Sales growth or employment growth? Exporting conundrum for new ventures

Abstract

Purpose

Previous studies primarily focus on how to achieve better performance in the international markets, but few centers on whether internationalization is a promising strategy for new ventures’ growth and development. Based on two pioneering frameworks Conservative, Predictable, and Pacemaker (CPP) model and the 7-P model, this paper fills this gap by analyzing how exporting exert heterogeneous effects on two types of growth, sales growth and employment growth. Accordingly, this paper aims to favor market-oriented new ventures to make a strategy on expanding international markets.

Design/methodology/approach

This study is based on firm-level data from the Chinese Industrial Enterprises Database. The year 2005 was used as the shock year. By conducting the propensity score matching method, 793 couples of matched new ventures were collected with sales growth and 686 couples with employment growth. The difference-in-differences method was applied to analyze the various influences that exporting has on new ventures’ sales growth and employment growth.

Findings

The main finding of this paper is that new ventures that exported can achieve better sales growth than their counterparts that only operated domestically, whereas new ventures that remain in the domestic market have no difference in employment growth from those that exported.

Research limitations/implications

This study shows that exporting is especially beneficial for market-seeking new ventures. Because the study is based on Chinese data, scholars of international business can conduct further research on other countries with different economic structures.

Originality/value

Theoretically, this paper contributes to both international business theory and entrepreneurship theory by combining the CPP model and the 7-P model. Practically, this paper shows that exports mainly benefit the sales growth of new ventures. This suggests that business practitioners should consider their growth goals before they choose to enter the global market.

Citation

Chen, M., Ni, P., Reve, T., Huang, J. and Lu, R. (2021), "Sales growth or employment growth? Exporting conundrum for new ventures", Review of International Business and Strategy, Vol. 31 No. 4, pp. 482-506. https://doi.org/10.1108/RIBS-04-2020-0048