University of Amsterdam
Faculty of Economics and Business
Internationalization through Social Media: The Role of Social Media in
Fortune 500 Firm’s Foreign Expansion
Msc. in Business Administration: International Management Student: Barbora Bednáriková
Student ID: 11365064 Supervisor: Dr Niccolò Pisani Second Reader: Dr. Mashiho Mihalache
Date of Submission: June 22th, 2018 Master’s Thesis – Final version
Statement of Originality
This document is written by Barbora Bednáriková who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Abstract
In this study we strive to advance the understanding of social media in international business context. Following this purpose, we tackle 2 seemingly independent constructs, i.e. internationalization and social media, and point out the underlying interconnections between them. Social media has gained importance over the past couple of years. Moreover, it has become a legitimate research area in the IM literature. However, with regard to international business research, social media has not received enough attention. Similarly, little research has examined the synergies between social media and internationalization. Therefore, we address this gap by answering how firms’ social media activity influence the scale and scope of
internationalization. In other words, we strive to shed more light on the relationship between
firms’ social media activity and the scale and scope of internationalization. Although we do not find support for our hypotheses, we uncover promising new directions that are worth further investigation. Meanwhile, we support scholars who call for further international business research. In addition, we support the prior research in that large firms are more prone to inertia. As a result, adopting novel practices becomes challenging. Following this, we acknowledge that social media is a more useful tool for small- and medium-sized firms.
Keywords: Social media; Scale of internationalization; Scope of internationalization; Firm size;
List of Content Statement of Originality 3 Abstract 4 List of Content 5 List of Figures 6 List of Tables 6 1. Introduction 7 2. Literature Review 9
2.1 Internationalization in Contemporary Research 9 2.2 Theories of Internationalization 14
2.3 Entry Mode 17
2.4 Social Media in IB Research 20
2.5 Research Gap 23
3. Theoretical Framework 24
3.1 Online Social Media and the Scale of Internationalization 24 3.2 Online Social Media and the Scope of Internationalization 27
3.3 Firm Size 29
4. Methodology 32
4.1 Sample and Data Collection 32
4.2 Variables and Measures 33
4.2.1 Dependent Variables 33
4.2.2 Independent and Moderating Variables 33
4.2.3 Control variables 34
4.3 Data Analysis 36
4.4 Results 39
5. Discussion 45
5.1 Academic Contribution 45
5.2 Implications for Practice 46
5.3 Limitations and Ideas for Future Research 48
6. Conclusion 49
Acknowledgement 51
Appendix 52
List of Figures
Figure 1. Conceptual Model 31
List of Tables Table 1. Industry Grouping 35
Table 2. Operationalization of Variables 36
Table 3. Descriptive statistics 37
Table 4. Means, Standard Deviations and Correlations 44
1. Introduction
International business (IB) scholars have studied numerous factors that stimulate, or in worse case hinder, internationalization. Moreover, scale and scope of firms’ internationalization, i.e. their international diversification, have become a focus area in the IB research (M. A. Hitt, Tihanyi, Miller, & Connelly, 2006). In this regard, contemporary IB literature offers several perspectives on internationalization and entry mode. Not surprisingly, some scholars question the need for further research. Given that the research on entry mode has not brought any substantive contributions recently, Shaver (2013) claims that the matter has been studied exhaustively. and any further research is not necessary. Additionally, the most influential papers (e.g. by Brouthers, 2002) have explained the subject exhaustively (Shaver, 2013).
On the other hand, some scholars justify the need for further research. In their commentary published in Journal of International Business Studies, Hennart and Slangen (2015) review the recent contributions of research on internationalization and entry mode. Despite the fact that the research has been quite extensive, some phenomena still call for further examination. As an example, firm-, industry- and environment-related factors (Gimeno, Hoskisson, Beal, & Wan, 2005) as well as interconnections between global strategies and their outcomes (Michael Geringer, Beamish, & DaCosta, 1989) require further specification. Furthermore, IB scholars have neglected the importance of social media and their effect on business performance (Enders, Hungenberg, Denker, & Mauch, 2008; Paniagua & Sapena, 2014), finance (Kaplan & Haenlein, 2010; Paniagua & Sapena, 2014) and marketing (Leeflang, Verhoef, Dahlström, & Freundt, 2014; Paniagua & Sapena, 2014; Weinberg & Pehlivan, 2011). Although several IB scholars have researched firm internationalization and entry mode, and international marketing (IM) scholars have examined the phenomenon of social media, the relationship between internationalization and social media has been overlooked to date and the link between both constructs remains understudied. Only recently,
Paniagua, Korzynski and Mas-Tur (2017) have scrutinized the strategic importance of social media on business performance, and consequently they have examine the impact of social media on foreign direct investment (FDI). In their words, ‘social media guide firms’ action,
shape the environment in which they operate, the way they hire employees, approach customers and so forth’ (Paniagua, Korzynski & Mas-Tur, 2017, 314). In addition, social media
oftentimes stimulates trends and initiate new hypes (Paniagua et al., 2017).
Hereby, we address the research gap and scrutinize the relationship between social media and firms’ internationalization. Additionally, we strive to enrich the contemporary research by answering the following research question: How do firms’ social media activity
influence the scale and scope of internationalization? In this study, we measure the effect of
firms’ social media activity on their geographic distribution of sales. We outline 4 hypotheses. The first 2 hypotheses investigate the direct relationship between firms’ social media activity and scale and scope of internationalization. The scale and the scope we measure as a ratio of domestic sales to total sales, and in the latter as regional sales to global sales. To quantify firms’ social media activity, we collect Facebook ‘likes’ and Twitter ‘followers,’ which we extract from their official profiles. In the remaining 2 hypotheses, we measure the extent to which firms’ size modifies the direct relationship between internationalization and social media. To test the hypotheses, we run a multiple hierarchical regression analysis on a sample of Global Fortune 500 firms as listed in 2017.
Because this study is interdisciplinary, we contribute to both IB and IM research. In this regard, we strive to advance the understanding of internationalization and social media and to explain the underlying interdependencies between both constructs. However, this study is not exempt from limitations. First of all, merely well performing firms are ranked in the Global Fortune 500. Hence, this study abstracts from firms that are not industry leaders, however they might enjoy a high degree of internationality. Because we review the impact on firms that are
already international, we do not scrutinize the influence of social media on firms in their initial stage of internationalization. Furthermore, the sample is constrained to large and very large firms. Therefore, we do not research the impact on small- and medium-sized firms. Similarly, internationalization through social media might be a vital strategy for new and young firms. However, neither these are included in the sample. In addition, only firms that internationalize, i.e. spread sales over foreign locations, are part of the research. Nevertheless, the active usage of social media is not a bespoke strategy for international firms. Hence, the limitations of this study could be addressed in the future research.
The remainder of this study is organized in the following order. In the next section, we review the prior research on internationalization, entry mode and social media. In the Section 3, we develop hypotheses and present them in the conceptual framework. In the theoretical part of Section 4, we explain the data collection, the final sample and the variables. Thereafter, we test the empirical validity of the hypotheses. In the Section 5, we present and discuss the empirical results. In addition, we address the limitations and outline an avenues for further research. Finally, in the Section 6, we conclude the research.
2. Literature Review
2.1 Internationalization in Contemporary Research
Since the late 1980’s, terms such as internationalization, globalization, geographic diversification, multinationality and international expansion have received increasing attention among IB scholars (El Namaki, 2017). Although they have been used interchangeably, they all refer to the same construct (M. Hitt, Ireland, & Hoskisson, 2007). For the purpose of this study, we adopt a definition provided by Hitt, Ireland and Hoskisson (2007). These scholars see internationalization as ‘[...] the strategy, through which firms spread their sales [...] across
borders of global markets and regions into different geographic markets or regions’ (M. Hitt
et al., 2007, pg. 251; M. A. Hitt et al., 2006, pg. 832).
Without any doubt, international firms are the driving force behind internationalization. Thus, they are ‘the economic actors who proactively seek new markets, either developed or
developing, on which they pursue global strategies’ (Rana & Elo, 2017, pg. 87). To pursue the
global strategies, international firms exploit their firm-specific advantage (FSA) (Hymer, 1976) and make an active use of their internal resources (Rana & Elo, 2017). Because the international firms are usually leaders in their industries, their importance is undeniable (Dunning, 1998). In addition, international firms pursue global marketing strategies (Malhotra, Agarwal, & Ulgado, 2003). Thus, international firms are the dominant economic units that exploit the FSA and other internal resources as well as compete with global strategies. These characteristics of international firms then facilitate their presence on the global markets (Rana & Elo, 2017).
Recently, IB scholars have researched the size of international firms (Ahi, Baronchelli, Kuivalainen, & Piantoni, 2017; Bruneel & De Cock, 2016; Holtgrave & Onay, 2017; Lindsay, Rod, & Ashill, 2017; Stoian, Rialp, & Dimitratos, 2017). Moreover, international firms with slightly distinct characteristics have attracted their attention. These firms are characteristic in that they are small and young, and that they enter multiple countries at once (Vanninen, Kuivalainen, & Ciravegna, 2017). Hence, their distinguishing feature lays upon their young age and small size (Oviatt & McDougall, 2005). Furthermore, they originate in developing countries and internationalize shortly after the inception. In most of the cases, they aim to overcome both liability of foreignness and newness, and to gain edge over other firms in the industry. Analogically, they optimize resources and generate sales on multiple foreign markets as well as seek demand for their products and services in multiple countries (Oviatt & McDougall, 2005). In addition, the young internationals strive to catch up with their mature counterparts (Luo & Tung, 2007).
Accordingly, the international firms do not cross borders by accident. Until very recently, extensive research has been conducted and the empirical findings reveal a range of benefits that are inherent to internationalization. Spare financial resources are a result of cost internalization (P. Buckley & Casson, 1976). If these are used for optimization of internal resources and capabilities (Barney, 1991), they can facilitate the FSA. Subsequently, the FSA stimulates a better market position and gives firm an advantage over its competitors (Hymer, 1976). Thanks to their geographical spread and asset diversification, international firms depend less on the economic conditions on a given market. Consequently, they experience a greater economic stability. If new needs arise, international firms can address them promptly and simultaneously on multiple markets (Barcellos, Cyrino, Júnior, Moacir de Miranda Oliveira, & Fleury, 2010). In addition, institutions play an important role as they give rise to policies that shape the business environment (Peng, Sun, Pinkham, & Chen, 2009). In this manner, state-owned international firms receive generous support from their government that stimulates their position on a foreign market (Benito, Rygh, & Lunnan, 2016). Besides that, governments favour certain industries and provide them with an extra stimuli (Porter, 1986).
Although local institutions oftentimes support internationalization by making favourable conditions, they can also impose constraints (Benito et al., 2016). Besides benefits, some negative effects are inherent to internationalization. In line with the agency theory, divergent views between agents (i.e. managers) and principals (i.e. stockholders) cause agency costs (Jensen & Meckling, 1976). With increasing internationalization, agency costs tend to increase (Jung, Lee, & Dalbor, 2016). In similar vein, internationalization may have a negative impact on transaction costs (Williamson, 1979) that increase as a result of cultural, political and institutional uncertainty (P. J. Buckley & Strange, 2011). Hence, scholars reflect on the concept of distance in order to better address the differences between countries (Beugelsdijk, Kostova, Kunst, Spadafora, & van Essen, 2018). In this manner, Ghemawat (2001) groups the
differences into a framework that consists of 4 dimensions, namely cultural, administrative, geographic and economic. Analogically, Berry, Guillén and Zhou (2010) measure inter-country distance along 9 dimensions. With regard to the individual dimensions, cultural distance and country risk appear among the major factors that contribute to uncertainty on the international markets (Zhao, Luo, & Suh, 2004). In comparison to purely domestic firms, international firms operate simultaneously on multiple markets. Therefore, they are exposed to multiple, sometimes contradictory, social norms (Beugelsdijk et al., 2018). However, the distinct cultural characteristics give rise to country-related risks and uncertainty, which pose constraints and can hinder the internationalization (Müllner, 2016).
Indeed, studies on internationality and performance reveal all kinds of relationships that range from positive/negative linear relationships to U- or S-shaped curvilinear relationship (Jung et al., 2016). Despite the discrepancy in their results, prior studies have identified multiple factors that stimulate internationalization and influence the choice for entry mode. In general, scholars examine factors such as experience and knowledge (Fletcher, Harris, & Richey Jr, 2013; Hutzschenreuter & Matt, 2017; Pla-Barber, Villar, & León-Darder, 2014; Riviere, Suder, & Bass, 2018), innovation (Álvarez & Marín, 2010), institutions (Arregle, Miller, Hitt, & Beamish, 2016; Blevins, Moschieri, Pinkham, & Ragozzino, 2016; Cantwell, Dunning, & Lundan, 2010; Hobdari, Gammeltoft, Li, & Meyer, 2017; Oguji & Owusu, 2017; Saka‐Helmhout, Deeg, & Greenwood, 2016) and culture (Beugelsdijk et al., 2018; De Jong & van Houten, 2014; Ramsey, Barakat, & Monteiro, 2013).
Initially, experience has been a cornerstone for the internationalization theory that has been elaborated by Johanson and Vahlne (1990) as well as one of the first determinants that has been examined with regard to the entry mode (Brouthers & Hennart, 2007). Nowadays, more and more firms operate internationally, and the number of internationally experienced managers has increased exponentially (Oviatt & McDougall, 2005). By studying international
firms from emerging and developed markets, Gaffney, Karst, and Clampit (2016) find that firms from emerging markets that aim to enter institutionally distant locations opt for equity entry modes. In addition, studies that examine the effect of international experience on firm’s performance have brought important implications. Likewise, firms benefit extensively from the knowledge they have gained on the foreign markets (Powell & Rhee, 2016). Furthermore, international experience mitigates the internal uncertainty, and therefore positively stimulates the financial performance (Zhao et al., 2004). In line with the theory of managerial cognition, individuals are rationally bounded, and so are managers (Maitland & Sammartino, 2015). Nevertheless, the managers that possess an international experience can think beyond their cognitive schema, and therefore are able to overcome the international obstacles (Kirca, Hult, Deligonul, Perryy, & Cavusgil, 2012).
Besides the experience, learning also brings important implications with regard to firm’s performance (Qi & Chau, 2018). With learning and knowledge, innovation is closely related. Birkinshaw, Bessant and Delbridge (2007) argue that the development of new technology is the main driver behind every innovation. However, the innovation does not necessarily refer to introduction of a new technology innovation (P. J. Buckley & Casson, 2009). In this context, it can be seen as development of a new product, a new business method, or another novel application of knowledge. In many cases, innovation is driven by young and small firms (Birkinshaw et al., 2007; Prashantham & Birkinshaw, 2008). In comparison to their younger counterparts, mature firms struggle with the adoption and implementation of innovation (Petruzzelli, Ardito, & Savino, 2018). To describe the phenomenon, scholars use different terms although they all refer to the same construct. For example, Chandy and Tellis (2000) use term 'incumbent's cue' whilst Hill and Rothaermel (2003) simply talk about 'incumbent's inflexibility' (Petruzzelli et al., 2018). Mature firms, or in other words market incumbents, need to keep track with the small and young firms because these are a vehicle for
innovation (Birkinshaw et al., 2007; Prashantham & Birkinshaw, 2008). Unfortunately, incumbents tend to give in stereotypes and routines, which lead to innovation inertia (Petruzzelli et al., 2018; Sørensen & Stuart, 2000) and may result in an absolute rigidness (Leonard‐Barton, 1992; Petruzzelli et al., 2018).
Next, institutions are another determinant that facilitates, or in worse case hinders, internationalization. The complex nature of institutions as well as their impact on firm’ behaviour, have attracted attention of many IB scholars in neo-institutionalism (Lok, 2010). In addition, institutions are an important building block for institutional theory (Saka‐Helmhout et al., 2016). Given their country-specific characteristics, institutions vary per country (Saka‐ Helmhout et al., 2016). However, they do have a direct impact on strategies, which firms execute across countries, as well as on their competitive advantage, which they hold over competitors (Meyer, Estrin, Bhaumik, & Peng, 2009). Although fragmented institutional settings pose some challenges, especially if the nature of home and host institutions is contradictory, firms during internationalization learn to navigate in different institutional contexts (Saka‐Helmhout et al., 2016). Besides that, Benito and his colleagues (2016) distinguish between private-owned and state-owned international firms. Lastly, through examination of European international firms, which focus on international expansion and growth, Blevins and his colleagues (2016) elaborate on the impact of institutional change on entry mode(Blevins et al., 2016).
2.2 Theories of Internationalization
In general, firms that internationalize need to consider their own resources and capabilities. The competitive advantage, a product of unique reconfiguration of resources into capabilities, becomes sustainable only if these are not freely available on the market, or easily substitutable, and if they bring value to the firm in a unique way (Barney, 1991). As an example, marketing resources translate into capabilities if their mutual reconfiguration stimulates desirable
marketing outcomes (Morgan, Feng, & Whitler, 2018). Because global markets are imperfect, and international firms in comparison to their local counterparts have limited knowledge of local markets, they experience liability of foreignness. However, the liability implies extra costs (Hymer, 1976; Zaheer, 1995). Hence, the international firms need to possess a firm-specific advantage (FSA) over domestic firms in order to compete successfully on the foreign markets (Hymer, 1976). Besides FSA, entering firms need to consider the environment in which they plan to operate because the host country institutions shape the local environment (Meyer et al., 2009). In this regard, firms, especially if they are the early entrants can exploit firm-, industry- and host country-related factors (Gaba, Pan, & Ungson, 2002). In addition, they can pre-empt political resources (Frynas, Mellahi, & Pigman, 2006). The political resources are assets that in connection to a given political setting enhance firm’s performance. They are of utmost importance in transition economies due to the underdevelopment of market competition (Frynas et al., 2006).
Next, numerous IB studies build upon transaction cost economics (TCE) (Brouthers & Hennart, 2007). In addition, TCE has enjoyed popularity among the IM scholars especially over the past 25 years (Seggie, 2012). In line with the TCE, firms should target low transaction costs rather than low production costs (Seggie, 2012; Williamson, 1979). If transaction costs tend to vary, the best option is to internalize them (P. Buckley & Casson, 1976). Moreover, the international markets are imperfect (Coase, 1937). Following that, firms can make profit as a consequence of imperfect markets. However, profitability varies per firm, and the differences in profitability lead to an unequal distribution of market power what then results in market power disequilibrium. On the other hand, if there are no transaction costs, the cost of contracting equals zero. As a result, the economic activity brings no benefits (Williamson, 1979).
Furthermore, economic geography scholars strive to explain the geographic distribution of economic activity with link to the economic and social characteristics of any location (Beugelsdijk, McCann, & Mudambi, 2010). Literature on international trade is mostly concerned with variables such as gross domestic product, trade and FDI (Beugelsdijk et al., 2010). Vernon’s (1966) product life cycle comes among the first theories on internationalization (Vernon, 1992). The product life cycle consists of 4 main stages. The length of each stage depends on multiple factors such as product type and its nature, product specification, institutional environment and government regulations, and competition (Beugelsdijk et al., 2010). In their Uppsala model, a model of internationalization, Johanson and Vahlne (1990), reflect on a psychic distance (Dow, 2000). In line with the Uppsala model, firms in their internationalization journey undergo several sequential stages. They start with exporting into locations that are geographically close. In the beginning, exports are irregular but they increase over time. In the second stage, firms appoint sales agents and exporting becomes a common practice. With increasing experience, firms establish their own sales subsidiaries. In the last stage, even the products are produced overseas (Johanson & Vahlne, 1990). With increasing levels of internationalization, the effect of psychic distance shrinks (Dow, 2000). Furthermore, a more holistic view on internationalization can be found in the Dunning’s (1998) study. In his eclectic theory, i.e. OLI paradigm, Dunning frames the prior empirical findings into an internationalization tripod. The internationalization tripod falls into 3 main factors: ownership, location and internalization. Before the internationalization, firms should decide either for exporting or equity/non-equity entry mode. However, the equity entry mode is a viable internationalization strategy only if the firm is able to leverage all 3 advantages (Dunning, 1998).
Finally, the prior research shows that networks and relationships have a positive impact on internationalization (Larson, 1992; Pinho & Prange, 2016). According to the network
theory, firms operate in a network of inter-organizational and inter-personal relationships (Coviello & McAuley, 1999; Malhotra et al., 2003). In a similar manner, firms internationalize through social business networks, and relationships within networks influence the entry mode (Coviello & McAuley, 1999; Malhotra et al., 2003). Firms build a successful network if they find the appropriate partners (Birkinshaw et al., 2007; Prashantham & Birkinshaw, 2008). Thanks to the ties within a social network (Pinho & Prange, 2016), firms can easily get along challenges and threats that are inherent to internationalization (Prashantham & Birkinshaw, 2008). In addition, the network ties stimulate trust between partners. As a consequence, exchange risks decrease (Larson, 1992). In addition, evidence shows that mostly the small- and medium-sized firms favour building social ties within the business networks (Prashantham & Birkinshaw, 2008).
2.3 Entry Mode
Entry mode choice is closely related with internationalization. Moreover, several studies examine the relationship between internationalization and entry mode (Malhotra et al., 2003). Internationalization is a complex process that consists of 3 subsequent steps: pre-entry, entry, and post-entry. In addition, each step calls for different set of strategies (Malhotra et al., 2003; Yip, Biscarri, & Monti, 2000). Regardless firm’s home country, entry mode choice comes among the first decisions any firm has to make before it crosses the borders. Not only comes it among the first decisions, the right entry mode is key for firm’s further expansion. Moreover, it is at heart of firm’s further performance (Ahi et al., 2017; Chang, Chung, & Moon, 2013). Nevertheless, there is no particularly superior entry mode, and firms generally achieve higher performance if they follow the theoretical recommendations (Brouthers & Hennart, 2007). In other words, internationalizing firms are likely to achieve better performance if they find fit with the theoretically predicted entry mode.
Generally, firms can enter through exporting, strategic alliances and FDI (Ahi et al., 2017). In their research, Brouthers and Hennart (2007) determine 3 main entry modes: contracts, wholly-owned subsidiaries (WOS) and joint ventures (JV), and 2 main perspectives. Following the first perspective, entry modes are a part of continuum in which control, commitment and risk increase. In this regard, entry modes range from contracts through JV, and to WOS. In addition, WOS and JV are the most researched types of entry mode. With regard to control, commitment and risk, contracts score low whereas WOS score high. In line with the second perspective, entry modes are grouped into 2 categories: contracts and equity. In this regard, both JV and WOS apply to the equity category (Brouthers & Hennart, 2007). In addition, Pan and David (2000) model a continuum framework, in which they group entry modes into non-equity and equity. Accordingly, the continuum moves from the non-equity entry modes that require least resource commitment, towards the equity entry modes that entail high commitment (Pan & David, 2000). Despite some peculiarities, the evidence shows that IB scholars more or less adopt similar perspectives with regard to the entry mode.
In terms of individual entry mode choices, exporting is one of the fundamental strategies. Together with contractual agreements, exporting builds the non-equity category (Pan & David, 2000). The contemporary research distinguishes between direct and indirect export. In case of the direct export, firms manage the whole process themselves whereas in the latter, firms export through independent agents (e.g. salespersons). In general, exporting brings a range of benefits. Here, we mention only a few. From a micro-economic perspective, the firms that export achieve economies of scale. Thus, their production costs are comparably low. Lower average costs then lead to lower prices, and lower prices stimulate firm’s competitiveness (Pan & David, 2000). Besides that, exporting facilitates a higher productivity (Masso & Vahter, 2015). Nevertheless, the aforementioned benefits are constrained to the firms that export (Gnepa, 2000). Nevertheless, every coin has two sides. Sunk costs are a specific
type of costs that cannot be taken back, and these are associated with exporting (Wagner, 2007). Furthermore, firms have to face a liability of foreignness and newness (Zaheer, 1995). In addition, some scholars show an evidence that large internal markets can substitute for the international marketplace (Hennart, 2007).
Together with exporting, contractual agreements form the non-equity category. The contractual agreements are a joint term for licensing/franchising, turnkey projects, R&D contracts and co-marketing. In comparison to hierarchically organized JV, contractual agreements represent more a vague organization form (Pan & David, 2000). Although JV is the preferable entry mode, research shows that firms that engage in R&D projects, i.e. those that operate in sophisticated industry as for instance technology development and innovation, choose contractual agreements over other entry modes (Comino, Mariel, & Sandonís, 2007).
Furthermore, two entry modes fold into the equity category, namely JV and WOS (Pan & David, 2000). JV are business entities that are legally established by two or more business partners (Brouthers & Hennart, 2007). In some cases, the amount of equity held by each partner may be very low. However, countries usually do not recognize any stake lower than 20 percent (Beamish & Lupton, 2009). The reason why firms opt for JV are a few. For example, firms establish the JV in order to enter a new market, develop a new product or simply develop and market products faster, gain a new knowledge, technology or complementary resources as well as to overcome ownership restrictions (e.g. in China) (Beamish, 2008; Beamish & Lupton, 2009). JV, and international JV in particular are created by two or more independent firms that pursue their own strategies. Therefore, management of JV might be challenging (Beamish & Lupton, 2009). With regard to WOS, studies usually distinguish between acquisitions and green-field investments (Brouthers & Hennart, 2007). Scholars generally agree that the fastest way to enter foreign market is through mergers and acquisitions, either partial or full (Brouthers & Hennart, 2007; Oguji & Owusu, 2017). In addition, recent trends indicate that managers
focus more on the acquisitions than on the green-field investments (Hennart & Slangen, 2015; Oguji & Owusu, 2017). Although the results vary (Eden & Miller, 2004), the international firms prefer JV to other entry modes (Beamish & Lupton, 2009). As compared to WOS, their enhanced performance might serve as plausible justification (Brouthers, 2002). On the other hand, some firms might transfer limited amount of know-how, innovation, and intangible assets in general, because they fear the opportunistic behaviour of their partner (Chang et al., 2013). In this regard, WOS are likely to outperform JV, especially in areas that require a plenty of intangible asset (Chang et al., 2013). However, if local partners possess complementary knowledge that cannot be freely purchased on the market, setting up JV is essential (Hennart, 2007). Importantly, mutual resource commitment might enhance cooperation, and possibly nullify the negative side-effects, especially if partners might have been competitors (Beamish & Lupton, 2009). In fact, the results on the performance of JV and WOS vary significantly. Nevertheless, the empirical evidence shows that the environmental factors play a key role. In addition, some contingencies are present. Therefore, firms should thoroughly elaborate on the entry mode strategy before they cross borders.
2.4 Social Media in IB Research
Social media is a common notion for social networking (e.g. Facebook), video sharing (e.g. Youtube) and career platforms (e.g. LinkedIn), blogs, and other content producing and content sharing services (Aula, 2010). Social media as “consumer-generated media that cover a variety
of new sources of online information, created and used by consumers intent on sharing information with others regarding any topic of interest” (Blackshaw, 2004, pg. 2; Kohli, Suri,
& Kapoor, 2015, pg. 37) are interactive in their nature because “participants can freely send,
receive, and process content for use by others” (Aula, 2010, pg. 43). Social media offers a
room for networking, communication, enables users to share content online (Paniagua & Sapena, 2014) and shapes consumers’ preferences (Hanna, Rohm, & Crittenden, 2011;
Paniagua & Sapena, 2014). A viral information, i.e. the information moved online, is promptly conveyed and easily accessible (Kohli et al., 2015).
A key driver that stimulates the shift towards quicker internationalization and faster adoption of new technologies is the changing international environment (Oviatt & McDougall, 2005). In particular, this is the case of the past two decades (M. A. Hitt et al., 2006). For example, transaction costs both communication and transportation are getting lower as a result of technological advancement (Knight & Cavusgil, 2004; Oviatt & McDougall, 2005), and markets are getting similar as a result of globalization and regionalization (Rugman & Verbeke, 2004). In addition, human capital is mobile and transferable almost without any borders, more and more managers are being exposed to international business environment (Knight & Cavusgil, 2004; Oviatt & McDougall, 2005) and psychic distance seems not to play important a role anymore (Benito & Gripsrud, 1992).
Importantly, consumers have shifted their perception of the Internet as a mere source of information to the Internet as a mean for interaction, content creation and sharing. Now, the question may arise as why consumers tend to stick to social media? Nevertheless, the answer is quite obvious. Consumers desire to be a part of the flow and strive not to miss out on any news or events (Fosdick, 2012). Nowadays, they not only passively look up content but interact with firms through social media, blogs and open source (Kietzmann, Hermkens, McCarthy, & Silvestre, 2011). However, the social media content is not narrowed down to the individual users. Many firms make business profiles and explore marketing opportunities through social media platforms such as Facebook or Twitter (Paniagua & Sapena, 2014). Therefore, social media has become a substantial ingredient in firms’ marketing mix (Mangold & Faulds, 2009). In light of this, Kohli and his colleagues (2015) report a study conducted by
Harvard Business Review Analytical Services in which the usage of social media by firms has
media, yet only as many as 7 percent have social media embedded in their marketing mix. Interestingly, the remainder still strives to grasp the best practices and anchor the potential that the social media offers, and translate it into their marketing mix (Kohli et al., 2015).
Furthermore, firms treat social media and online campaigns as means to reach out to the consumers, and consumers get actively involved in the creation of marketing content (Hanna et al., 2011). Social media (e.g. Facebook and Twitter) serve as platforms on which consumers indicate preferences and show their tastes (Paniagua & Sapena, 2014). In other words, consumers reveal invaluable information. Based on the information, firms can predict demand for their products and services (Paniagua et al., 2017). Although the information revealed through social media is non-financial, it reflects in increased financial performance. In this vein, Puah, Wong and Liew (2013) indicate a positive impact of non-financial data on the financial performance. Similarly, Yelkur, Tomkovick and Traczyk (2004) report that social media and traditional marketing share the same goals that is to increase the sales. Furthermore, Paniagua and Sapena (2014) find that the information obtained through social media has led to the sales forecasts. Nonetheless, the peculiarity of social media marketing lays upon the means of the value delivery. An empirical test on the effect of social media on firm performance conducted by Paniagua and Sapena (2014) shows that both Facebook ‘likes’ and Twitter ‘followers’ have an impact on the share value. Their results reveal that Twitter is a more efficient tool to increase firms’ performance. However, there is a requirement that a sufficient number of ‘likes’ and ‘followers’ must be attracted. Besides the effect on performance, information obtained through social media has led to increase in firms’ productivity, real-world predictions in travel destination planning (Choi & Varian, 2012; Paniagua et al., 2017) and a rate of unemployment (Ettredge, Gerdes, & Karuga, 2005; Paniagua et al., 2017). In part, social media diminish the institutional distance between countries regardless their institutional quality, i.e. whether the institutions are developed or developing (Paniagua et al., 2017).
However, the argument does not hold in the case of FDI. Since the relationship between the social media and FDI is linear, the effect of social media has a tendency to rise with an increasing level of FDI (Paniagua et al., 2017).
In general, firms are more and more relying on the internal social media tools that help them communicate, share content and educate themselves (Thomas & Akdere, 2013). Although many of them realize the positive effects of social media on the business performance, the challenge remains to recognize the right performance indicators and to manage social media activities in a sustainable way (Hanna et al., 2011). In this regard, managers often allocate financial resources inappropriately, and this results in uncertainty (Kaplan & Haenlein, 2010). Because participation in social media content is open, free and the information between recipients is conveyed fast (Aula, 2010), a proper management of social media is crucial (Kaplan & Haenlein, 2010). Since consumers can participate without any constraints, the content that they share is not known in advance. Hence, firms lack control over the information that is shared online. In the worst-case scenario, the inability to control the content can jeopardize firms’ reputation (Aula, 2010).
2.5 Research Gap
Internationalization and social media have been treated as different constructs. Several studies have researched the phenomenon of internationalization and social media itself. In addition, previous research has acknowledged the importance of social media on firms’ performance (Paniagua & Sapena, 2014) and FDI (Paniagua et al., 2017). However, tighter relationship between both constructs has been overlooked to date, and the link between internationalization and social media in IB research remains unknown. Hence, the purpose of this study is to shed more light on the relationship between internationalization and firms’ social media activity, and to enrich the existing research on internationalization. In other words, we aim to answer
internationalization? Additionally, we discuss the moderating effects of firm size on the direct
relationship between the social media activity and internationalization.
3. Theoretical Framework
3.1 Online Social Media and the Scale of Internationalization
In principle, it is incorrect to treat international firms as stand-alone entities. In reality, they are part of a broader network of synergies between both national and international environments (Pinho & Pinheiro, 2015). In this regard, it stems from their nature that international firms are a bundle of domestic as well as international assets and resources. Although the world is not entirely homogenized and differences between countries exist (Ghemawat, 2007; Rugman & Verbeke, 2004), the globalization forces firms to standardization that will likely results in less diversity (Brown, 2016). In addition, the forces behind globalization cause interdependencies between firms and the markets. Nevertheless, firms that are not able to keep up with the flow risk loss of their market share (Brown, 2016). However, existing studies on internationalization show contrasting evidence. They reveal that the majority of international firms do not cross borders of their home regions (Ghemawat, 2007; Rugman & Verbeke, 2004). Because the vast majority of international firms generate over half of the total sales in their home region, they are regionalized (Rugman & Verbeke, 2004). In this regard, the expansion of trading blocs in Europe, Asia as well as South and North America offers a plausible explanation (Rugman & Oh, 2010).
Furthermore, the world is semi-globalized (Ghemawat, 2007) and regionalized (J. U. Kim & Aguilera, 2015; Rugman & Verbeke, 2004) because international firms have a weaker position in the host regions as compared to the domestic firms (Rugman & Verbeke, 2004). When crossing borders, international firms experience a liability of foreignness and newness (Hymer, 1976; Zaheer, 1995). In addition, the liabilities can hinder the transfer of legitimacy
and can jeopardize firm’s internationalization effort (Zhang, Zhong, Wen, & Jiang, 2014). In fact, the legitimacy is another reason that stimulates the regionalization of international firms. Once firm has established a legitimacy in a given region, it is easier and less costly to operate within that region than across regions (Y. Kim & Gray, 2017). Therefore, firms prefer to stay within the regional borders. Nevertheless, consumers reveal their preferences on the social media platforms (Paniagua & Sapena, 2014). If a firm can translate this valuable information into its offering, it will likely gain a status of a legitimate market player. In addition, the characteristics of social media help firms bypass the national as well as regional borders (Crooks et al., 2014; Zhu, 2017) and stimulate the internationalization (Pinho & Prange, 2016). Because the Internet facilitates communications between numerous users, it serves as a medium for globalization (Dolunay, Kasap, & Keçeci, 2017). Besides that, the foreign investments, trade and economic activity in general, all are largely dependent on the modern Internet Communication Technology (Latif et al., 2017). Because the Internet and other online technologies help cut costs that are inherent to internationalization, they serve as a tool for trade liberalization (Lendle & Vézina, 2015). In this regard, the Internet facilitates lower transaction costs, both communication and transportation. If firm has the legitimacy to operate on the market, and the legitimacy spreads across borders by the means of social media, then the both liabilities will likely diminish when entering a new market. In this regard, the firm is dependent on the social media. Because the social media encourages global strategies, firms can cover a larger number of foreign markets. A broader market coverage then stimulates the globalization (Brown, 2016). Following this evidence, we argue that through social media, international firms can cross borders of their regions. Firms are dependent on social media because the Internet facilitates spread of the information to potential customers.
Moreover, people look up information online. Regrettably, consumers do not find visiting official websites administered by firms appealing anymore. Nonetheless, it is incorrect
to contemplate that they have lost interest in the firms’ matters (Fosdick, 2012). In comparison to information provided by the firm itself and shared on its official website, customers consider the ‘word of the mouth’ and the ‘voice of the crowd’ as a more credible and relevant source of information (Kohli et al., 2015). Therefore, the next fundamental step is to build a good reputation (Kotha, Rindova, & Rothaermel, 2001). Although establishing legitimacy and reputation on a foreign market are key, they are far from sufficient. Besides that, consumers’ active involvement is crucial. Indeed, consumers want to get actively involved with firms. Together with firms, they build up online communities that make them feel in charge (Kohli et al., 2015). In addition, the most common way to stay in touch with other peers is through social media. In this vein, social media replaces the traditional means of communication (e.g. billboards, radio and newspaper advertisements, etc.) between firm and its customers, both existing and potential (Fosdick, 2012). Moreover, online social networks are embodied in the interpersonal ties and stimulated by users’ reciprocal interaction. Thus, they can spread globally (Zhu, 2017) thanks to their decentralized nature and horizontal structure (Castells, 2015; Zhu, 2017). Since social media reinforces the spread of information across countries, it encourages a foundation of social communities that operate online. And because users incline to participate actively, the establishment of online communities becomes inevitable. Since these communities easily diffuse beyond the national borders (Zhu, 2017), they spread the firm’s reputation around the globe. And because they are citizen-driven (Castells, 2015; Zhu, 2017), the reputation spreads through the ‘word of the mouth.’ Following this evidence, firms depend on the social media because it encourages consumers to active participation and makes them feel involved. Through consumers’ active participation, social media transfer the legitimacy and reputation from one region to another.
Following this evidence, we argue that social media stimulates the interaction between consumers and firms, and therefore serves as a tool for globalization. The interaction through
online media substitutes for the traditional means of communication, and serves as a tool for liberalization. Following this, social media stimulates the internationalization and helps firms in transcending the regional borders. Furthermore, consumers interact with firms through online communities. The social media spreads the ‘word of the mouth,’ and therefore stimulates firms’ legitimacy which is an essential building block for winning a good reputation. Because the Internet and social media facilitate an easy access to information with regard to the firm and its offering, and have gained legitimacy among consumers, firms depend more and more on the social media platforms. Hereby, we hypothesize the following:
H1: Social media activity is positively related to the Scale of internationalization
3.2 Online Social Media and the Scope of Internationalization
Nowadays, the Internet is considered as a legitimate tool for communication. It contributes to the development of ‘digital era’ so that it shapes the environment we live in, gives us room for socialization and facilitates our access to information (Dolunay et al., 2017). Existing research shows that digital media play an increasingly important role as they are the driver of change that has occurred in society over the past two-three decades (Schroeder, 2018). Indeed, interconnections between the digital media and social media are obvious. Due to their viral nature, digital media reinforce reach of the traditional media and make them a fundamental component of everyday life. Consequently, socialization through social media has become a daily routine (Schroeder, 2018). In this regard, social media offers a room for networking, communication, enable users share content online (Paniagua & Sapena, 2014) and shape consumers’ preferences (Hanna et al., 2011). Nevertheless, the content is not restricted to individuals (Paniagua & Sapena, 2014). Firms treat the social media and online campaigns as means that allow them reach out to consumers, and consumers get actively involved in the creation of the firm-specific marketing content (Hanna et al., 2011).
In general, participation in the social media content is open and free (Aula, 2010). Moreover, any information conveyed between recipients is promptly transferable across countries (Kohli et al., 2015) and accessible to users in remote locations who have access to the Internet (Kohli et al., 2015). In other words, the viral information is not constrained to national borders and is easily accessible. These idiosyncrasies encourage individuals to spend more and more time online (Schroeder, 2018), and enable them to create and share content, as well as to interact with companies through social media, blogs and open source (Kietzmann et al., 2011). As a result, being connected has become easier. Indeed, evidence shows that the number of the Internet users has increased exponentially over the past few years (Statista, 2018).
Furthermore, the social media content is not narrowed down to the individual users and many firms make business profiles and explore marketing opportunities through the social media (Paniagua & Sapena, 2014). In line with this, the prior research has revealed that online sellers enter a larger number of markets as compared to their offline counterparts (Lendle & Vézina, 2015). In this regard, we contemplate that having an offering online facilitates firms’ entry into a foreign market. Importantly, consumers have shifted their perception of the Internet as a mere source of information to the Internet as mean for interaction, content creation and sharing. Although in the past, content sharing was not an important part of the social media, it has become an inseparable part nowadays (Fosdick, 2012). In this vein, on the social media platforms (e.g. Facebook and Twitter) consumers indicate their preferences and show their tastes (Paniagua & Sapena, 2014). In other words, consumers give away invaluable information, based on which firms can predict demand for their products and services (Paniagua et al., 2017). Hereby, consumers reveal their needs and desires by the means of social media. This information becomes swiftly available, and after its thorough analysis, firms can better target the market needs and tailor their portfolios.
Because consumers not only passively look up content but actively interact by the means of social media, blogs and open source (Kietzmann et al., 2011), social media influence firms’ relationships with the society (Paniagua & Sapena, 2014). In this regard, social media are a substantial ingredient in firms’ marketing mix (Mangold & Faulds, 2009). In light of this, social media reinforce firms’ visibility whereas firms nurture their relationships with consumers.
The evidence shows that social media disrupts the way people connect with each other as well as with the firms. In this regard, social media stimulates networking, communication and the way people interact. Because social media facilitates the content co-creation, it engages consumers’ to interaction with the firm. In addition, the interaction through social media is easy and prompt. Since users share content online, they simultaneously reveal preferences and give away a valuable feedback. Because firms know the consumers’ preferences, they can tailor their portfolios. If they target the right market needs, this will likely reflect in higher sales. In addition, it will strengthen firm’s position over the competitors. Thus, social media disrupts the IB environment as it strengthens the social ties and reinforces firms’ visibility. Moreover, social media facilitates firms’ entry onto multiple foreign markets simultaneously. Hereby, we argue that active usage of social media has a positive impact on the scope of internationalization. Thus, we hypothesize the following:
H2: Social media activity is positively related to the Scope of internationalization
3.3 Firm Size
Large and very large firms are at the heart of this study. As compared to their small counterparts, firms large in size are usually equipped with abundant resources (Petruzzelli et al., 2018). Drawing on resource- and capability-based view, valuable, rare, inimitable and non-substitutable resources, translated into capabilities, facilitate firms through competitive
advantage (Barney, 1991). Resources, if successfully recombined into capabilities, support firms’ operations and help them meet the market needs (Enkel & Gassmann, 2010; Petruzzelli et al., 2018). Furthermore, managers need to create a viable environment in which resources can develop (Corsino, Espa, & Micciolo, 2011; Petruzzelli et al., 2018). Besides that, it is necessary that firms possess technologies, which if recombined, support the resource development and facilitate innovativeness (Carayannis, Grigoroudis, Del Giudice, Della Peruta, & Sindakis, 2017; Mangold & Faulds, 2009; Petruzzelli et al., 2018). Because small firms have limited resources and lack international experience, they have to find creative ways to sustain competitive pressures on the market. To overcome the constrained resources, small firms make active use of social media (Bell & Loane, 2010; Turcan, 2013). Thanks to the resource abundance, large firms do not necessarily search for the cost-effective options.
Although failure might have destructive consequences for small firms, it is less threatening to large firms (Petruzzelli et al., 2018). The large firms usually cover geographically dispersed locations and have comparably more diversified portfolios. Because large firms operate on multiple markets simultaneously, they can exploit differences and pay back for potential losses generated on a given market (Damanpour, 2010; Ghemawat, 2007; Petruzzelli et al., 2018). Therefore, they are not dependent on trust and social ties in-between them and their business partners. Consequently, they can undertake several risks. On the contrary, small- and medium-sized firms favour building extensive social ties within the business networks (Prashantham & Birkinshaw, 2008). In this regard, they actively use the social media as it facilitates connections to both business partners and customers. Again, thanks to the resource equipment, the dependence on social media decreases with an increasing firms’ size.
Besides the strategy development, another critical task for managers is its successful execution along all the countries in which firm operates. However, the management of large
firms often gives in stereotypes and routines (Petruzzelli et al., 2018; Sørensen & Stuart, 2000). Consequently, long-term inertia results in the firm rigidness (Leonard‐Barton, 1992). Hereby, adopting novel practices becomes even more challenging.
Because large firms are usually equipped with plenty of internal resources, they do not necessarily search for the cost-saving options. Since budget of large firms is less constrained, they are not dependent on free advertisement through social media. Since large firms are not forced to search for novel practices, they are less agile and tend to give in inertia. In addition, managing large organization is challenging and social media require careful management. Hence, we hypothesize following:
H3a: Firm size negatively moderates the relationship hypothesized in H1
H3b: Firm size negatively moderates the relationship hypothesized in H2
4. Methodology
4.1 Sample and Data Collection
From the population of all firms, we extract a sample of Global Fortune 500 firms as listed in 2017. The Global Fortune 500 is a list of world-leading international firms (Fortune, 2017). The list is updated on a yearly basis and the firms included are ranked by sales in a descending order, i.e. from the highest sales to the lowest. The list embraces large and very large firms, majority of which are global industry leaders. By definition, large and very large firms employ more than 250 employees (European Commission, 2015). In this regard, leading global firms provide an input for this study. Several motives drive the choice for Global Fortune 500 firms. Industries, in which they operate, range from primary goods through consumer goods to technology and innovation. Since Global Fortune firms operate in a variety of industries, they cover broad markets, and therefore provide us with diversified data. Regarding their ownership, both private- and state-owned firms are included. Because the sample is diverse, the final dataset covers a spectrum of information related to firms’ domestic and international activities.
In this study, we utilize a database research. To obtain the secondary data, we use ORBIS, a worldwide database of firms administered by Bureau van Dijk. Using ORBIS is the most viable way for secondary data collection since it includes a large collection of data on firms which have local as well as global reach. Despite its wide coverage, we tackle some missing values. For this reason, we retrieve the Annual reports from firms’ websites in which we look up the missing pieces of information. Because many of the Annual reports for 2017 have not been published prior to the data collection, we use Annual reports for the previous period, i.e. the Annual reports for 2016. Because differences in the data disclosure exist on both firm and country level, we are not able to replenish all the missing values. Due to the missing values, we cannot utilize all the 500 firms, and therefore the overall sample reduces down to
94 firms. These data are missing mostly due to differences in the information disclosure on both country and firm level. In total, we utilize 75 observations.
4.2 Variables and Measures
4.2.1 Dependent Variables
Scale and Scope of internationalization. The prior research analyses firms’ cross-border
investment activity with regard to social media (Paniagua et al., 2017). However, there is no evidence concerning the effect of social media on firms’ internationalization. Hence, we strive to clarify the underlying relationship. In this study, we adopt a more holistic view. Because internationalization is a complex process, it is important to distinguish between its scale and scope (M. A. Hitt et al., 2006). The scale demonstrates firm’s dependency on a given market, and the scope relates to its spread over a number of foreign markets (Lu & Beamish, 2001). Hereby, we operationalize two dependent variables. The scale of internationalization we measure as a ratio of foreign sales to total sales, and the scope of internationalization as a ratio of global sales to total sales. Foreign sales are generated outside the firm’s home country whereas global sales come from outside the region in which firm operates (Rugman & Verbeke, 2004).
4.2.2 Independent and Moderating Variables
Social media activity. In this empirical study, we consider firms’ social media activity (SMA)
as the independent variable. For this purpose, we collect extra data. Similarly to prior research, we utilize a number of Facebook ‘likes’ and Twitter ‘followers’ (Paniagua et al., 2017) which we retrieve from the official Facebook and Twitter profiles. Thereafter, we sum up ‘likes’ and ‘followers’ for each individual firm. Subsequently, we divide this number by 2. To assure that
the data is comparable, we include solely firms that make an active use of both Twitter and Facebook.
Firm size. On top of the direct relationship between social media activity and the scale and
scope of internationalization, we test the moderating effect of firm’s size. The size is an important determinant with regard to internationalization because large firms enjoy economies of scale in production, R&D, marketing and other disciplines (Oviatt & McDougall, 2005). Therefore, we utilize the firm size as moderating variable. To operationalize this variable, we extract a number of employees for each firm as employed in 2016. For the consistency reasons, we retrieve the number of employees for 2016 instead of 2017. Herein, ORBIS provides us with the input data.
4.2.3 Control variables
In this study, we control for multiple variables. Prior studies outline the importance of firm’s age with regard to internationalization (Oviatt & McDougall, 1994). In this regard, we introduce firm age as the first control variables. To indicate the age, we compare a year of firm’s incorporation to a basal year. Because we retrieve the Annual reports for 2016, we choose 2016 as the basal year. In this regard, we compute firm’s age as the difference between the year of incorporation (i.e. the foundation year) and 2016 (i.e. the basal year). Secondly, we control for industry. In theory, industries per se give rise to networks which affect the nature of online social networks. Online social networks then influence other activities performed by the firm, e.g. its foreign investments (Paniagua et al., 2017). In addition, the prior research draws on a positive effect of social media on consumers of luxury goods (Pentina, Guilloux, & Micu, 2018). To indicate the industry, we retrieve SIC Codes from the ORBIS database. Due to their detailed categorization in ORBIS, we group all industries represented in the sample into 7 main categories (see Table 1 below). As a proxy, we use Global Industry Classification
because of the fact that the sample includes global firms. Since firms operate in a variety of institutional settings, differences exist (Almond, 2011). Instead of using the whole country name, we utilize dummy variables. Lastly, we control for gearing. Prior research indicates that an increase in firm’s social media activity leads to enhanced financial performance (Rialp-Criado & Rialp-(Rialp-Criado, 2017). Social media facilitates cost-benefits. Therefore, the spare financial resources can be used for other firm-enhancing activities. Because gearing, i.e. the ratio of firm debt to its capital equity, is a percentage, we multiply it by 0.01.
Table 2. Operationalization of Variables
4.3 Data Analysis
The dataset, from which we extract the data for dependent, independent and moderating variable as well as control variables, includes in total 500 observations. Before we proceed to the data analysis, we screen and clean the dataset. In this regard, we aim to identify and remove potential outliers as well as extract missing values by applying a list-wise deletion. Having outliers in the sample is undesirable as they represent values outside the normal range, e.g. values that are either extremely high or extremely low, and can cause bias in the analysis (Field, 2013). Because values are missing completely at random, mostly due to different information disclosure policies between countries and firms, the sample is free from bias. After screening the data, deleting missing values as well as outliers, the final sample reduces down to 75 observations.
In the next step, we proceed to frequencies and descriptive statistics, which we examine for all the corresponding variables. The analysis shows that the average scale of
internationalization is slightly higher than the average scope. Firms on average attain 58.13 percent of their total sales on foreign markets and 47.82 percent in foreign regions. In other words, more than half of the firms attain higher sales on foreign markets than on domestic markets. Meanwhile, they generate almost half of their sales outside their home region. With regard to the social media activity, an average number of ‘likes’ is 3 899 426 and an average number of ‘followers’ is 495 053. In addition, we assume that the firms have accumulated enough experience because their average age is 61 years. Due to the fact that the average number of employees is 121 050, the dataset includes large and very large firms. Altogether, 18 countries are represented in the sample. With their slightly more than 34 percent representation (i.e. 26 firms), United States rank the highest. With approximately 14 percent share (i.e.11 firms), Germany occupies second place. Following Germany, Japan concludes the top three with the 12 percent share. Hereby, more than a half of all the firms represented in the sample (i.e. 61.3 percent) originates from one of the top three countries. With regard to the industry, the distance between the first and the second place is negligible. With their roughly 27 percent share, Machinery, Equipment, Furniture & Recycling rank the highest. Then, Consumer goods, Wholesale & Manufacturing follow with almost 22 percent share. More exhaustive information regarding descriptive statistics is presented in Table 3 below.
Subsequently, we check credibility of several assumptions. In an ideal case, all the data is equally distributed around the centre, i.e. the shape of the graph constitutes a bell (Field, 2013). In this case, both social media activity and firm size show positive skewness. Therefore, we transform both into a logarithm. To re-validate the graphic interpretation, we run a test of normality. Because we operate sample larger than 50 data points, we run Kolmogorov-Smirnov test. With an exception of firm age, test indicates normal distribution of all other variables (p > .005). In the subsequent analysis, we run collinearity tests. Collinearity is caused by abnormally high correlation between individual predictors. It represents abnormality, and can cause errors in the empirical outcomes and lead to misinterpretation of the results (Field, 2013). In this setting, any correlation higher than 0.8 signalizes multi-collinearity issues, and therefore is unacceptable. For this purpose, we use Pearson’s coefficient (r), which indicates the strength of the relationship between the variables (Field, 2013). In this study, no variable is susceptible to collinearity since all correlations between the predictor variables express acceptable levels. Although correlation between the scale and scope of internationalization is slightly higher (r = .603), it is within acceptable range. Since both variables are used separately, slightly higher correlation has no negative impact on the analysis. A more detailed summary of all correlations is presented in Table 4 below.
Further, we investigate tolerance and variance inflation factors (VIF). Whereas tolerance represents the proportion of variance in the independent variable, VIF indicates the inflation of standard error that is caused by collinearity (Field, 2013). In theory, VIF offer a more profound view on collinearity. Acceptable tolerance levels score higher than 0.2 and the acceptable range for VIF is below 10 (Field, 2013). With regard to the tolerance, no variable scores below 0.767. Because all variables score in interval from 1.035 to 1.305, the VIF are within the acceptable range. To investigate the independence of the individual observations, we run Durbin-Watson test. Values for both dependent variables, i.e. the scale (2.118) and
