Choose Your Friends Carefully: Home-Country Ties and New Venture Internationalization

While host-country relationships are known to help new ventures internationalize, we know little about how a firm’s home-country relationships affect its subsequent internationalization. We develop new theoretical arguments by combining social capital theory with reference group theory, to suggest that internationalization is in general adversely affected by home-country relationships, but facilitated by a specific networking strategy viz. of joining an aspirational local industry group in the home market. Based on a mixed-method study, with quantitative analysis of 102 Indian software firms and a longitudinal study of four firms, we find support for our arguments. Our process-based qualitative findings provide useful insights into the way new venture founders actually make sense of their relationship-building activities in the pursuit of international growth. A particularly novel facet here is the aspiration-building part of the process that is suggested by reference group theory, which has not been previously analyzed in the international business context.