How do Nepalese start-ups internationalize - strategies and drivers of internationalization

Abstract

Nepal has not yet witnessed a significant number of international new ventures, although the number of start-ups has substantially risen in the country in the past few years. The Nepalese start-up ecosystem is still in a nascent phase lacking proper sophistication to support the start-ups for both domestic and international growth. However, despite a poorly aligned ecosystem, few start-ups have still managed to internationalize while some new firms are in the process of taking their products to foreign markets. The major objective of this thesis is to understand how these firms have streamlined their internationalization by exploring their foreign strategies. While studying the strategies, the study has also outlined some of the major drivers of internationalization for firms in Nepal. The research is qualitative and exploratory which is based on case studies of 7 start-ups from Nepal. The research stands on the theoretical foundation developed by Oviatt & McDougall (1994) on “International New Ventures (INV)”. The theory of INV describes four conditions for a firm to become a sustainable international new venture; internalization of transactions, use of alternative governance structures, foreign location advantage, and unique resources. Therefore, the study also cross-checks the applicability of INV theory in the context of emerging economies with a poorly developed ecosystem. This has not been prioritized by previous researchers researching on internationalization of firms from emerging economies. The study suggests that start-ups extensively use their alternative governance structures such as network relationships to internationalize. Although the prior international business experience has benefitted the entrepreneurs in the internationalization process, the causal relationship between such experience and an entrepreneur’s foreign intention does not exist. The strict policy against outbound foreign direct investments (FDIs) has restricted the investment of resources outside the country thereby reducing the firms’ international exposure and internationalization through foreign subsidiaries. The study also revealed that export-startups tend to compete in the international market through pricing whereas tech start-ups are more aligned towards product differentiation. As an outcome of a weak economy and less sophisticated ecosystem, start-ups are considerably hindered from rapid internationalization due to various financial, institutional, and market barriers.