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Is Perceived Domestic Market Attractiveness a Growth Impediment? Evidence from the German Software Industry
Abstract
The German software industry is vital to the German economy's success. However, it has missed some current trends where software companies lack broader international activity. Existing models that take domestic market size into account can only partially explain the different degrees of internationalized companies between different countries. In addition, they are unable to explain individual companies' internationalization within a specific country. In our empirical study, an online survey of 869 German software companies, we examined the impact of perceived domestic market attractiveness as an impediment to internationalization. We found that it accounts for a considerable share of companies' variation in their internationalization activities. Based on our findings, we discuss policy and management implications.
The internationalization of a company is a complex endeavor. However, because of the special characteristics of the software industry, the internationalization of a software company can be particularly critical to its success. This study is among the first to employ institutional theory to analyze a software company's degree of internationalization. An analysis based on the survey of 306 German software companies shows that both managers' perception of the domestic market as a "comfort zone" and debt investors' pressures have a significant impact on the companies' internationalization behavior. Besides, when they perceive the domestic market as unattractive, software companies that have other German IT companies as a role model internationalize to a lesser degree than companies without German role models. The study's findings therefore point to successful strategies for policy-makers and managers alike that aspire to foster the internationalization of software companies. © (2013) by the AIS/ICIS Administrative Office. All rights reserved.
Internationalization is often described as a gradually developing process of involvement and form of entry in which firms gradually target more distant markets. This article examines the entry forms and market selection of five small Norwegian computer software firms. Data were based on interviews and site visits. A firm's network relationships were found to determine which forms of foreign entry they choose and, to some extent, which markets they enter. Software presents a more complex pattern than for physical products when considering agents, distributors, and licensing. Firms in this study referred to their partners as agents, distributors, or both. These firms were less concerned with the category of partner, than for competency, solidity, and ability to generate sales. It was also found that the relationship between firms' international experience and market selection is limited. Firms may adopt one form of entry in one market, and a different one in another market that is very similar. It is suggested that software company managers must balance resource allocation between expanding their network and focusing on establishing new relationships and customers. Overall, the study shows the complex international network relationships among firms. (TNM)
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Recognizing that country-specific resources are generally difficult to imitate or diffuse across national boundaries, we propose
that home country conditions are key determinants of firms’ strategic choices. By embracing insights from both institutional
economics and resource-based view, we identify two country-level environmental constituents – domestic market size and legal
institutions – to examine how these resources influence multinational firms’ international diversification strategies. We
further propose that home country legal institutions moderate the link between geographic diversification and firm performance.
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These hypotheses are tested with historical data on 435 multinational firms based in 13 developed economies. Results suggest
that a multinational firm’s degree of international diversification has a U-shaped relationship with the size of the firm’s
domestic market; firms from civil law countries are more likely to pursue international diversification than their counterparts
from common law countries; and the effect of international diversification on firm performance was more pronounced among MNCs
from civil law countries.
This article investigates the influence of cultural distance, geographic distance, and three market size variables in the target country preference of small and medium-sized enterprises (SMEs) in the software industry. In addition, the authors examine the shift of SMEs' priorities in country selection by analyzing how these factors affect the selection of the first, second, and third target countries. The empirical findings suggest that approximately 70% of country choices can be explained by software market size and geographic distance alone. The findings also show that SMEs' entry priorities shift quickly from countries within a short geographic distance to countries with high purchasing power and at a greater geographic distance. The authors discuss relationships of these macrolevel factors and compare them with prior qualitative and conceptual studies in this field. They also note implications for managers.
This paper deals with the potential for internationalization of the Brazilian software industry from the perspective of software developers and service providers. The purpose of the study conducted was to better understand the way Brazilian software companies relate to the international software market by comparing the perceptions of entrepreneurs and those of government agency officials responsible for increasing Brazil's participation in the international software market. Data collection took place by means of semi-structured interviews with entrepreneurs and government agency officials. The data gathered was subjected to content analysis. Results show that Brazilian software companies perform poorly with regard to levels of exporting their products and services for a number of reasons, among which the most outstanding is that they still think that the internal market offers enough challenges and opportunities.
DOMESTIC MARKETS AND INTERNATIONAL COMPETITIVENESS This paper develops a theoretical and empirical model to analyze the effects of the size and nature of domestic markets on the international competitiveness of national industries. We validate our theory using data on the more than 20,000 plants in the sector producing engineering services for petrochemical plants. Our analysis suggests that the (relative to the US) competitiveness of European or Japanese industries is greater in activities whose underlying competencies can be utilized repeatedly across products instead of being confined to well defined product category. Put differently, the cost penalty due to the fragmented European markets is the least in the case of activities based on generic competencies, and the greatest for activities based on product specific competencies. Keywords: International competition, market size, competencies, engineering industry
So far the critical choice of the entry mode for a target country has been examined ignoring the special features of firms. Particularly, the impact of the wide variation of business models of software firms has been ignored. This multi case study investigates the relation between the business model and the entry mode, of eight software firms. The results imply that the product strategy and the service and implementation model of a software firm are closely connected to the entry mode choice, while the distribution model of intangible software products does not seem to have an impact on the operation mode. Copyright Springer Science+Business Media, LLC 2006
There are many products for which the utility that a user derives from consumption of the good increases with the number of other agents consuming the good. There are several possible sources of these positive con- sumption externalities.1 1) The consumption externalities may be generated through a direct physical effect of the number of purchasers on the quality of the product. The utility that a consumer derives from purchasing a telephone, for ex- ample, clearly depends on the number of other households or businesses that have joined the telephone network. These network externalities are present for other communi- cations technologies as well, including Telex, data networks, and over-the-phone facsimilie equipment. 2) There may be indirect effects that give rise to consumption externalities. For example, an agent purchasing a personal computer will be concerned with the number of other agents purchasing similar hardware because the amount and variety of software that will be supplied for use with a given computer will be an increasing function of the number of hardware units that have been sold. This hardware-software paradigm also applies to video games, video players and recorders, and phonograph equipment. 3) Positive consumption externalities arise for a durable good when the quality and availability of postpurchase service for the good depend on the experience and size of the service network, which may in turn vary with the number of units of the good that have been sold. In the automobile market, for example, foreign manufacturers' sales initially were retarded by consumers' awareness of the less experienced and thinner service networks that existed for new or less popular brands. In all of these cases, the utility that a given user derives from the good depends upon the number of other users who are in the same "network" as is he or she. The scope of the network that gives rise to the consumption
Ob ERP-Software, Office-Anwendungen, Open-Source-Produkte oder Online-Spiele: Software unterscheidet sich im Hinblick auf ihre ökonomischen Eigenschaften grundsätzlich von Industriegütern oder Dienstleistungen. Auf Basis der ökonomischen Prinzipien und Spielregeln der Softwareindustrie behandelt das Buch Strategien und Geschäftsmodelle für Softwareanbieter. Dabei handelt es sich um Kooperations-, Vertriebs-, Preis- sowie Produktions- bzw. Industrialisierungsstrategien. Das Buch enthält zahlreiche Fallstudien und neue empirische Erkenntnisse, die unter anderem auf Basis einer Vielzahl von Expertengesprächen entstanden sind. Zielgruppe des Buches sind Fach- und Führungskräfte aus der Software-, Beratungs- und IT-Branche sowie Studierende und Wissenschaftler aus Betriebswirtschaftslehre, Informatik, Wirtschaftsinformatik und Wirtschaftsingenieurwesen.
Die zweite Auflage wurde vollständig überarbeitet und erweitert - beispielsweise um die Themengebiete Software as a Service sowie Plattformkonzepte. Darüber hinaus enthält dieses Buch neue Teilabschnitte, u. a. zum Outsourcing-Verhalten von Softwareanbietern und -anwendern, zur Bereitstellung betriebswirtschaftlicher Software als Open Source Software, zur Softwareauswahl sowie zu den Wertschöpfungsketten in der Softwareindustrie.
This paper deals with the potential for internationalization of the Brazilian software industry from the perspective of software developers and service providers. The purpose of the study conducted was to better understand the way Brazilian software companies relate to the international software market by comparing the perceptions of entrepreneurs and those of government agency officials responsible for increasing Brazil's participation in the international software market. Data collection took place by means of semi-structured interviews with entrepreneurs and government agency officials. The data gathered was subjected to content analysis. Results show that Brazilian software companies perform poorly with regard to levels of exporting their products and services for a number of reasons, among which the most outstanding is that they still think that the internal market offers enough challenges and opportunities.
What do Tetra aquarium supplies, Elector-Nite sensors, and Nissha touch panels have in common? They are typical "hidden champions," medium-sized, unknown companies (with annual revenues under $4 billion) that have quietly, under the radar, become world market leaders in their respective industries. Hermann Simon has been studying these hidden champions for over 20 years, and in this sequel to his worldwide bestseller, Hidden Champions, he explores the dramatic impact of globalization on these companies and their outstanding international success. Going deep inside more than a thousand hidden champions around the world, Simon reveals the common patterns, behaviors, and approaches that make these companies successful, and, in many cases, able to sustain world market leadership for generations, despite intense competition, financial pressures, and constantly evolving market dynamics. In the tradition of In Search of Excellence, Built to Last, and Good to Great, Simon identifies the factors in business operations, customer service and marketing, innovation, human resources management, organizational design, leadership, and strategy that separate these outstanding performers from the rest of the pack - and from the large corporations of the day. In the process, he provides a glimpse behind the curtains of many secretive companies who buck today's management fads, and succeed instead through such common-sense strategies as focusing on core capabilities, delivering real value to the customer, establishing long-term relationships, innovating continuously, rewarding employees for performance, decentralized operations, and developing an unparalleled global presence. Hidden champions teach us that good management means doing many small things better than the competition-quietly, with determination, commitment, and never-ending stamina. And in turbulent economic times, the hidden champions represent an antidote to the short-sighted and excessive practices that have brought many corporate giants crashing down. The hidden champions provide invaluable lessons for all stakeholders in the business community, from entrepreneurs to corporate managers, investors to employees, union organizers to regulators, advanced and emerging countries and may well serve as the new role models for sustainable economic growth in the globalized world of the future.
This article, the first of a two-part series, shows how the value-added chain can be used to analyze sources of international strategic advantages. The author argues that it is essential that a distinction be drawn between competitive and comparative advantage. He illustrates the importance of this distinction by looking at structural shifts in the world economy and arguing that these shifts reflect changes in comparative advantage. The impact of these changes leads to only a few choices for the firm facing import competition and possessing no competitive advantage. The author stresses that if the global advantages acquired by international participation are not sustained, competition reverts to domestic competition among firms with different national names.
With the publication of his best-selling books "Competitive Strategy (1980) and "Competitive Advantage (1985), Michael E. Porter of the Harvard Business School established himself as the world's leading authority on competitive advantage. Now, at a time when economic performance rather than military might will be the index of national strength, Porter builds on the seminal ideas of his earlier works to explore what makes a nation's firms and industries competitive in global markets and propels a whole nation's economy. In so doing, he presents a brilliant new paradigm which, in addition to its practical applications, may well supplant the 200-year-old concept of "comparative advantage" in economic analysis of international competitiveness. To write this important new work, Porter and his associates conducted in-country research in ten leading nations, closely studying the patterns of industry success as well as the company strategies and national policies that achieved it. The nations are Britain, Denmark, Germany, Italy, Japan, Korea, Singapore, Sweden, Switzerland, and the United States. The three leading industrial powers are included, as well as other nations intentionally varied in size, government policy toward industry, social philosophy, and geography. Porter's research identifies the fundamental determinants of national competitive advantage in an industry, and how they work together as a system. He explains the important phenomenon of "clustering," in which related groups of successful firms and industries emerge in one nation to gain leading positions in the world market. Among the over 100 industries examined are the German chemical and printing industries, Swisstextile equipment and pharmaceuticals, Swedish mining equipment and truck manufacturing, Italian fabric and home appliances, and American computer software and movies. Building on his theory of national advantage in industries and clusters, Porter identifies the stages of competitive development through which entire national economies advance and decline. Porter's finding are rich in implications for both firms and governments. He describes how a company can tap and extend its nation's advantages in international competition. He provides a blueprint for government policy to enhance national competitive advantage and also outlines the agendas in the years ahead for the nations studied. This is a work which will become the standard for all further discussions of global competition and the sources of the new wealth of nations.
Purpose
This paper aims to analyse the role of market orientation in the internationalisation of small software firms.
Design/methodology/approach
The study combines qualitative case studies with quantitative data from the firms in question.
Findings
Market orientation in the internationalisation of knowledge‐intensive small firms consists of three elements: customer orientation, competitor orientation and value‐network coordination. Achieving a successful balance between these elements will considerably smoothen the internationalisation process.
Practical implications
The results of this study suggest that small companies should consider their market‐oriented behaviour in line with their value network. The role of market orientation may also vary according to market‐pull or technology‐push conditions.
Originality/value
This study is among the first empirical contributions to combine the internationalisation and market‐orientation approaches in studying SMEs. It also contributes to achieving a better understanding of the market‐orientation concept from the perspective of small high‐technology firms.
This paper develops a theory of how the size of the domestic market shapes firm competencies. Our theory implies that large markets are beneficial even if factors such as economies of scale or learning effects are absent. We validate our model by an international comparison of the performance of firms that provide engineering services to the oil and petrochemical industry. We conclude that, relative to the United States, the competitiveness of European or Japanese industries is greater in activities whose underlying competencies are not product specific and can be utilized across a variety of products. The benefits of large markets are greatest for activities based on product-specific competencies. © 1997 by John Wiley & Sons, Ltd.
Ob ERP-Software, Office-Anwendungen, Open-Source-Produkte oder Online-Spiele: Software unterscheidet sich im Hinblick auf ihre ökonomischen Eigenschaften grundsätzlich von Industriegütern und Dienstleistungen. Auf Basis der ökonomischen Prinzipien und Spielregeln der Softwareindustrie behandelt das Buch Strategien und Geschäftsmodelle für Software- und Serviceanbieter. Dabei handelt es sich um Kooperations-, Vertriebs-, Preis- und Industrialisierungsstrategien. Zudem werden mit serviceorientierten Architekturen, Offshoring und Open Source zentrale Trends und deren Auswirkungen auf die Softwareindustrie betrachtet.
Das Buch enthält zahlreiche Fallstudien und neue empirische Erkenntnisse, die unter anderem auf Basis einer Vielzahl von Expertengesprächen entstanden sind. Zielgruppe des Buches sind Fach- und Führungskräfte aus der Software-, Beratungs- und IT-Branche sowie Studierende und Wissenschaftler aus Betriebswirtschaftslehre, Informatik, Wirtschaftsinformatik und Wirtschaftsingenieurwesen.
Incl. bibliographical notes and references, index, biographical note on the author
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