may have included a significant proportion of non-internet users this was felt to be reasonable. 3.2 Data Collection Data were collected via web boards and also by E Mailing questionnaires to respondents who expresses an interest at MBA events. These data collection techniques were preferred to E mailing questionnaires to a larger database as Oppermann (1995) suggests that inviting volunteers is more effective than spamming. 3.3 Sample Frame The sample of respondents included 30 product and 49 service marketers. Size was measured both in terms of the number of employees and turnover. As these two measures were found to inter-related (See Table 1), size was subsequently measured on the basis of number of employees. To gain insights into potential differences between small and larger firms in the sample, this was divided into two groups, firms with less than 1000 employees and firms with more than 1000 employees. 7

10 (Insert Table 1 here) The sample contained a number of different nationalities. The respondent firms can be categorised as 49 European, 16 North American and 13 from Asia-Pacific and Rest of World. The sample can also be split in terms of the level of international experience. 34 firms were international before using Internet, whilst 36 firms began to serve international markets via the Internet. These two are used as the basis of a comparison between firms with previous international experience and Internet internationalists. 3.4 Data Analysis Barriers and opportunities to internationalization via the Internet were analysed on the basis of variables identified from the literature review. In each case, respondents were asked to rate the importance of these, using a five point likert scale (where 1 = not at all important and 5 = extremely important). Analysis subsequently explored the similarities and differences between firms that were a) previously international and international as a result of the Internet, b) product and service c) small and large. The existence of significant differences was analysed using a series of t-tests based on standard error of the mean between the sets of two groups identified on the basis of international experience, sector and size respectively. The full analysis is included in this paper as appendices Findings 4.1 Opportunities Comparison of firms by level of International experience Firms that have become International as a result of the new technology perceive the speed, interaction and access possibilities of Internet as the most significant opportunities (See Table 2). In contrast, those who were previously international, focus more on the ability to communicate and build brand and give greater emphasis to the performance benefits. The general importance attributed to these variables differed between the two types of firms. 8

11 Firms who were previously international ranked a number of opportunities as being of greater importance (in terms of mean score) than those who became international via the Internet. There is little evidence that either perceived the ability to enter markets using lower levels of resources, or to make cost savings, as particular benefits of Internet (See Appendix 1 for full analysis). One of the most striking differences revealed by comparison of firms with previous international experience and Internet internationalists is that the former place significantly more emphasis on performance benefits (See Table 3. Full details are included in Appendix 2.) This difference may relate to differing expectations and accountability of the two types of firms involved. Market expectations on dot.com companies, whether venture capital funded or market flotation, may be lower as it is widely recognised that many such firms are not initially profitable. Larger firms, with shareholders and public reporting of results may have to take greater account of the shorter-term performance implications of Internet activity. (Insert Tables 2 and 3 here) Comparison of firms by size When firms are compared on the basis of size, more fundamental differences are revealed in their perception of the opportunities of Internet (See table 4) (Insert Table 4 here). On first sight, the opportunities appear similar. Regardless of size, firms consider the access and communication potential of Internet as the most important benefits of the new technology for accessing international markets. Further, however, smaller firms also pay attention to speed of internationalization. Larger firms are more concerned with the interaction possibilities. The most important characteristic of comparison on the basis of size is that that small firms are less positive overall about the opportunities. Accordingly, when the scoring of the opportunities between the two groups is compared a number of significant differences are identified (See Table 5). This halo effect was further explored by normalising the score of smaller compared with larger firms, but the significant differences between smaller and larger firms remained. This paper argues, therefore, 9

12 that the differences between the smaller and larger firms are real. In other words, small firms are generally more pessimistic about the opportunities for internationalization offered by Internet than are larger rivals (See Appendices 3 and 4 for full details). (Insert Table 5 here) Comparison of firms by product or service When comparing firms as to whether they are product or service marketers, communication benefits of Internet also feature as important to both groups (See Table 6). That these are rated as most important by service firms may be because Internet may help to solve inherent problems with the intangibility of services. Similarly, the need to communicate quality in all aspects of service (rather than a physical product) might explain the concern with ease of access and the speed of doing business. Product marketers are less concerned at the speed of business maybe because they still have to supply products physically over land but place more emphasis on interacting with the customers on-line (See Appendix 5 for full analysis). (Insert Table 6 here) Despite these differences in ranking and the slightly more optimistic view of the Internet s potential in general by product marketers there are no significant differences between the two groups in terms of their ranking of the opportunities (See Appendix 6). 4.2 Barriers Comparison of firms by level of International experience Regardless of their level of previous international experience, firms attribute the same general level of important to barriers to internationalization (See Table 7). In contrast to the opportunities, however, firms pick out different barriers. Firms that were previously international are most concerned at price transparency. Revealing price differentials between markets may trigger pressures for price harmonisation. Slightly more emphasis is placed on legal complexity and gaining sales. Firms without previous international experience are more concerned that they may need to adapt products or services and about how to build site awareness. This may 10

13 relate to their inexperience as internationalists in overall terms. Although legal barriers were mentioned by both groups of respondents, other macro-level issues, such as cultural barriers and government restrictions were identified among the greatest barriers to internationalization via the Internet. Overall, the differences between the assessment of barriers by product and service marketers are slight and are not statistically significant (See Appendix 2 for details). (Insert Table 7 here) It should be noted that the barriers to internationalization via the Internet were generally rated as less important than the opportunities across the total sample of respondents. This suggests general optimism about the ability of Internet to facilitate internationalization Comparison of firms by size When comparisons are made on the basis of size (Table 8), firms identify similar barriers to those discussed in the previous section. Differences can be seen, however, in the rank order of these. Larger firms consider strong competition as a greater barrier than do smaller firms. The smaller firms perceive lower barriers, in general, than do larger firms. As in the corresponding analysis of opportunities by size (See Section 4.1.2), the number of significant differences between small and large firms reflects small firms rating all variables lower than larger firms (See Table 9). Again, after normalising scores, these significant differences remain. Smaller firms are less pessimistic overall about the barriers than are larger firms. The most significant differences between the two groups lie in the areas of competition, Internet penetration, language and logistical difficulties. Larger firms perceive these to be the most important barriers and smaller firms consider them significantly less of a problem. (Insert Tables 8 and 9 here) Comparison of firms by product or service Service marketers perceive lower barriers to Internet internationalisation than do product marketers (See Table 10). This cannot be explained by the complexity of 11

14 physical distribution of products (ranked only 6 th by product marketers - See Appendix 5 for details), but affects the importance attributed to all barriers. (Insert Tables 10 and 11 here) Product marketers are more concerned at price transparency (although this is on the borderline of statistical significance - see Table 11). This may be associated with greater ease of transferring products across borders than services. As the latter may be performed and consumed simultaneously, less diversion in response to price differentials may be possible. Service firms rank the strength of competition as a barrier to Internet internationalization (ranked 3=). This may signal lower entry barriers in the marketing of Internet services than Internet products. It should be noted the mean score for the importance of competition is still higher for product marketers, although they rank this lower than do service firms. Important barriers for both groups lie in the areas of awareness building and converting interest into Internet sales. The only area of statistically significant difference and then only on the borderline of significance is price transparency. 5. Discussion 5.1 Exploring the findings in the context of Internet and internationalization literature Structuring the discussion around the main propositions of Internet and internationalization literature to date, the following contributions to knowledge can be made by this paper: 12

15 Lowering of resources needed for internationalization (Quelch and Klein 1996, Hoffman and Novak 1996). Resource and cost issues were not among the most important opportunities identified by firms in this paper. Gains from lower marketing costs (Sterne 1995) may underlie the emphasis by all firms on the communication benefits offered by Internet. It might be argued, however, that, in communication terms, Internet is seen as offering improvements in effectiveness rather than in cost terms as offering improvements in efficiency. More firms will pursue global niches (Quelch and Klein 1996). The availability of global niches is not considered as an important opportunity offered by Internet even small firms do not consider this amongst the most important opportunities. Use of Internet to tailor products or services to customer requirements The proposition that Internet will allow for more efficient tailoring of the product or service offer using technology, rather than physical adaptation, is separated here from issues of interaction. The capability to tailor products and services does not figure largely in this paper, even for service marketers. This finding is somewhat surprising in that this is one of the key benefits proposed for international services in the marketspace (Berthon et al 1999). Internet allows firms to interact with a segment of one on a global basis (Furash 1999, Walsh and Godfrey 2000). Despite this lack of support for the notion of tailoring products or services via the Internet, the interactive possibilities offered by the technology emerge more strongly from the data. Ease of access is rated in the top 5 opportunities offered by Internet across all groups. Speed of doing business via the Internet emerges as important for some types of firms. Speed is considered particularly important by service firms, smaller firms and for those who have gone international via the Internet. Two explanations can be proposed for this phenomenon. Firstly, these may be the same firms. Small, service firms may also be those who have internationalised via the Internet. This explanation is plausible given the proposed benefits of Internet for these two types of firms (See Hamill 1997, Bennett 1997, Hamill and Gregory 1998 relating to small firms; Berthon et al 1999, Lituchy and Rail 2000 relating to service firms) and requires further investigation. 13

16 Secondly, speed may be particularly important to each of these types of firms. For example, service firms may need to offer a rapid service to meet customer expectations. Small firms are typically flexible and responsive and may value speed more highly than larger firms. Firms internationalising via the Internet may be more entrepreneurial than firms who have bolted Internet onto existing international activities and, accordingly, speed may be a valuable benefit for these firms. Information provided on the Internet will overcome distances including psychic distance - between the marketer and customer (Hamill 1997, Bennett 1997, Hamill and Gregory 1998). Cultural barriers do not figure as an important barrier to internationalization in this paper. Language barriers are identified as barriers by some groups, but are ranked further down the list. This finding raises the interesting question of whether the advent of Internet has really broken down the perception of psychic or cultural distance for international marketers? Additional insights can be gained by analysing the responses to the broader set of barriers to Internet internationalization. Other variables that might expose potential distances (such as international logistics for geographic distance, culture, language, legal and political differences between markets) are all ranked as relatively unimportant by respondents in comparison with their assessment of the opportunities that exist. This suggests that respondents are generally optimistic about the impact of Internet on internationalization. The general view seems to be that distances between markets (Ford 1984) are reducing. Some researchers, however, argue that levels of psychic distance are perceived differently dependent on characteristics of the individual such as international work experience, education level and ethnic origin (Barrett and Wilkinson 1986). This sample of international MBA students might, therefore, be expected to perceive relatively lower psychic distance in serving international markets. The question then arises as to whether this type of individual is most likely to engage in a new technology such as Internet, or in international marketing activity. If there is a correlation between the two then this might explain a reduction in perceived distances between international markets. This is a fruitful area for future study. 14

17 An interesting aspect of the findings in this paper is that among a sample of individuals who are broadly comparable with respect to education, international exposure etc. firms still perceive different levels of differences. This suggest that similarities and differences may be explained by firm-level, as well as individual, characteristics. Firms internationalising via the Internet, small firms and service firms considered the barriers to internationalization via the Internet as relatively unimportant. These were the same groups that considered speed of business very important. It is proposed that these may be entrepreneurial firms similar to those identified by research into firms that are born international Oviatt and McDougall 1994). These firms may be similarly inclined towards rapid internationalization. 5.2 Integrating the findings into the broader theory on the internationalization process When the findings of this paper are considered in the context of the broader debate on models of the internationalization process, additional insights are revealed. Structuring discussion of this paper s findings around the debates in the areas of sequential models (Johanson and Vahlne 1977) and the alternative simultaneous models of the internationalization process (Oviatt and McDougall 1994, Coviello and Martin 1999) the following arguments can be raised: Internet as a technological advance helps to reduce levels of uncertainty and perceived distances between international markets Uncertainty is generally recognised as an inhibitor of internationalization (Mascarenhas 1982, Miller 1992). Specific categories of uncertainty, such as psychic distance, are proposed as explanations of gradual or stage -wise internationalization, such as that described by the Uppsala model (Johanson and Wiedersheim-Paul 1975, Johanson and Vahlne 1977). Challenges to the Uppsala model, however, hold as a central tenet that technological advances break down the uncertainty of international operation. Physical, geographic, technological and even psychic distance might be reduced by greater travel and communication ability (Oviatt and McDougall 1994). Internet is a further technological development outside the range of consideration of many of the earlier papers. The findings of this paper support the contentions that technology can break down distances and hence uncertainty in international operation. Barriers were generally 15

18 considered as less important than opportunities, particularly by smaller firms and recent internationalists. These firms seem to correspond to those in born international literature in that technology helps them to perceive lower levels of uncertainty. Resource benefits from Internet are not the most significant drivers of internationalization Whilst lower resource requirements may open up the possibilities of rapid internationalization to smaller firms (Bonaccorsi 1992, Hansen et al 1994, Kaufmann 1995), the ability of Internet to lower the resources needed for market entry is not identified as a significant opportunity even by smaller firms. The failure of the latter to identify lower resources as an issue may link to their lack of concern with performance benefits. It is a distinctive characteristic of the smaller firms and those that have internationalised via the Internet that they do not identify performance benefits as major opportunities offered by Internet. This may relate either to general pessimism over the ability of Internet to deliver performance benefits, or to the nature of the funding of these firms. It should be noted that firms that were previously international, larger firms and product marketers emphasised performance opportunities. This may suggest that these firms are accountable to shareholders for short-term benefits from Internet expenditure. Internet internationalists are concerned at the speed and ease of access into international markets is their internationalisation process simultaneous or sequential? Given that they perceive lower distances and are not particularly concerned at the resource implications of internationalization, firms using Internet in internationalization might be expected to follow the more simultaneous internationalization process suggested by this school of literature (Oviatt and McDougall 1994). An interesting question arises, however, as to whether firms in this paper are indeed simultaneous in their internationalization, or follow a more sequential process. Two dimensions of expansion are proposed by sequential models of internationalization (Johanson and Wiederheim-Paul 1975, Johanson and Vahlne 1977); expansion within markets and expansion into new international markets. Whilst simultaneous 16

19 models of internationalization emphasise the ability to enter new international markets rapidly, few insights are offered into progression along the establishment chain. Research into the internationalization of small, high-technology firms suggests that simultaneity may bring the use of low resource entry modes as a necessary consequence (Stray, Bridgewater and Murray 2000). Some insights have been offered into Internet s role in the internationlization process. Contentions are, however, contradictory. Benjamin and Wigland (1995) suggest that Internet will reduce the need for traditional intermediaries. Samiee (1998), however, suggests that this will not be the case. Indeed, new types of intermediaries may be required by firms using Internet to access international markets. Further insights may be gained by looking at the implications of Internet as a new type of international operation. Whilst Internet differs from export in terms of the nature of its resource requirements technology rather than people it may be comparable in offering low commitment and hence low risk - entry into international markets. Internet may, also, however, have the associated limitations of low commitment modes in serving international markets; low control, low opportunities for gaining experiential knowledge, few linkages within the market. To serve international markets effectively, Internet marketers will need to accumulate knowledge of their customers and their markets, rather than only information. If this knowledge cannot be gained via the Internet then it may not result in the development of fruitful longterm business. Moreover, especially for established international marketing firms, Internet will not remove the need for other types of channel to international markets, such as agents or joint ventures. 6. Conclusions This paper finds that analysis of the opportunities and barriers to Internationalization using the Internet suggest similarities between two groups of firms. Small firms, those internationalising via the Internet and service firms consider speed and ease of access important benefits of the Internet and perceive few barriers. Larger firms, those with previous international experience and product marketers want to explore Internet especially for its interactive potential, but do so with a greater awareness of 17

20 the performance implications of the new technology. It should be noted that this group may perceive higher barriers to Internet s use in internationalization, but they also place higher importance on the potential benefits. These may represent two separable clusters of firms, or simply reflect a similarity in perceived opportunities and barriers between two sets of firms with similar needs in accessing international markets. The first set of firms (small, Internet International and service marketers) seem closer to the entrepreneurial firms associated with simultaneous models of internationalization (Oviatt and McDougall 1994, Coviello and Martin 1999). This is borne out in their interest in speed of doing business and ease of access to international markets. These firms also perceive the lowest barriers to internationalization via the Internet. The second set express a somewhat more cautious picture of the Internet, although the opportunities are perceived as more significant than the barriers. It is not clear which set of firms have the most realistic picture of the Internet s impact on internationalisation. The smaller entrepreneurial firms may not perceive as many obstacles to internationalization via the Internet, but is this optimism justified or is it a facet of their relative inexperience in marketing to international customers? Larger, more internationally experienced, firms may reflect a greater understanding of the challenges or fail to realise that the magnitude of the changes to the international marketspace wrought by the new technology. Whose perceptions will prove most accurate? Until performance changes can be analysed, this remains an area of speculation 7. Practitioner Implications As yet there is little analysis of the impact of Internet on accessing the international marketspace despite the considerable hype. Internet has been proposed as a panacea it will overcome barriers to international markets including geography, time and culture. In this paper, firms in this paper do perceive Internet as creating more opportunities than barriers. This supports the view that Internet will improve access international markets. The main benefits perceived by these firms lie in the area of communication such as increasing international visibility and brand awareness. Some types of firms 18

21 identify particular benefit in the speed and ease of access provided by Internet. These include small firms, service marketers and Internet internationalists. This benefit may relate to the way in which these particular firms are using Internet to add value. Larger firms and those with previous international experience show greater concern over the potential performance benefits of Internet. This could be viewed either as short-termism or as a more realistic assessment of Internet potential. These firms also perceive higher barriers to use of the Internet to access international markets. The most interesting question is whether the more optimistic view of Internet potential for international markets is unrealistic these firms will soon be asked to turn this optimism into performance gains and may have a naïve view of international marketing. Or, do firms with greater international experience and size fail to appreciate the magnitude of the changes in the international marketplace? The answer seems to lie with the customers. If the customers also perceive few barriers to international marketing via the Net then the brave, new world will speedily gain in credibility. If not, and Internet does not translate into performance benefits, then the sceptics will be vindicated. Bibliography Barrett, N and Wilkinson, I (1986) Internationalization Behaviour: Management Characteristics of Australian Manufacturing firms by level of international development in P W Turnbull and S J Paliwoda (eds.) Research in International Marketing: Benjamin, R and Wigland, R (1995) Electronic markets and virtual value chains on the information superhighway Sloan Management Review, 36, Winter: 72. Bennett, R (1997) Export Marketing and the Internet: Experiences of Web Site use and perceptions of export barriers among UK businesses International Marketing Review, 14, 5: Berthon, P, Pitt, L, Katsikeas, C and Berthon, P (1999) Executive Insights: Virutal Services Go International: International Services in the Marketspace Journal of International Marketing, 7, 3: Bonaccorsi, A (1992) On the relationship between firm size and export intensity Journal of International Business Studies, 23, 4, pp

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23 Hoffman, D L and Novak, T P (1996) The new marketing paradigm for electronic commerce The Information Society, 13, January March: Johanson, J and Vahlne, J-E (1977) The Internationalization of the Firm: A Model of Knowledge Development and Increasing Foreign Market Commitments Journal of International Business Studies, 8, 1, pp Johanson, J and Vahlne, J-E (1990) The Mechanism of Internationalization International Marketing Review, 7, 4 pp Johanson, J and Wiedersheim-Paul, F (1975) The Internationalization of the Firm - Four Swedish Cases Journal of Management Studies, October, pp Kaufmann, F (1995) Internationalization via Co-operation Strategies of SME International Small Business Journal, Jan- March pp Knight, G A and Cavusgil, S T (1996) The born global firm: a challenge to traditional internationalization theory In S Tamer Cavusgil and T Madsen (ed.) Advances in International Marketing, 8, Greenwich, JAI Press. Lazer, W and Shaw, E H (2000) Executive Insights: Global Marketing Management: At the Dawn of the New Millennium Journal of International Marketing, 8, 1: Levitt, T (1983) The Globalization of Markets Harvard Business Review, May-June, pp Liesch, P W and Knight, G A (1999) Information Internalization and Hurdle Rates in Small and Medium Enterprises Journal of International Business Studies, 30, 1: Lituchy, T R and Rail, A (1999) Bed and Breakfasts, Small Inns and the Internet: The Impact of Technology on the Globalization of Small Businesses Journal of International Marketing, 8, 2: Mascarenhas, B (1982) Coping with Uncertainty in International Business Journal of International Business Studies, Fall, pp Miller, K D (1992) A Framework for Integrated Risk Management Journal of International Business Studies, Summer pp Millington, A I and Bayliss, B T (1990) The Process of Internationalization: UK Companies in the EC Management International Review, 30: McDougall, PP, Shane, S and Oviatt, B M (1994) Explaining the Formation of International New Ventures: The Limits of Theories for International Business Research Journal of Business Venturing, 9:

24 Ohmae, K (1989) Managing in a Borderless World Harvard Business Review, May-June Oppermann, M (1995) E Mail Surveys Potentials and Pitfalls. Marketing Research, 7, 3: Oviatt, B M and McDougall, P P (1994) Toward a Theory of International New Ventures Journal of International Business Studies, Spring, pp Quelch, JA and Klein, L (1996) "The Internet and International Marketing" Sloan Management Review, Spring: Rummel, R J and Heenan, D A (1978) How Multinationals Analyse Political Risk Harvard Business Review Jan-Feb. pp Samiee, S (1998) The Internet and International Marketing: Is there a fit? Journal of Interactive Marketing, 12, 4: 5-21 Sterne, J (1995) World Wide Web Marketing: Integrating the Internet into your Marketing Budget, John Wiley, New York. Toffler, A (1970) Future Shock, Bantam Books, New York Vahlne, J-E and Nordström, K (1992) Is the Globe Shrinking? Psychic Distance and the Establishment of Swedish Sales Subsidiaries During the Last 100 Years Working Paper RP 92/3 Stockholm School of Economics Institute of International Business. Walsh, J and Godfrey, S (2000) The Internet: A new era in customer service European Management Journal, February, 18, 1: Yip, G (1989) Global Strategy In a World of Nations? Sloan Management Review, Fall: Young, M (1999) The Internationalization of small, high-technology firms Journal of International Marketing, 7, 4: Figures to insert Table 1: Correlations of Size of Sample Number of Employees Pearson Correlation Sig (2-tailed) N Turnover ($US) million.884* Number of Employees Turnover ($US) million.884* Correlation is significant at the 0.01 level (two-tailed) 22

25 Table 2: Top 5 Opportunities offered by Internet in internationalization by firms who became international via the Net and those who were previously international International via Net Previously International Opportunity Mean Rank Opportunity Mean Rank Score Score Speed of doing Increased business Visibility Interaction with = Improve customers Corporate Image Ease of Access = Ease of Access Improve = Increased Corporate Image Profits Increase Visibility = Increased Sales N= 36 N= 34 Table 3 Analysis of significant differences in the importance attributed to different opportunities. Via web vs t-test for Equality of Means Pre web T Sig. (2-tailed) Increased sales * Increased profits ** * Significant at the 90 per cent level ** Significant at the 95 per cent level Table 4: Top 5 Opportunities for Firms with less than 1000 employees compared to those with more than 1000 employees. Less than 1000 employees More than 1000 employees Opportunity Mean Rank Opportunity Mean Rank Score Score Increased Visibility Increased Visibility Ease of Access Ease of Access Improve Corporate Image Improve Corporate Image Speed of doing business Interaction with customers Increased Sales Increased Profits N= 35 N= 38 23

26 Table 5: Analysis of Significant differences in the importance attributed to different opportunities. <1000 empl vs T test for Equality of Means >1000 empl. T Sig. (2-tailed) Increased ** visibility Low resource ** market entry Cost savings ** Speed of doing ** business Interaction w/ ** customers ** Significant at the 95 per cent level Table 6: Top 5 Opportunities for Firms supplying products or services. Product Service Opportunity Mean Rank Opportunity Mean Rank Score Score Ease of Access Increased Visibility Increased Visibility Improve Corporate Image Improve Corporate Ease of Access Image Interaction with Speed of doing customers business Increased Profits Increased Sales N= 30 N= 49 Table 7: Top 5 barriers offered by Internet in internationalization by firms who became international via the Net and those who were previously international International via Net Previously International Barrier Mean Rank Barrier Mean Rank Score Score Strong Competition Price Transparency Building Site Awareness Legal Complexities Need to alter = Gaining Internet product/service offer Sales Gaining Internet Sales = Building Site Awareness Language Barriers/Legal = Strong Complexity Competition N= 36 N= 34 24

27 Table 8: Top 5 Barriers for Firms with less than 1000 employees compared to those with more than 1000 employees. Less than 1000 employees More than 1000 employees Barrier Mean Rank Barrier Mean Score Rank Score Building Site Strong Awareness Competition Price Transparency Price Transparency Legal Complexity = Legal Complexities Need to alter = Building Site product/service offer Awareness Strong Competition Language Barriers N= 35 N= 38 Table 9: Analysis of significant differences in the importance attributed to different barriers <1000 empl vs T test for Equality of Means >1000 empl. T Sig. (2-tailed) Low internet ** penetration Strong competition ** Price ** Transparency Gaining internet ** sales Int'l logistics ** Cost of int'l ** delivery Cultural barriers ** Language ** Legal complexities ** ** Significant at the 95 per cent level Table 10: Top 5 Barriers for Firms supplying products or services. Product Service Opportunity Mean Rank Opportunity Mean Rank Score Score Price Transparency Building Site Awareness Building Site Legal Complexities Awareness Gaining Internet Strong Competition = Sales Legal Complexities Gaining Internet Sales = Strong Competition Price Transparency N= 30 N= 49 Table 11: Analysis of significant differences in the importance attributed to different barriers Product or service T test for Equality of Means T Sig. (2-tailed) Price transparency * * Signficant at the 90 per cent level 25