Based on the above analysis, a model of accelerated internationalization linked with Internet adoption is proposed in this section (Fig. 1). We believe that the adoption of the Internet over the last decade by more organizations around the world greatly contributed to the recent phenomenon of accel- erated firm internationalization, which is especially noticeable among new ventures. At the same time, accelerated internationalization also increased the need for organizations to more actively pursue the application of In- ternet technologies, which in turn further enhanced organizations’ ability to JIFENG YU ET AL.
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explore foreign markets. As depicted below, economic forces are strongest among early adopters, which are often small entrepreneurial or new ven- tures, while institutional forces emerge among the early majority of adopters and predominate among the late majority and laggards. (We do not include Rogers’ (1983, 1995)category of innovators in this model, as they are pri- marily motivated by the love of technology, which falls outside of the scope of our theoretical argument.)
Fig. 1 and its associated theoretical reasoning imply several testable propositions that we delineate below.
PROPOSITIONS CONCERNING EARLY INTERNET ADOPTION: ECONOMIC FORCES PREDOMINATE
It was noted earlier that adoption of the Internet for business purposes can provide increased effectiveness and efficiency and, therefore, economic
Economic Forces Predominate Time 1:
Early Adoption of Internet
Internet Adoption
Both Economic & Institutional Forces are Potent Time 2:
Early Majority Adoption of Internet
Internet Adoption
Institutional Forces Predominate Time 3:
Late Majority and Laggards Adoption of Internet
Internet Accelerated
Internationalization Accelerated Internationalization Accelerated Internationalization
Adoption
Fig. 1. Economic and Institutional Forces on Internet Adoption and Accelerated Internationalization.
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benefits (Amit & Zott, 2001; Barua et al., 1997; Devinney et al., 2001;
Dewan et al., 2000; Leamer & Storper, 2001; Lucking-Reiley & Spulber, 2001). However, in the early and middle 1990s, as Internet communication slowly became available to greater numbers of people, routines for using the Internet and those economic benefits were not clear to everyone. Long in- stitutionalized methods for distant communication (e.g., telephones) and business practices predominated and appeared satisfactory to many. The fax machine was relatively new at the time, and norms for using the Internet in business were just emerging. Thus, during that period, firms that used the Internet for business purposes were deviating from common industry prac- tices, were therefore regarded with some skepticism, risked some loss of legitimacy, and had to be focused primarily on the economic benefits they expected (or hoped for). Such reasoning is consistent with the usual expec- tation that early adopters of organizational innovations are motivated pri- marily by efficiency reasons (DiMaggio & Powell, 1983;Sherer & Lee, 2002;
Tolbert & Zucker, 1983). One example of this careful, economically oriented approach to Internet adoption can be seen in the earliest online booksellers.
Powell Books, located in Portland Oregon, sold technical books through the Internet for 3 years before making the investment to put their full catalog on the web. Subsequently, sales grew 10–20% per month.
Proposition 1. Early adopters of the Internet for business purposes were motivated predominately by economic forces.
Clearly, not all business organizations saw advantage in the Internet.
Early on, firms that were less tied to traditional methods of doing business, less comfortably established in their communities, and more vulnerable to attack by industry leaders were the ones that adopted the Internet as a commercial innovation. This is consistent with the institutional theory pre- diction that small and new organizations are more likely to deviate from institutional norms than large, established firms (Greenwood & Hinings, 1996;Leblebici et al., 1991). As small and new organizations, they had less to lose and they observed a possible opportunity to gain an advantage over established firms. Established organizations initially liked the status quo because they were advantaged by it. Therefore, they could afford to ignore the Internet and to maintain institutionalized routines.
It may also be observed that small and new organizations tend to benefit more from innovation adoption than large, established firms. The emer- gence of the Internet technology offered small and new organizations an opportunity to create new industry standards that were good for their sur- vival and growth. Thus we observe among the American booksellers that JIFENG YU ET AL.
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only small firms (e.g., Powell Books starting in 1993) and new ventures (e.g., Amazon.com starting in 1995) were major players in the earliest phases of Internet book sales.
Proposition 2. Early adopters of the Internet for business purposes were predominately small and new ventures.
Once they were using the Internet, these early adopters were automat- ically connected to an international network. It is an inescapable corollary of Internet use. Anyone on the planet with an Internet connection could contact them. Thus, even the small Clark and Stone Book Company of Spokane Washington received inquiries from multiple countries during its first day on the World Wide Web in 1994.
In a variety of ways, the Internet makes foreign market expansion and exploitation more effective and efficient, and it helps organizations over- come the liability of foreignness. Even without experience in a foreign mar- ket, a company can obtain through the Internet some information about foreign customers with very little investment. Thus, the technology helps organizations – especially those with few resources – spot foreign market opportunities and plan appropriate strategies for their exploitation. It is even possible for a new venture to be‘‘Born Global’’ by having a presence on the Internet (Katz et al., 2003;Jarvenpaa & Yayavaram, 2002), as was the case with Amazon.com. Therefore, early adopters of the Internet were able to beneficially internationalize earlier in their life cycles than older firms.
Proposition 3. Early adopters of the Internet for business purposes were more likely to be engaged in accelerated internationalization than later adopters.
PROPOSITIONS CONCERNING LATER INTERNET ADOPTION: INSTITUTIONAL
FORCES PREDOMINATE
As Internet adoption spread among businesses and its benefits were dem- onstrated, firms that had not yet adopted the new technology came under increasing pressure to change. This institutional pressure originated from customers, partners, owners, professional organizations, governments, and the public. However, actions that were efficient for some individual organ- izations were not efficient for all, and some firms were reluctant to adopt the
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new Internet technology. However, institutional forces, such as the desire to maintain certain business relationships, influenced them to accept what had been suggested by powerful partners. Such decisions were sometimes made without reference to efficiency. Moreover, professional associations, such as those in information technology, may influence organizations to embrace new technology standards before there is a comprehensive understanding of their effects. That is reflected in the following quotation:
Many retailers have launched Web stores only to find e-commerce operations costly relative to ROI, and thus have subcontracted to third-party solution providersy (Kellee, 2001).
One solution provided in 1999 by the American Booksellers Association invited independent stores who were association members to list and sell their inventory through booksense.com. These stores felt the pressure to develop online sales, yet the cost of building up the website would have been uneconomic if they acted on their own. In this case, institutional forces were so strong that an economic solution had to be found.
Proposition 4. As time passed, adopters of the Internet for business pur- poses were increasingly motivated by institutional forces until they pre- dominated.
Over time, some benefits of the Internet were demonstrated among the upstarts, and increasingly customers wanted the firms they dealt with to be accessible on the Internet. So firms that were older and better established in their communities began to engage in electronic commerce. Initially, adopt- ing the Internet would have cost these firms legitimacy in their industry and markets and may have threatened their survival. Over time, however, as Internet adoption spread, the established firms’ survival was threatened if they did not adopt the Internet. The early majority adopters of the Internet waited until legitimacy costs were minimized; the late majority of adopters experienced a reversal in legitimacy costs, where adoption was necessary to retain legitimacy in the changing environment. Thus, Barnes & Noble felt considerable pressure from Amazon.com’s fame and competition for sales, and created their own online store in early 1997, despite initial doubts about profitable returns. Over time, more and more booksellers adopted the In- ternet. Indeed, by 1997, Publisher’s Weekly reported 1,000 booksellers had an online presence.
Proposition 5. As time passed, adopters of the Internet for business pur- poses were increasingly established firms.
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Not only can use of the Internet accelerate the internationalization proc- ess of organizations, but the process of internationalization can accelerate the adoption of Internet technology within organizations. Timely informa- tion and communication among the various national units of a multina- tional enterprise are important and can clearly be aided by use of the Internet. More importantly, international customers have come to expect the convenience and timeliness of Internet-enabled transactions. Thus, there may be a reciprocal relationship between the adoption of the Internet and firm internationalization. For new ventures and small firms, we suspect that the Internet came first, but during the mid-to late 1990s, as the Internet was commercialized, some firms that were already international undoubtedly found both economic and institutional reasons for adopting the Internet. An interesting example of this trend can be seen in the antique and rare book- sellers who already had international markets and who, following the ex- ample of mainstream trade booksellers, have increasingly relied on the Internet to buy and sell books.
Proposition 6. As time passed, more internationalized businesses adopted the Internet for business purposes.