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Should Small, Young Technology-Based Firms Internalize Transactions in Their Internationalization?


  • This study is supported by the Standard Research Grants of the Social Sciences and Humanities Research Council of Canada (File number: 410-2010-2289). The authors thank Professor Thomas Keil and three anonymous referees for their insightful and constructive comments.


Small, young entrepreneurial firms' governance structure across countries has generated an interesting debate in recent years. That is, should these firms internalize or externalize transactions in their internationalization? Existing studies suggest that there are advantages and disadvantages to both structures, but the findings are mixed. This study explores the factors that determine the governance structure of small, young technology-based entrepreneurial firms (SYTEFs). Evidence collected in this study indicates that choice of governance structure by SYTEFs is determined by a specific set of conditions, specifically, their choice of governance structure depends on their strategic assets, industry dynamism, and business scope.