Paper short abstract:

Our study of IT start-ups in Japan reveals that most of these firms do not internationalize successfully. We find similary results for China and Korea. We identify a variety of factors that deter Japanese and East Asian start-ups from internationalizing.

Paper long abstract:

Rapid technological progress and globalization of markets have lowered international market entry barriers and reduced investment requirements for internationalizing firms, particularly in Information Technology (IT) and internet-related products and services. As a result, the internationalization of start-ups, understood as small, newly founded firms that are designed to grow, has intensified in recent years. There

are now numerous 'born globals': entrepreneurial start-ups that derive a substantial portion of

their revenues from international markets at the point of, or near, their founding. However, empirical research on born globals is predominantly based on the study of Western country firms. Our study of 40 IT start-ups in Japan, China and Korea reveals that most of these firms do not internationalize successfully. We identify a variety of factors that deter East Asian start-ups from internationalizing, including large domestic markets, general resource and capability shortages, insufficient international market knowledge, international adaptation costs, and unfavorable home

and host country policies. Findings suggest that start-ups in East Asia may not necessarily face lower internationalization barriers than established firms. We observe across our three focal East Asian countries, many IT products and services are strongly customized to national markets, especially in the early stages of

technology life cycles. While such customization may enhance domestic performance, it also results in major adaptation cost when internationalizing. A shortage of international networks and overseas market knowledge is also a frequent and important bottleneck for the internationalization of start-ups, as we can see for the case of East Asian new ventures.