First geographic expansion of startup firms: Initial size and entry timing effects

Abstract

While previous studies mostly analyze the performance effect of geographic expansions, this paper explores a more fundamental research question: What are the factors that may influence the propensity of startup firms to launch first geographic expansion? This study adopts event history analysis to examine the individual and interactive effects of firm initial size and entry timing on firm decision to undertake first geographic expansion. Empirical results demonstrate that firm initial size and late entry have a positive relationship with firm propensity to launch first geographic expansion, and that firm initial size negatively moderates the relationship between firm late entry and the likelihood of undertaking geographic expansion. The study suggests various strategic choices for startup firms. In addition to deciding when to enter an industry and with what size to enter that industry, startup firms may need to contemplate whether to launch first geographic expansion sooner than competitors. © 2006 Elsevier Inc. All rights reserved.