Internationalization of I-business Firms: The role of distance on location choice

We examine the impact of cross-national distances based on the CAGE framework (i.e., cultural, administrative, geographic, and economic) on the location choice of I-business firms. While technology enables I-business firms to internationalize at a faster pace, unfamiliarity and uncertainty of distant host countries may still affect their location choice. Further, we identify two firm-level contingencies – direct network externalities and engagement in business-to-business transactions – that condition the effect of cross-national distances on the location choice decision. Using a global data set of 185 I-business firms, we find that cultural, geographic and economic distances negatively impact the location choice. While direct network externalities strengthen the negative relationship between certain types of distance and location choice, a business-to-business (B2B) model weakens that relationship. Our study demonstrates the continuing role of distances on the internationalization of I-business firms.