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Journal of Business Venturing xxx (xxxx) xxx–xxx
Contents lists available at ScienceDirect
Journal of Business Venturing

journal homepage: www.elsevier.com/locate/jbusvent
The CAGE around cyberspace? How digital innovations

internationalize in a virtual world
⁎
Noman Ahmed Shaheer , Sali Li
Darla Moore School of Business, University of South Carolina, 1014 Greene St, Columbia, SC 29208, United States of America
A R T IC LE I N F O ABS TRA CT
Keywords: This paper analyzes some salient factors affecting the internationalization speed of digital in-
Digital entrepreneurship novations by tracking international penetrations of 127 apps at Apple's app store. Although apps
Digital innovations are globally available via online platforms, their international penetration is still subject to
International entrepreneurship cultural, administrative, geographic, and economic (CAGE) distances that act as user adoption
Mobile apps
barriers to impede app internationalization. App developers may overcome these barriers by
Demand-side perspective
User engagement
employing the demand-side strategies of engaging users in value co-creation. We contribute to an
Value co-creation improved understanding of internationalization process in a digital context and also extend de-
mand-side perspective to inform international entrepreneurship research.
Executive summary
The recent rise of digital economy offers unprecedented opportunities of international entrepreneurship (IE) by upending the way
start-ups expand into foreign markets. Instead of trading physical atoms through cargo ships and aircrafts, many start-ups develop
digital innovations that are globally available from inception via online platforms. The internationalization of these digital in-
novations may not conform to many conventions in IE research that conceptualize internationalization as a gradual process of foreign
market entries, which is often deterred by entry barriers imposed by cross-national distance, such as cultural, administrative, geo-
graphic, and economic (CAGE) distances. The CAGE distances, however, may be less relevant as entry barriers for globally accessible
digital innovations that can simultaneously acquire users from around the world.
Extending IE literature to incorporate the unique dynamics of cyberspace, we move beyond the traditional research focus on
foreign market entries to conceptualize digital internationalization as a process of user adoption through which digital innovations
penetrate across countries. The speed of international penetration, however, may still be subject to the CAGE distances that may
prevent users from adopting foreign innovations. As start-ups may have a better understanding of home country users, they may tailor
their digital innovations around local needs. Hence, digital innovations may appeal to home market users but appear less relevant to
users in countries with higher CAGE distances, which may impede user adoption of digital innovations in distant markets. In this
sense, the CAGE distances in cyberspace may act as “user adoption barriers”, instead of market entry barriers.
When user adoption barriers are present, start-ups cannot take full advantage of internationalization opportunities in cyberspace
without accounting for the CAGE distances. While IE research largely focuses on entrepreneurial resources and capabilities for
overcoming internationalization challenges, we suggest that start-ups in cyberspace may also utilize the demand-side opportunity of
engaging their users in value co-creation. Specifically, we propose two demand-side strategies: social sharing strategy and virtual
community strategy. Start-ups pursuing a social sharing strategy may encourage current users to post their usage of digital
⁎
Corresponding author.
E-mail address: noman.shaheer@grad.moore.sc.edu (N.A. Shaheer).
https://doi.org/10.1016/j.jbusvent.2018.08.002
Received 19 June 2017; Received in revised form 26 July 2018; Accepted 7 August 2018
0883-9026/ © 2018 Elsevier Inc. All rights reserved.
Please cite this article as: Shaheer, N., Journal of Business Venturing (2018), https://doi.org/10.1016/j.jbusvent.2018.08.002
N.A. Shaheer, S. Li Journal of Business Venturing xxx (xxxx) xxx–xxx
innovations on their social media profiles, which may publicize a digital innovation to prospective foreign users in the networks of
current users. Similarly, start-ups pursuing a virtual community strategy may enable users to interact with each other, encouraging
current users to produce diverse content meeting the needs of multiple users segments across different countries.
We test our theoretical contentions in a sample of 127 newly launched mobile apps at Apple's app store. We find that the digital
world indeed enables rapid internationalization as apps in our sample, on average, penetrated into 16 countries within only
12–15 months after their launch. We also show that the CAGE distances decelerate the internationalization speed of mobile apps but
start-ups may partly overcome these barriers through social sharing and virtual community strategies. Our results draw attention to
unique internationalization challenges in cyberspace and also chart some novel strategies for overcoming them.
1. Introduction
Internationalization speed of start-ups and their innovations has been a primary focus of international entrepreneurship (IE)
research (e.g. Jones and Coviello, 2005; Knight and Liesch, 2016; Oviatt and McDougall, 2005). Largely, IE literature conceptualizes
internationalization as a gradual process because cross-national distances—such as cultural, administrative, geographic, and eco-
nomic distances, termed as CAGE by Ghemawat (2001)—deter many start-ups from quickly expanding into foreign markets (Cavusgil
and Knight, 2009; Deng and Sinkovics, 2017; Freeman et al., 2012). The recent rise of the digital economy, however, demands
substantial theoretical extensions (e.g. Arenius et al., 2005; Autio, 2017; Bell and Loane, 2010; Coviello et al., 2017). Many start-ups
in the digital economy offer digital products, termed as digital innovations, which become instantly available across the globe via
online platforms (Boudreau, 2012; Huang et al., 2017; Katz et al., 2003; Srinivasan and Venkatraman, 2018). As the CAGE distances
no longer impede these start-ups from virtually transmitting their digital innovations across countries, it becomes essential to re-
evaluate the drivers behind the internationalization speed of digital innovations. Responding to this gap, we revisit the concept of
internationalization and the role of distance in a digital context. We also highlight some novel strategies for accelerating the in-
ternationalization speed of digital innovations.
Recognizing the global availability of most digital innovations (e.g. Coviello et al., 2017; Sinkovics and Bell, 2005), we move
beyond the traditional IE focus on foreign market entries to conceptualize digital internationalization as a process of user adoption
through which digital innovations penetrate across foreign countries. The speed of digital internationalization, however, may still be
decelerated by the CAGE distances that may discourage users from adopting foreign innovations (Boudreau, 2012; Ghemawat, 2013;
Kim and Jensen, 2014). In this sense, the CAGE distances in cyberspace may act as user adoption barriers, instead of foreign market
entry barriers. While prior research emphasizes on entrepreneurial resources and capabilities to overcome internationalization
barriers (e.g. Cavusgil and Knight, 2015; Fan and Phan, 2007; Fernhaber et al., 2009; Freeman et al., 2012; Shaw and Darroch, 2004),
we build on demand-side perspective (DSP) (Priem and Butler, 2001; Priem et al., 2012) and the literature on user engagement and
co-creation (e.g. Brodie et al., 2011; Chandra and Coviello, 2010; Payne et al., 2008; Prahalad and Ramaswamy, 2004; Sawhney
et al., 2005) to suggest some demand-side strategies start-ups can employ to overcome user adoption barriers and accelerate the
internationalization speed of their digital innovations.
We use a unique dataset about mobile apps at Apple's app store to analyze the internationalization speed of digital innovations.
Similar to prior research on online entrepreneurship (Hennart, 2014; Reuber and Fischer, 2009, 2011), we focus on individual apps to
evaluate the successful pursuit of international opportunities by start-ups in cyberspace. By tracking international penetrations of 127
newly launched apps across 50 countries, we find that internationalization speed has indeed increased in the digital world as on
average, a mobile app penetrates into 16 countries within the short span of 12–15 months after its launch. However, we indicate that
the CAGE distances still decelerate internationalization speed as apps are likely to take longer to penetrate in countries with higher
CAGE distances. Our analysis also reveals that start-ups can use certain demand-side strategies related to user engagement and co-
creation (e.g. Payne et al., 2008; Priem et al., 2012; Siqueira et al., 2015; Sawhney et al., 2005) for overcoming some of the challenges
imposed by the CAGE distances.
We make some important contributions to IE literature. First, we contribute to the discussion about the role of distance in
cyberspace (e.g. Bell and Loane, 2010; Coviello et al., 2017; Luo et al., 2005; Mahnke and Venzin, 2003) by theorizing a mechanism
through which the CAGE distances may impact the speed of digital internationalization. We conceptualize digital internationalization
as a process of user adoption and market penetration, which is impeded by user adoption barriers imposed by the CAGE distances.
Indeed, we show that the speed of digital internationalization is subject to not only cultural, administrative, and economic but also
geographic distances. Our novel conceptualizations of internationalization speed and the role of distance contribute to a rethinking of
current IE frameworks on the wake of modern technologies, as also emphasized by prior studies (e.g. Cavusgil and Knight, 2015;
Jones et al., 2011; Nambisan, 2017).
Next, we extend DSP literature in an IE context to suggest some novel strategies for overcoming distance. We draw attention to
various demand-side opportunities that typically reside outside firm boundaries in broader digital ecosystems and can be employed
by start-ups to cost-efficiently achieve their business objectives (Amit and Han, 2017; Autio, 2017; Priem and Butler, 2001). In
particular, we build on user engagement and co-creation literature (e.g. Chandra and Coviello, 2010; Shah and Tripsas, 2007;
Sawhney et al., 2005) to theorize how start-ups can creatively use the users of their digital innovations for accelerated inter-
nationalization. Indeed, we provide a more nuanced understanding of these strategies by specifying the contexts in which such
strategies are likely to be effective. We expect our study to stimulate further research on the intersection of DSP and IE.
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2. Literature review
2.1. Internationalization in the digital world
Over the past decades, a key feature of globalization has been digitalization. The worldwide digital infrastructure of computers,
mobile devices, and broadband networks is connecting the world to an unprecedented level. Among the many marvels of the digital
era, a prominent phenomenon is the emergence of digital innovations, defined as embedded software that enables capabilities into
physical objects to produce novel products (Boudreau, 2012; Nambisan et al., 2017; Yoo et al., 2010). The term digital innovation
encompasses a wide spectrum of digitally enabled innovations, ranging from physical products like robots and connected cars
(Barrett et al., 2012; Svahn et al., 2017) to fully digitized products like mobile apps and online software (Ghose and Han, 2014;
Nambisan and Baron, 2013; Rietveld, 2018). In this paper, we limit our focus to the latter type of digital innovations.
The recent rise of digital innovations offers unprecedented opportunities of rapid internationalization to many start-ups.
Traditionally, internationalization has been conceptualized as a gradual process of entering into foreign markets through estab-
lishment of subsidiaries or export networks (Buckley and Casson, 2009; Johanson and Vahlne, 1977). Internationalizing start-ups are
particularly challenged by cross-national differences, such as the CAGE distances, that increase the costs and risks of foreign market
entries and impede many entrepreneurs from crossing national borders (Fan and Phan, 2007; Hashai, 2011; Lopez et al., 2009). Such
entry barriers, however, may not impede start-ups offering digital innovations, who can join globally accessible online platforms that
internalize many barriers to internationalization, such as the presence into foreign markets, payment mechanisms, and trust between
businesses and users (Autio et al., 2018; Nambisan et al., 2017; Srinivasan and Venkatraman, 2018). Affiliation with such platforms
grants digital innovations global accessibility from inception with little or no barriers to entering foreign markets.
The traditional method of measuring internationalization speed may be less relevant in a digital context as mere presence in a
country may not represent the internationalization of a digital innovation. Instead, internationalization speed in the digital world
may be better measured by the pace of foreign market penetrations, which are determined by the adoption of a digital innovation by
an adequate number of users in a particular country (Agarwal and Bayus, 2002; Chandrasekaran and Tellis, 2008). Such con-
ceptualization acknowledges that digital innovations penetrate across countries through a diffusion based process of user adoption,
instead of a firm-led process of choosing foreign markets (Brouthers et al., 2016; Coviello et al., 2017).
Shifting the focus from global presence to international penetration may explain the relevance of cross-national distance to the
internationalization speed of digital innovations. According to the extant research, digital innovations, like most other products,
possess various cultural, intellectual, and aesthetic elements that appeal to users with specific needs, tastes and preferences (Amit and
Zott, 2001; Boudreau, 2012). As online preferences of users differ widely across countries (Kim and Jensen, 2014; Lynch and Beck,
2001; Rothaermel et al., 2006; Steenkamp and Geyskens, 2006), the penetration of digital innovations may also vary depending upon
the match between the attributes of digital innovations and the preferences of users in particular countries. As such differences are
deeply rooted in national cultures, they may not be addressed by merely offering host country languages or adjusting prices to foreign
countries. In this sense, despite lower entry barriers in cyberspace, cross-national distance may still act as a user adoption barrier for
digital innovations.
2.2. Overcoming user adoption barriers through demand-side strategies
As user adoption barriers are present in the virtual world, start-ups cannot take full advantage of lower entry barriers in cy-
berspace without accounting for cross-national differences. Some start-ups may customize their digital innovations to the unique
needs of overseas users (Amit and Zott, 2001; Kotha et al., 2001; Lynch and Beck, 2001) but such an endeavor requires an adequate
understanding of foreign markets (Ghemawat, 2013; Singh and Kundu, 2002), which may be difficult to develop for many small and
resource-constrained start-ups.
We draw from the expanding research on DSP—particularly the literature on user engagement and co-creation—to argue that
start-ups can engage the users of their digital innovations to overcome user adoption barriers. As several scholars (e.g. Adner and
Levinthal, 2001; Adner and Zemsky, 2006; Prahalad and Ramaswamy, 2004; Priem, 2007) indicate, traditional research tends to
emphasize the role of supply-side factors, such as resources and capabilities, for creating customer value and achieving business
objectives. Such conceptualization treats users as passive recipients of the value created by businesses, limiting the role of users to
revenue sources. On the contrary, DSP literature draws from the marketing research on user engagement and co-creation to advocate
a paradigm shift away from the producer-centered model, assigning a more central role to users in the process of innovation and
value creation (Brodie et al., 2011; Füller et al., 2008; Priem et al., 2012; Van Doorn et al., 2010). Hence, DSP stresses the importance
of both supply-side and demand-side factors in innovation and value creation, suggesting that firms can achieve their strategic
objectives by capitalizing on various demand-side opportunities that reside outside organizational boundaries (Dhanaraj and Parkhe,
2006; Fernhaber et al., 2009). In particular, users can serve as important external partners who can actively participate in each
activity of the value chain and help businesses in achieving their objectives (Chandra and Coviello, 2010; Payne et al., 2008).
The demand-side strategies of user engagement and value co-creation can be more suitable for digital innovations owing to some
unique features of cyberspace (Coviello et al., 2017; Sawhney et al., 2005). As Piskorski (2014) noted, the internet is primarily a
communication medium, where people strengthen their existing relationships and also establish new connections. The social nature
of the internet may enable and empower users to engage in business operations if firms could provide attractive socialization op-
portunities or other non-pecuniary rewards in return (Chandra and Coviello, 2010; Nambisan and Baron, 2009; Von Hippel, 2005).
Especially in an international context, users from different nations can contribute heterogeneous knowledge about various countries
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Fig. 1. Hypothesized relationships between time to penetration, the CAGE distances and demand-side strategies.
and cultures, which may enable start-ups to better internationalize their digital innovations. While extensive literature in marketing
and entrepreneurship explores several user engagement and co-creation strategies (e.g. Brodie et al., 2013; Coviello and Joseph,
2012; Füller et al., 2008; Sawhney et al., 2005), little IE research investigates the effectiveness of such strategies for digital inter-
nationalization.
In developing the research hypotheses below, we begin by describing how cross-national differences, particularly the CAGE
distances, potentially affect the international penetration of digital innovations as user adoption barriers. Next, we suggest two
demand-side strategies, social sharing strategy and virtual community strategy, through which start-ups can involve users to po-
tentially overcome these user adoption barriers and accelerate the internationalization speed of their digital innovations. We gra-
phically represent our Model in Fig. 1.
3. Hypotheses
3.1. CAGE distances
Despite the easy global visibility and accessibility of digital innovations on the existing global platforms, their speed of inter-
national penetration may still be subject to the CAGE distances. First, as start-ups are likely to be more familiar with their home
countries, their digital innovations may closely match the needs of home country users. This may, in turn, accelerate the penetration
of digital innovations in home countries, or countries with similar user preferences. However, as Kim and Jensen (2014) argue, an
increase in distance may lead to greater divergence in user needs and preferences between the home and the host markets. Therefore,
digital innovations, developed in the context of home countries, may appear more foreign, less relevant and even offensive to users as
the CAGE distances increase.
Second, the CAGE distances may decelerate the internationalization speed of digital innovations by enhancing the difficulty of
communicating the value of digital innovations to overseas users. As Chen and Hennart (2002) argue, market communication is a
culture-specific process which needs expertise in local contexts. Simply translating product descriptions or promotional messages into
foreign languages is not sufficient because users in different countries may misinterpret the content of the message (Chidlow et al.,
2014; Hite and Fraser, 1988). Thus, there is a possibility that overseas users may misunderstand the intended value propositions of
digital innovations, which may delay the adoption of digital innovations in distant countries.
Third, some unique features of the digital world may further decelerate the penetration of digital innovations in distant countries.
Higher CAGE distances may provide greater information advantages to firms that are more familiar with the needs of local users
(Zaheer, 1995). As most digital innovations are not patented (Arenius et al., 2005; Boudreau, 2012; Boudreau and Jeppesen, 2015;
Schu et al., 2016), start-ups in host countries may capitalize on their information advantages by replicating successful digital in-
novations from foreign countries and modifying them according to the local tastes and preferences. In the presence of local clones,
users may become more reluctant to adopt digital innovations from distant countries, which may further delay the international
penetration of digital innovations.
In sum, while the CAGE distances may not prevent digital innovations from establishing their presence in foreign markets, they
can still decelerate the international penetration of digital innovations by impeding users from adopting foreign innovations.
Therefore, we hypothesize:
H1. An increase in the CAGE distances slows the penetration speed of a digital innovation in a focal country.
Our prior arguments posit that the CAGE distances may impede start-ups from adequately publicizing their digital innovations in
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foreign countries and also developing relevant content to match the needs of overseas users. Marketing research on user engagement
and value co-creation offers a possible solution by showing the effectiveness of users in publicizing products as well as producing
relevant content (e.g. Brodie et al., 2011; Chandna and Salimath, 2018; Piskorski, 2014; Rogers, 2003). Extending this research in an
international setting, we propose that the demand-side strategies of engaging current users in value co-creation may enable start-ups
to overcome both obstacles imposed by the CAGE distances. Specifically, we identify two demand-side strategies: social sharing
strategy and virtual community strategy.
Our first demand-side strategy, social sharing strategy, refers to the business practice that encourages current users to post their
personal usage of digital innovations on social media. Digital innovations pursuing this strategy may incorporate social sharing
features which enable users to share their interactions with digital innovations, such as their achievements or performance, on their
social media profiles on Facebook, Instagram, or Twitter etc. This strategy may enable digital innovations to employ their users as
spokespeople, who publicize digital innovations to new users (Aral and Walker, 2011; Rogers, 2003). As argued by Piskorski (2014),
social sharing enables users to strengthen their current relationships as users share their life activities with relatives and friends while
indirectly generating publicity for digital innovations.
The second demand-side strategy, virtual community strategy, aims at turning current users of digital innovations into con-
tributors or complementors, mainly by enabling users of a digital innovation to interact with each other. Virtual communities can be
established through a variety of methods such as creating discussion boards, encouraging members to form collaborative teams, or
enabling users to view and post comments on activities of other users (Chandra and Coviello, 2010; Hagel and Armstrong, 1997;
Nambisan and Baron, 2007; Von Hippel, 2005). A digital innovation can incorporate any one or a combination of these techniques to
form a virtual community (Brodie et al., 2013; Coviello et al., 2017; Füller et al., 2008). Such virtual communities help users establish
new relationships, whereas the interaction among users creates enriched content for digital innovations (Boudreau and Jeppesen,
2015; Jeppesen and Frederiksen, 2006; Nambisan and Baron, 2009; Payne et al., 2008).
Next, we elaborate on the effectiveness of these demand-side strategies in overcoming the CAGE distances and accelerating the
internationalization speed of digital innovations.
3.2. Social sharing strategy and the CAGE distances
We propose that a social sharing strategy may help digital innovations overcome the CAGE distances by resolving two important
challenges associated with distant markets. First, the higher the distance, the less likely are start-ups to possess adequate knowledge
for identifying and targeting prospective users for their digital innovations. Second, higher distance may impede the ability of start-
ups to effectively communicate the value of their digital innovations to target users. A social sharing strategy may reduce the impact
of both barriers.
First, social sharing strategy may facilitate start-ups in overcoming the important challenge of publicizing digital innovations to
prospective users in distant countries. Recent research (Brouthers et al., 2016; Hofstede et al., 2002; Venaik and Midgley, 2015)
argues that digital technologies are increasingly connecting like-minded people from across countries by enabling them to easily
discover and connect with one another through social media. As these cross-national networks are based on shared interests, their
members often inform and influence the choices of each other (Brouthers et al., 2016; Van Alstyne and Brynjolfsson, 2005). Ac-
cordingly, many current users of a digital innovation may be connected to several prospective users from different countries. Mo-
tivating these users to share their usage of digital innovations on their social networks may publicize the digital innovations to the
relevant market segments even in distant and hard-to-reach foreign countries. Such an exposure to a broader audience may increase
the adoption of digital innovations in distant markets, accelerating the internationalization speed of digital innovations.
Second, social sharing strategy may relieve start-ups from the need of mastering distant cultures for creating effective promotional
messages. Several studies confirm that people share their usage of products on social networks due to the social desires of connecting
with others, gaining personal attention, and connoting status (Ho and Dempsey, 2010). These motivations may persuade users to
personalize their social posts with attractive messages, written in appropriate languages, following the cultural norms and values of
people in their networks. As a result, pursuing a social sharing strategy may generate an abundance of promotional messages, tailored
for heterogeneous users around the world (Bampo et al., 2008). These user generated messages may also carry higher persuasiveness
and credibility because people in the digital world are bombarded with a variety of digital innovations. Observing the usage of a
digital innovation by people in their networks may send potential users a more persuasive signal about the quality and usefulness of
that particular digital innovation (Aral and Walker, 2011; Schulze et al., 2014). Such a signal may be especially convincing when the
CAGE distances hinder users from appreciating the value of foreign innovations on their own. Hence, a social sharing strategy may
weaken the influence of distance by customizing promotional messages to different cultures and also by improving the persuasiveness
of market communication. Therefore,
H2. Pursuing a social sharing strategy will mitigate the effect of the CAGE distances on the penetration speed of a digital innovation.
3.3. Virtual community strategy and the CAGE distances
Virtual community strategy corresponds to the concept of coproduction, which stresses that collaboration between producers and
consumers can create higher value for both businesses and users (Chandra and Coviello, 2010; Desarbo et al., 2001; Füller et al.,
2008; Prahalad and Ramaswamy, 2000). Von Hippel (1994) specifies two conditions for pursuing a coproduction strategy. First, the
knowledge of user needs must be “sticky”—that is, costly to transfer from users to producers. Information stickiness is higher when
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knowledge is tacit and producers lack sufficient absorptive capacities to accurately understand the user needs. Second, users must be
segmented into small and heterogeneous groups so that producers cannot fulfill the large variety of user needs. If these conditions
hold, Von Hippel (2001, 2005) argues that the coproduction initiatives, such as user communities, may have an advantage over
producer–centered systems because users in communities can collaborate to fulfill their needs without relying on producers. We
argue that both these conditions apply to digital innovations when the CAGE distances are high. Therefore, we follow Von Hippel
(1994, 2001) to propose that employing a virtual community strategy may enable digital innovations to overcome the CAGE dis-
tances.
An increase in the CAGE distances may increase the problem of information stickiness by compromising the ability of start-ups to
understand and decipher the needs of foreign users (Kotha et al., 2001; Rothaermel et al., 2006). This may substantially decelerate
the internationalization speed of digital innovations as recent research (Gnyawali et al., 2010; Viard and Economides, 2014) em-
phasizes the importance of understanding user needs and offering relevant content to gain acceptance by online users. Virtual
community strategy may alleviate the need for start-ups to understand the user needs in distant markets as the production of relevant
content is partly transferred to their users (Chandra and Coviello, 2010; Coviello et al., 2017). In this sense, virtual communities may
help start-ups bypass their lack of information about distant markets. In the long run, virtual communities may also help start-ups in
reducing information stickiness as analyzing user generated content may provide start-ups more relevant information about diverse
user needs, enabling them to better fit their digital innovations to the unique needs of users in distant markets.
Pursuing a virtual community strategy may also turn the problems of higher CAGE distances and user heterogeneity into op-
portunities. Internationalization of a digital innovation requires acquisition of users across multiple countries, who share interests in
the content of that digital innovation. However, these user groups may exhibit heterogeneous preferences due to their national
backgrounds (Hofstede et al., 2002; Steenkamp and Geyskens, 2006; Venaik and Midgley, 2015). While it is critical for digital
innovations to tap these small and heterogeneous user segments to develop a larger user base worldwide (Jank and Kannan, 2005;
Van Alstyne and Brynjolfsson, 2005), higher CAGE distances may compromise the ability of start-ups to meet user needs in distant
countries. Virtual community strategy helps overcome this challenge by drawing from the expertise of globally dispersed users
(Chandra and Coviello, 2010; Faraj et al., 2011; Nambisan and Baron, 2007; Shah and Tripsas, 2007), who may create more enriched
content to attract new users from multiple countries. It may create positive network externalities as participation of diverse users may
make a digital innovation more attractive for new users (Amit and Zott, 2001; Katz and Shapiro, 1985), enhancing the amount and
the versatility of resources available to all. Offering a richer content may also improve the usefulness of digital innovations in distant
countries, which may, in turn, attenuate the impact of distance on the adoption of digital innovations. Hence,
H3. Pursuing a virtual community strategy will mitigate the effect of the CAGE distances on the penetration speed of a digital
innovation.
4. Methods
4.1. Research context
To test our hypotheses, we examine international penetrations of a specific type of digital innovations—mobile apps. Mobile apps
can be defined as software that enable users to perform various functions on smartphones (Ghose and Han, 2014). According to
several scholars (e.g. Boudreau, 2012; Boudreau and Jeppesen, 2015; Yoo et al., 2012), digitally available software, particularly
mobile apps, provide an important context to examine various aspects of digital innovations and online entrepreneurship.
Mobile apps are now being used worldwide to perform a variety of tasks. An average smartphone user downloads 40 apps,
actively uses 15 of them, and spends 82% of mobile minutes on apps (Gupta, 2013). International Data Corporation (2016) expects
worldwide annual downloads of mobile apps to reach 210 billion, earning annual revenues of $57 billion by 2020. This is an
especially striking number, considering that total revenues app developers earned during the first five years of apps history amounted
to just $15 billion (Forbes, 2015).
Mobile apps are available to users through a variety of app stores. App stores are multi-sided platforms that connect innovators of
mobile apps, the so called app publishers or app developers, with app users who can download mobile apps for free or at a fee
(Boudreau, 2012; Eckhardt, 2016). The model received acclaim in 2008 when Apple Inc. launched Apple's app store. With only 500
apps at its launch, Apple's app store surpassed a staggering 300,000 apps by 2010 (Lardinois, 2010). Soon after, various competing
smartphone platforms such as Google Android and RIM (Blackberry) followed. However, Apple's app store still remains the world's
largest app store in revenues and the second largest in downloads. Apple announced in the 2016 worldwide developers conference
(WWDC) that Apple's app store hosted > 2 million apps, served 130 billion cumulative downloads and earned more than $50 billion
revenues.
In our study, we limit our attention to mobile apps available in the health & fitness category of Apple's app store. Apple's app store
categorizes mobile apps into 28 categories such as games, books, health & fitness, and social networking etc. An app can register into
one main category and can also select another category as its subcategory. Allowing apps to register in subcategories improves app
discoverability as there is a large variety of apps in each category. While imperfections exist in these categorization schemes, in
several ways they compare favorably to schemes that are commonly used to group related products and innovations in management
and entrepreneurship research, such as industry and patent classes (Eckhardt, 2016).
Focusing on a specific category and app store offers us several important advantages. First, previous research has confirmed the
existence of various systematic differences across app categories and app stores (Ghose and Han, 2014). Restricting our sample to
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only one category and app store may mitigate the influence of such heterogeneity on our results. Second, as Apple's app store is one of
the world's most prominent app platforms, our sample grants us the opportunity to trace an app's international activities and provides
adequate grounds to generalize our findings. Third, users of other major app stores based on Android, such as Google Play, can
download the same apps from many different stores, making it difficult to track the penetration of an app in a given country. On the
contrary, iPhone and iPad users can only download or purchase apps from Apple's app store, which enables us to more accurately
track the penetration of an app in each focal country.
4.2. Sample and data sources
We use a variety of data sources to construct a longitudinal, cross country database on the internationalization of iOS mobile apps
in the health & fitness category of Apple's app store. Health & fitness category provides us a suitable context to examine the inter-
nationalization of digital innovations. It is one of the fastest growing categories, in which the number of apps has grown by 100% in
just 2.5 years and revenues are expected to grow > 10 fold, from $2.4 billion in 2013 to $26 billion by the end of 2017 (re-
search2guidance, 2014). This rapid growth and intensely competitive environment, fueled by the growth in both number of users and
app developers, provides us with an ideal context to examine the internationalization patterns of newly launched digital innovations.
Furthermore, health & fitness is a diverse category, covering 24 subcategories ranging from games and sports to magazines, social
networking and lifestyle. This diversity helps us generalize our results to a broader context. Finally, our focus on health & fitness
category is partially motivated by data availability issues. We note that there are significant data availability challenges regarding
mobile apps, constraining research in this context. We acquire a proprietary dataset from a prominent app data provider, Apptopia,
on health & fitness category apps. This rich dataset provides detailed information on the daily performance of mobile apps across 50
countries for the period October 2014 to December 2015, including country wise rankings, downloads, and revenues for 4583 top
ranked apps, accounting for > 80% of the downloads and revenues earned by the iOS health & fitness category across 50 countries
during our study period.
We supplement our acquired data with a number of variables from publicly available data sources. We write various API
(Application Programming Interface) programs to set up data crawlers and web robots on a number of websites, particularly
sensortower.com, appannie.com, and prioridata.com, which store information on mobile apps. These crawlers gather a number of
important variables such as languages offered by apps in each country, home countries, and experiences of app developers with iOS.
Finally, we merge our data with country level variables obtained from world development indicators by the World Bank and the
CAGE distances variables provided by Berry et al. (2010). A list of countries in our sample is provided in Table 1.
For our study, we decide to focus on only newly launched apps so that we could track their country wise penetrations from
inception. Based on our criteria of international penetration (defined and discussed later in a subsequent section), we find in our data
that new apps penetrate into 75% of the 50 countries within 180 days since their launch. Accordingly, we pick all apps that were
launched in the last quarter of 2014 to track the internationalization trajectories of mobile apps for at least 12 months since their
launch. Our base sample comprises of 127 apps from 13 subcategories, tracked on a daily basis across 50 countries. A few apps were
not available in all 50 countries due to the fact that some governments impose restrictions on certain types of apps or developers
decide to avoid some countries. After merging our data with the CAGE distances variables, we obtain a final sample of 5757 app-
country observations.
Table 1
List of countries included in the sample.
1. Argentina 21. Indonesia 41. Sweden
2. Australia 22. Ireland 42. Switzerland
3. Austria 23. Israel 43. Taiwan
4. Belgium 24. Italy 44. Thailand
5. Brazil 25. Japan 45. Turkey
6. Canada 26. South Korea 46. United Arab Emirates
7. Chile 27. Kuwait 47. United Kingdom
8. China 28. Malaysia 48. United States of America
9. Colombia 29. Mexico 49. Venezuela
10. Croatia 30. Netherlands 50. Viet Nam
11. Czechia 31. New Zealand
12. Denmark 32. Norway
13. Egypt 33. Philippines
14. Finland 34. Poland
15. France 35. Portugal
16. Germany 36. Romania
17. Greece 37. Russian Federation
18. Hong Kong 38. Saudi Arabia
19. Hungary 39. Singapore
20. India 40. Spain
7
4.3. Variables
4.3.1. Dependent variable

Our dependent variable is the time to penetration, which is calculated as the time (in days) that an app took to penetrate in a focal
country since its launch. In our sample, we obtain the event of penetration for 2025 app-country observations. We truncate all other
observations where an app could not penetrate in a focal market till our cutoff point (December 31, 2015).
We follow prior research to define international penetration as the possession of a product by a substantial number of users in a
focal country (Agarwal and Bayus, 2002; Chandrasekaran and Tellis, 2008). As most digital innovations are instantly available
worldwide from their launch, traditional measures, such as the establishment of foreign operations, acquisition of first few customers,
and exports (Autio et al., 2000; Cassiman and Golovko, 2011; Hashai, 2011) may not effectively reflect the internationalization of
digital innovations. The construct of international penetration is a more appropriate measure in our context, because it measures not
only the availability of a digital innovation, but also its adoption in a focal market. Our measure is also consistent with the IT
literature which emphasizes the actual usage of an innovation as a key performance metric (e.g. Iacovou et al., 1995).
We leverage a unique property of the iOS ecosystem to identify the cutoff point for the successful penetration of an app in a focal
country. iPhone displays Top 150 apps in each category using a proprietary formula based mainly on downloads (Ghose and Han,
2014; Kapoor and Agarwal, 2017). Breaking into this highly visible zone reflects an adequate level of penetration in a focal market
(Garg and Telang, 2013). Accordingly, we consider an app to penetrate into a focal country when it was ranked among top 150 for the
first time in that particular country in health & fitness category. To ensure the robustness of our results, we also use several alternate
criteria for defining international penetration. We use top 25, top 50, top 100, top 200, and top 250 rankings as cutoff points to define
penetrations in focal countries. We also define international penetration on the basis of app downloads in a focal country. Our data
indicates that an app usually captures a download share of at least 0.5% in a focal market within its respective subcategory in the
month it ranks among the top 150. Using this alternate criterion, we consider an app to penetrate into a focal market in the first
month when it achieved at least 0.5% download share in that particular country. As the results were qualitatively consistent in terms
of signs and significances under all these alternate criteria, we present and discuss only the results obtained under our main spe-
cification of international penetration.
4.3.2. Independent variables

Our independent variables are the CAGE distances, which we measure between each pair of the home country of an app developer
and the focal country. As recognized by various scholars, cross-national distance is a construct with multiple dimensions (Berry et al.,
2010; Ghemawat, 2001). Accordingly, prior research has operationalized distance through a variety of measures such as psychic
distance (e.g. Johanson and Vahlne, 1977), cultural distance (e.g. Kogut and Singh, 1988), and geographic distance (e.g. Burtch et al.,
2014) etc. In this study, we follow Ghemawat (2001) CAGE index to assess whether Cultural, Administrative, Geographic, and
Economic distances will affect the internationalization speed of mobile apps. Although the CAGE framework, like all other distance
measures, is an imperfect proxy to capture the true complexities of cross-border activities (Berry et al., 2010), recent studies ap-
preciate the comprehensiveness of CAGE measures and increasingly employ them in empirical work (e.g. Campbell et al., 2012). We
also follow this approach by operationalizing cross-national distance through the four dimensions of the CAGE framework.
We measure Cultural, Administrative, Geographic, and Economic distances by using the distance scores provided by Berry et al.
(2010). The data provides dyadic country comparison scores for these four distance measures. Cultural distance reflects the differ-
ences in cultural values across countries (Hofstede, 1980). Administrative distance refers to the differences in colonial ties, language,
religion, and the legal system (Ghemawat, 2001). Geographic distance captures the great circle distance between geographical
centers of countries. Economic distance deals with the differences in key economic indicators such as income levels (GDP per capita),
inflation, and foreign trade. All of these dimensions reflect differences among people across countries in terms of values, preferences,
purchasing power, and openness to external influences.
4.3.3. Moderators
The moderators in our study are social sharing strategy and virtual community strategy. To identify whether an app utilizes social
sharing and/or virtual community strategies, we employ two coders, who independently reviewed mobile app descriptions,
screenshots, app websites, social media pages, and user reviews. Both coders separately checked all the apps in the sample to identify
the ones that encourage users to share their app related achievements on their social media profiles. Such apps were classified as
having a social sharing strategy. Similarly, coders identified apps that offer community related features. As observed in prior studies
(e.g. Hagel and Armstrong, 1997), user communities can be established through a variety of methods such as creating discussion
boards, encouraging members to form collaborative teams, or enabling users to post comments. Coders classified any app as using
virtual community strategy if it employs at least one of the above mentioned techniques. We limit to a binary coding for this variable
because we find most apps to simultaneously employ multiple ways to enable interactions among users. To further ascertain the
accuracy of coding, coders downloaded and used apps to check the presence (or absence) of social sharing or virtual community
features. Since coding required judgment only on the presence or absence of a specific criterion, it was relatively easy to do with little
potential for coder's subjective biases significantly influencing the coding. The disagreements were discussed until both coders agreed
on the proper coding.
Based on this extensive coding exercise, we develop our two moderators, each representing a specific demand-side strategy. The
first moderator, social sharing strategy, assigns the value of 1 to any app that enables users to post their interaction with the app on
their online social networks. Our second moderator, virtual community strategy, takes the value of 1 for any app that allows its users
8
to engage in social interactions with each other. We find 37 apps pursuing a social sharing strategy and 19 apps using a virtual
community strategy. We find only 9 apps employing both strategies.
We further ensure that our moderating variables are not endogenous in a sense that initial demand of an app may motivate its
developer to introduce these strategies. We review app release notes, a document app developers release whenever they add any
feature in their apps. A thorough review of release notes confirms that social sharing or virtual community features were available in
apps since their launch.
4.3.4. Control variables

We control for a comprehensive set of variables in our estimation. Among app level variables, we first control for app price,
indicating actual prices of all paid apps in US dollars and assigning a value of zero to free apps. The price of an app may have an
important impact on app penetration (Eckhardt, 2016; Ghose and Han, 2014) because free or lower priced apps can attract more
downloads and quickly rise into top rankings.
We also control for trial promotion, a binary variable that takes the value of 1 if an app offers a free trial before purchase. This is an
important variable because several studies recognize the importance of free trials (also termed as a freemium model) in earning a
higher number of downloads (Ghose and Han, 2014; Liu et al., 2014; Rietveld, 2018).
In addition, we use number of SDKs (software development kits) in a mobile app as a proxy to measure the sophistication and
quality of an app. SDKs act as digital artifacts that introduce various features and functionalities into mobile apps (Autio et al., 2018).
App developers add or creatively recombine SDKs to introduce innovative features in their apps (Boudreau, 2012; Yoo et al., 2010).
Number of SDKs is a more fine grained proxy of app quality as compared to the traditional measures, such as app size in megabytes,
used in prior studies (e.g. Ghose and Han, 2014). In an unreported regression however, we use app size instead of number of SDKs and
obtain consistent results.
We also follow prior research on online businesses (Kotha et al., 2001; Reuber and Fischer, 2009) to control for mass media
advertising and publicity. We search several news sources, search engines, as well as official websites and social media pages of app
developers to manually find whether each app in our sample was advertised or received publicity by any press or TV sources. Based
on this extensive exercise, we create a binary variable, media exposure, which is coded as 1 if an app received any publicity or
advertisement on either TV or press.
In addition to mass media advertising, any advertising or publicity within app store may also impact app penetration. Hence, we
control for two indicators of app advertising and publicity within app store. First, we add a control for the advertising expense, in app
advertising, by each app in each country. To calculate this variable, we multiply total downloads an app received before penetrating
into a country with the cost per install (download) in each country (CPI) to get a close estimation of the advertising expenses of a
given app in a given country. Second, we recognize that an important publicity for mobile apps is to get officially selected by Apple's
app store as a “featured app”. Apple's app store selects a limited number of apps as featured apps and prominently displays them to
users at app store. Featured apps not only enjoy a higher exposure to prospective users but are also perceived to offer higher quality.
Therefore, we control for featured app, a binary variable which takes the value of 1 if an app was featured in a particular country
before it penetrated into that country or truncated at the end of study period.
Furthermore, as Apple's app store allows developers to incorporate multiple languages in their apps to facilitate user adoption in
foreign countries, we control for language, a binary variable which is coded 1 if the home country of app developer shares at least one
official language with a focal country. We also control for multihoming, defined as the tendency of hosting an app on multiple app
stores. We create a dummy variable for multihoming, which indicates whether an app is also available on Google Play store.
We also take into account the social media followers of an app as a proxy to measure the marketing efforts by an app. Social media
has received increased prominence as a cost-effective tool for promoting online businesses and digital innovations (Brouthers et al.,
2016). We create a variable, social media followers, which represents the total number of Twitter and Facebook followers of each app
or app developer in thousands. We focus on Facebook and Twitter because the global reach of these platforms is more likely to expose
an app to overseas users.
Moreover, we take into account the specialized apps in our sample, whose scope is limited to certain geographic regions. While
such regional specialization may improve the attractiveness of apps for users in certain geographic areas, these apps are less likely to
succeed in other markets. We use a binary variable that takes the value of 1 for specialized apps.
In addition, we recognize that prior experience of app developers can have important consequences for the penetration of apps.
Mobile apps industry is relatively new and most stakeholders are still in the learning phase (Li et al., 2013). Most developers
accumulate experience with the passage of time as they better understand programming techniques on their particular app stores and
interact with more customers to better understand their preferences and needs. Therefore, we control for developer experience, which
is measured by the number of years since a developer first launched an app at Apple's app store.
We also control for two important category-country level variables, market size and category concentration. We use the complete
dataset of 4583 apps to calculate these two variables for the health & fitness category in each country for the month an app was
launched. We measure our first category-country level variable, market size, as the total revenues earned by all apps in the health &
fitness category in a focal country. Market size reflects the attractiveness of a focal country, which may motivate greater customi-
zation to the unique tastes and preferences of a focal country (Rothaermel et al., 2006). A larger market also provides a more open
environment, in which many digital innovations can penetrate and coexist.
Our second category-country level variable, category concentration, describes the revenue shares of ten leading apps in the health
& fitness category in each country. We follow Eisenhardt and Schoonhoven (1990) to calculate this variable. First, we select top 10
apps that earned highest revenues in a focal country in a particular month. Next, we divide the revenues of top 10 apps by the total
9
revenues earned by all apps in the focal country for the same time period. Category concentration is an important indicator of overall
competitiveness. Highly concentrated categories are characterized by relatively few large players holding significant shares of the
total market, whereas categories with lower levels of concentration are characterized by greater number of firms with smaller market
shares. Prior research treats higher concentration as an important barrier that can limit new entrants' ability to penetrate into a focal
country (e.g. Mudambi and Zahra, 2007). Finally, we include mutually exclusive binary variables to indicate the subcategory of each
app. We also control for the fixed effects of each app's home country.
4.4. Statistical approach
The purpose of our study is to identify the determinants of the length of time taken by digital innovations to penetrate into a focal
country. Accordingly, we follow previous research on penetration, takeoff, and diffusion (e.g. Chandrasekaran and Tellis, 2008) to
use a hazard model with an accelerated failure time (AFT) specification. AFT models are used to express the impact of independent
variables on time to an event. Hence, positive coefficients are associated with later penetrations whereas negative coefficients in-
dicate earlier penetrations. This connects directly with our hypotheses that are constructed in terms of penetration speed. AFT models
also make it possible to include right censored observations in which an app did not penetrate into a focal market until the end of our
observation period. The ability to use such observations is crucial because 63% observations are right censored in our sample.
However, left censoring did not pose a problem as we tracked all apps from their respective launch dates.
We estimate the AFT model with multiple-record data and multiple events, in which the model considers that individuals (apps)
experience different events (penetration into different countries) during the time span under analysis. Our observations are at the
app-country level. Each observation is included only once, either at the time the app penetrated into a focal country or at December
31, 2015 if not penetrated within our timeframe.
We run our AFT model using a random effects approach (frailty model), assuming a hazard function with a Weibull distribution.
The relative mathematical simplicity and flexibility of Weibull distribution has made it among the more popularly used parametric
hazard models (Klein and Moeschberger, 2003). Weibull specification is also suitable in our research context because app penetration
rates may vary systematically with the time under observation, changing monotonically with the age of apps.
5. Results
Table 2 reports the descriptive statistics and correlations between the variables, except for subcategory and home country
dummies. Table 2 indicates little correlation among variables, indicating that multicollinearity may not be a problem.
Table 3 presents the results for the AFT model with Weibull specification. Model 1 includes only control variables. In Model 2, we
add our four measures of the CAGE distances. In Model 3, we include the main effects of social sharing and virtual community
strategies. In Model 4, we interact our first moderator, social sharing strategy, with each measure of the CAGE distances. Similarly in
Model 5, we interact our second moderator, virtual community strategy, with our measures of the CAGE distances. Model 6 presents
the full model. The model fit, as indicated by Chi-Square and Log likelihood, shows improvement in each subsequent model.
The results for the control variables provide some interesting insights. We find statistically significant impact for trial promotions
(p < 0.05), No. of SDKs (p < 0.1), language (p < 0.00), and social media followers (p < 0.00) on our dependent variable, time to
penetration.
Regarding our hypotheses, Model 2 in Table 2 shows that Hypothesis 1 is supported. The coefficients for cultural, geographic, and
economic distances are statistically significant and positive, showing that most CAGE distances increase the time to penetration. Next,
we follow Elfenbein and Knott (2015) to calculate the economic significance of our results. The economic significance of our esti-
mates is also substantial: when all other variables are held at their means, one standard deviation increase in cultural, geographic,
and economic distances is associated with an increase in the time to penetration by 12% (p < 0.01), 8% (p < 0.05), and 11%
(p < 0.01) respectively.
We report the tests for social sharing and virtual community strategies in Model 3. Each of these strategies shows a negative sign
and also attains statistical significance. We also find these two strategies to have substantial economic impact. Holding all variables
on their means, a social sharing strategy reduces the time to penetration by > 55% (p < 0.05) whereas a virtual community strategy
reduces the time to penetration by > 72% (p < 0.01) for the average app.
Model 4 tests Hypothesis 2 by including the interaction terms between social sharing strategy and our indicators of the CAGE
distances. We find that the interaction terms with cultural distance (p < 0.1), administrative distance (p < 0.05), and economic
distance (p < 0.00) are negative and significant—only the interaction term involving geographic distance is not significant. Con-
sistent with Hypothesis 2 and as plotted in Fig. 2,1 this finding indicates that the relationship between distance and the time to
penetration is less positive for apps that pursue a social sharing strategy. Hypothesis 2 is, therefore, supported.
Model 5 tests Hypothesis 3 about the moderating impact of virtual community strategy. Only one interaction term between virtual
community strategy and economic distance is negative and significant (p < 0.01). Against the predictions in Hypothesis 3, we find
1
Figs. 2 and 3 represent cumulative hazard of international penetration with the passage of time. These figures are for illustration purpose only
and they are not adjusted for any control variables. For the sake of simplicity, we first standardize all four measures of distance and later, we add
these standardized scores to create a comprehensive variable of cross-national distance. We use this comprehensive measure of distance in Figs. 1
and 2 to illustrate our interaction effects.
10
N.A. Shaheer, S. Li
Table 2
Correlation matrix.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
1. Time to penetration
2. App price 0.05
3. Trial promotion −0.04 −0.08
4. No. of SDKs −0.18 −0.09 0.26
5. Media exposure −0.01 −0.06 0.21 −0.04
6. In app advertising 0.08 −0.11 0.13 0.22 −0.05
7. Featured app −0.09 0.01 0.3 0.11 −0.05 0.1
8. Language −0.04 0.04 0 0.02 −0.02 0.06 −0.04
9. Multihoming −0.02 −0.11 0.05 0 0.12 0.01 −0.08 0.05
11
10. Social media followers −0.13 −0.04 0.25 0.33 0.17 0.1 0.09 0.03 0.09
11. Specialized app 0.01 −0.05 −0.05 0.09 0.32 −0.04 −0.03 0.02 0.18 0.26
12. Developer experience −0.17 0.07 0.08 −0.02 0.12 −0.04 0.16 0.03 −0.04 0.15 0
13. Market size −0.02 0.01 −0.01 0 0.01 0.32 0.04 0.18 −0.01 0 0 0
14. Category concentration 0.01 0 0 0 −0.01 0.01 −0.02 −0.06 0 0 0 0 0.24
15. Cultural distance 0.02 0 −0.02 −0.03 0.02 −0.16 −0.03 −0.15 0.02 0 0.01 0 −0.16 0.12
16. Administrative distance −0.03 −0.01 0.01 −0.01 −0.02 −0.01 0.06 −0.28 −0.04 0 −0.02 0.01 −0.17 −0.11 −0.06
17. Geographic distance 0.09 0.01 0 −0.05 0.02 −0.19 −0.11 −0.05 0.05 0.01 0.02 0 −0.07 −0.05 0.1 −0.05
18. Economic distance 0.05 0 −0.02 −0.03 0.06 −0.14 −0.08 0.14 0.06 0.02 0.01 0.02 −0.2 −0.08 0.07 −0.11 0.27
19. Social sharing strategy −0.12 −0.07 0.04 0.02 −0.02 0.17 0.14 −0.12 0.06 −0.04 −0.12 −0.13 −0.03 −0.01 −0.04 0.06 −0.08 −0.04
20. Virtual community strategy −0.11 −0.09 0.17 0.15 0.08 0.1 0.02 −0.01 0.07 0.08 −0.07 −0.08 0.01 0 −0.02 0.01 0.02 −0.04 0.16
Note: There are 2025 app-country observations for variable 1 (which excludes right truncated observations) and 5757 app-country observations for variables 2–20.
Journal of Business Venturing xxx (xxxx) xxx–xxx
virtual community strategy to have only limited impact on the time to penetration when cross-national distance is high. These results
are further illustrated in Fig. 3.
While our hypotheses (except Hypothesis 3) find support in isolation, we also report the full model in Model 6 that tests all hypotheses
simultaneously. The model indicates that all relationships that are significant in isolation maintain their significance in combination.
Table 3
Examining factors influencing the time to penetration (survival analysis is using accelerated failure time coefficients, Weibull specification).
Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6
Control Distance Demand side Social sharing Virtual community Full model
variables Main effects strategies strategy strategy
Main effects Interaction effect Interaction effect
App price −0.02 −0.02 −0.03 −0.03 −0.03 −0.03

(0.02) (0.02) (0.02) (0.02) (0.02) (0.02)
Trial promotion −1.54⁎ −1.58⁎ −1.40⁎ −1.40⁎ −1.39⁎ −1.39⁎
(0.76) (0.76) (0.65) (0.65) (0.64) (0.65)
No. of SDKs −0.13+ −0.13+ −0.11+ −0.12+ −0.12+ −0.12+
(0.08) (0.08) (0.07) (0.07) (0.07) (0.07)
Media exposure 1.22 1.25 1.49+ 1.52+ 1.47+ 1.50+
(0.96) (0.96) (0.88) (0.88) (0.88) (0.88)
In app advertising −0.00 0.00 0.00 0.00 0.00 0.00
(0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Featured app −0.06 −0.05 −0.03 −0.05 −0.04 −0.05
(0.23) (0.23) (0.23) (0.23) (0.23) (0.23)
Language −0.97⁎⁎⁎ −0.97⁎⁎⁎ −0.97⁎⁎⁎ −0.96⁎⁎⁎ −0.96⁎⁎⁎ −0.95⁎⁎⁎
(0.07) (0.08) (0.08) (0.08) (0.08) (0.08)
Multihoming 0.29 0.28 0.47 0.45 0.48 0.45
(0.38) (0.38) (0.35) (0.35) (0.35) (0.35)
Social media followers −0.00⁎⁎⁎ −0.00⁎⁎⁎ −0.00⁎⁎⁎ −0.00⁎⁎⁎ −0.00⁎⁎⁎ −0.00⁎⁎⁎
(0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Specialized app 1.63 1.63 1.18 1.17 1.18 1.18
(1.06) (1.07) (0.97) (0.98) (0.97) (0.97)
Developer experience −0.11 −0.11 −0.18+ −0.18+ −0.18+ −0.18+
(0.10) (0.10) (0.09) (0.09) (0.09) (0.09)
Market size 0.04+ 0.05⁎ 0.05⁎ 0.06⁎ 0.05+ 0.06⁎
(0.02) (0.03) (0.03) (0.02) (0.02) (0.02)
Category concentration 0.43 0.16 0.16 0.31 0.05 0.23
(1.41) (1.43) (1.43) (1.43) (1.42) (1.43)
Cultural distance 0.63⁎⁎ 0.63⁎⁎ 0.98⁎⁎ 0.59⁎ 0.93⁎⁎
(0.22) (0.22) (0.32) (0.23) (0.32)
Administrative distance −0.27 −0.27 0.12 −0.28 0.12
(0.17) (0.17) (0.24) (0.19) (0.25)
Geographic distance 0.19⁎ 0.19⁎ 0.06 0.18⁎ 0.05
(0.08) (0.08) (0.11) (0.09) (0.11)
Economic distance 1.02⁎⁎ 1.01⁎⁎ 3.22⁎⁎⁎ 1.43⁎⁎⁎ 3.37⁎⁎⁎
(0.35) (0.35) (0.52) (0.38) (0.53)
Social sharing strategy −0.81⁎ −0.34 −0.81⁎ −0.35
(0.39) (0.42) (0.39) (0.42)
Virtual community strategy −1.29⁎⁎ −1.29⁎⁎ −1.18⁎ −1.29⁎⁎
(0.44) (0.44) (0.48) (0.48)
Social sharing strategy ∗ cultural distance −0.70+ −0.72+
(0.42) (0.42)
Social sharing strategy ∗ administrative −0.65⁎ −0.68⁎
distance (0.33) (0.33)
Social sharing strategy ∗ geographic distance 0.20 0.19
(0.16) (0.16)
Social sharing strategy ∗ economic distance −4.20⁎⁎⁎ −4.00⁎⁎⁎
(0.67) (0.68)
Virtual community strategy ∗ cultural 0.39 0.55
distance (0.68) (0.68)
Virtual community strategy ∗ administrative 0.01 0.02
distance (0.44) (0.44)
Virtual community strategy ∗ geographic 0.10 0.08
distance (0.21) (0.21)
Virtual community strategy ∗ economic −2.42⁎⁎ −1.47+
distance (0.84) (0.84)
Constant 3.98⁎ 3.43+ 4.12⁎ 3.62⁎ 4.10⁎ 3.63⁎
(1.80) (1.82) (1.71) (1.72) (1.71) (1.72)
Control for app home country Yes Yes Yes Yes Yes Yes
Control for app subcategory Yes Yes Yes Yes Yes Yes
(continued on next page)
12
Table 3 (continued)
Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6
Control Distance Demand side Social sharing Virtual community Full model
variables Main effects strategies strategy strategy
Main effects Interaction effect Interaction effect
Observations 5757 5757 5757 5757 5757 5757

Number of apps 127 127 127 127 127 127
Log likelihood −5773 −5757 −5750 −5727 −5746 −5725
χ2 271 303 319 365 327 368
Standard errors in parentheses.

⁎⁎⁎
p < 0.001.
⁎⁎
p < 0.01.
⁎
p < 0.05.
+
p < 0.1.
0.80
0.60
0.40
0.20
0.00
0 50 100 150 200 250 300 350 400 450

Time to penetration (in days)
High distance, Social sharing strategy High distance, No social sharing strategy
Low distance, Social sharing strategy Low distance, No social sharing strategy
Fig. 2. Impact of social sharing strategy on cross-national distance.
5.1. Robustness test
To examine the robustness of our results, we conduct a series of additional tests. First, as our criterion for international pene-
tration is slightly unconventional, we fit several additional models under different measures of international penetration as we specify
earlier in the manuscript. Under all these alternate specifications, the results remain robust.
In addition, we limit our regression analysis to an established measure of distance, i.e. the CAGE framework (Ghemawat, 2001).
0.60
0.40
0.20
0.00
0 50 100 150 200 250 300 350 400 450

Time to Penetration (in days)
High distance, Virtual community strategy High distance, No virtual community strategy
Low distance, Virtual community strategy Low distance, No virtual community strategy
Fig. 3. Impact of virtual community strategy on cross-national distance.
13
As traditional distance measures reflect differences in people preferences across countries (Kim and Jensen, 2014; Lynch and Beck,
2001), the CAGE framework provides an adequate empirical test for our arguments. At the same time, we also construct a new
measure, virtual distance, to capture cross-national differences in people preferences in a digital setting. To construct this measure, we
draw from Caprar et al. (2015), who emphasize that online data about actual behaviors of people can help in better understanding
national cultures and cross-national differences. Accordingly, an important way to delineate the patterns of behaviors and preferences
is to compare online activities across countries, such as differences in app downloads. Building on these important insights, we gather
a large dataset about category wise app downloads in 58 countries for the year 2014. We use Mahalanobis distance formula, similar to
Berry et al. (2010), to convert these category wise downloads into a virtual distance score between each country pair. This variable
measures the extent to which people from any two countries download apps from different app categories, delineating some patterns
about differences in online preferences of people around the world. We use this measure as a robustness test in our model. We find a
positive and significant co-efficient of virtual distance. We also find that none of our demand-side strategies could positively over-
come virtual distance, as the interaction terms between both demand-side strategies and virtual distance remain statistically insig-
nificant. These results confirm our initial assertion that cross-national distance matters in cyberspace. More importantly, these results
show the importance of having exclusive measures for virtual world to capture the uniqueness of this important context.
We also conduct additional tests on different subsamples of our data. We examine a sample after excluding the home countries of
mobile apps, which led to 5632 observations. Furthermore, we run our analyses after excluding specialized apps, as these apps may
have restricted geographic scopes. We find that our results stay robust in both subsamples as we find the impact of the CAGE distance
measures to be positive and significant in both subsamples. We also find our interaction terms to positively moderate our measures of
the CAGE distances, similar to our main results in Table 3. We also account for any unobservable differences among countries by
estimating all models with focal country fixed effects and obtain similar results.
We also confirm the robustness of our model under alternate control variables. Apps advertise within app stores by incorporating
advertising SDKs. Therefore, we create a new variable, advertising SDK, counting the total number of advertising SDKs in an app. We
could not use this variable in our main model as this control is highly correlated with another control variable, No. of SDKs. Instead,
we run a robustness test by replacing No. of SDKs with advertising SDKs. We also replace our variable, social media followers, with
social media presence, a dummy variable taking the value of 1 if an app or its developer had a Facebook or Twitter page. In addition,
we replace our variable, language, with a new variable, language match, a binary variable coded as 1 if an app offers at least 1 official
language of the focal country. We also use another control for language, number of similar languages, which counts the total number of
official languages a home country shares with a focal country. Our results stay robust after replacing our original controls with these
alternate variables.
Finally, we ascertain that our results are not driven by our choice of Weibull model. We fit other parametric regressions models,
log-logistic, exponential, and log-normal distributions, as well as semiparametric Cox model. Our results under all specifications stay
nearly identical.
6. Discussion
In this article, we seek to expand IE literature to encompass the novel context of digital internationalization. In particular, we
analyze some salient factors that may influence the internationalization speed of digital innovations. Internationalization speed is
critical in the digital world where successful innovations are rapidly imitated, and quickly building a large global base of users can
serve as an important competitive advantage (Amit and Han, 2017; Autio, 2017; Srinivasan and Venkatraman, 2018). While modern
technologies enable digital innovations to access global markets from inception, we indicate that start-ups in virtual space still need
to account for cross-national distance to accelerate the internationalization speed of their digital innovations. We identify and em-
pirically evaluate some demand-side strategies that may help start-ups overcome distance even with limited internal resources. The
foregoing analysis reveals that the demand-side strategies of user engagement and co-creation can facilitate the internationalization
of digital innovations but the effectiveness of these strategies varies with respect to the degree and the type of distance.
6.1. Implications for theory
Our study makes some important contributions to IE literature on the internationalization speed in a digital context (e.g. Coviello
et al., 2017; Luo et al., 2005; Sinkovics and Bell, 2005). Primarily, our analysis reveals that the average time to international
penetration has reduced from multiple years to a few weeks. On one hand, this finding supports prior IE research which expects
digital technologies to experience early and rapid internationalization (e.g. Arenius et al., 2005; Coviello and Tanev, 2017; Loane
et al., 2004; Mahnke and Venzin, 2003). At the same time, we extend this research by demonstrating substantial variations in the
internationalization speed of digital innovations, showing that global availability alone is not a sufficient condition for rapid in-
ternationalization. While IE research largely attributes such differences in internationalization speed to entrepreneurial decisions of
entering into foreign markets (e.g. Oviatt and McDougall, 2005; Zahra et al., 2000), this may be less relevant in a digital arena where
entrepreneurs instantly access international markets even if they do not have international ambitions (Coviello et al., 2017; Coviello
and Tanev, 2017; Kobrin, 2001; Kotha et al., 2001; Loane, 2005; Yamin and Sinkovics, 2006). We depart from traditional IE theories
by indicating that the internationalization speed of digital innovations may be largely determined by the pace of user adoption,
instead of entrepreneurial decisions of entering into foreign markets. Accordingly, we emphasize the need to understand factors that
may influence users to adopt digital innovations and hereby determine the international penetration speed of digital innovations.
Shifting research focus on the drivers of user adoption may be critical to extend IE literature in a digital context.
14
We also offer the theoretical rationale behind the impact of distance on the internationalization speed of digital innovations. Prior
IE research largely treats distance as an entry barrier (e.g. Fan and Phan, 2007; Freeman et al., 2012; Shaw and Darroch, 2004),
which may be less relevant for start-ups that can access global markets via digital channels since inception. Indeed, IE research has
found that online entrepreneurs are less likely to regard distance as a barrier (Loane and Bell, 2002). Such underestimation of the role
of distance may be partly attributed to the traditional conceptualization of distance as an entry barrier. However, even if distance
may not pervade start-ups from establishing foreign presence, we show that cultural, administrative, economic, and even geographic
distances may impede digital internationalization by preventing users from adopting foreign innovations. By conceptualizing distance
as a user adoption barrier, we provide the theoretical foundation to explain the importance of distance for internationalizing start-ups
in the digital world.
The impact of geographic distance in a digital context is a counterintuitive finding as many scholars expect geographic distance to
have lessened importance in cyberspace (Amit and Zott, 2001; Brouthers et al., 2016; Loane et al., 2004). We offer some possible
explanations. Prior research finds geographic distance to reduce cross-national interactions and hereby cultural awareness (Burtch
et al., 2014), which may inhibit people from appreciating and adjusting to even minute differences. Such issues may impede users
from understanding and adapting to digital innovations that originate from geographically distant countries. Our finding echoes a
recent study by Agrawal et al. (2015), who surprisingly find that investors are geographically bound in partaking in digital
crowdfunding platforms. The role of geographic distance in the digital context presents intriguing puzzles that warrant further
research attention.
Another important contribution of our study is to extend DSP and marketing research on user engagement and co-creation in an IE
context by evaluating the impact of demand-side strategies on internationalization of digital innovations. While literature on user
engagement and co-creation forms an important pillar of marketing and entrepreneurship research, IE research largely limits its focus
on the role of entrepreneurial resources and capabilities (e.g. Cavusgil and Knight, 2015; Fernhaber et al., 2009; Freeman et al., 2012;
Oviatt and McDougall, 2005). We address this research gap by drawing attention to the importance of demand-side strategies for
accelerated internationalization. Theoretically, we extend the literature on user engagement and co-creation in an international
setting by proposing the theoretical rationale behind the effectiveness of these strategies in facilitating the internationalization of
digital innovations. Empirically as well, we show both social sharing and virtual community strategies to accelerate the international
penetration of digital innovations, implying that demand-side factors may complement or substitute the internal resources of en-
trepreneurs (Brodie et al., 2011; Payne et al., 2008; Prahalad and Ramaswamy, 2004; Priem et al., 2013; Sawhney et al., 2005; Ye
et al., 2012). However, when the CAGE distances are high, we find that only social sharing strategy accelerates the international
penetration of digital innovations whereas the virtual community strategy plays a limited role. Hence, for overcoming the CAGE
distances, it may be more effective to overcome the external barrier of communicating with users through social sharing strategy,
compared to the internal barrier of producing relevant content via virtual community strategy.
The limited effectiveness of virtual community strategy is slightly counterintuitive, given the research emphasis on the benefits of
coproduction and prosumption (e.g. Bogers et al., 2010; Sawhney et al., 2005; Von Hippel, 2005). Theoretically, virtual communities
encourage heterophily as communication among non-similar individuals allows information flows across diverse groups (Rogers,
2003). However, such synergistic benefits may not materialize when cross-national distance is high (Goerzen and Beamish, 2005).
Instead, heterophilious interactions may result in cultural frictions (Shenkar et al., 2008), deterring users from engaging in virtual
communities. In this sense, our results imply that the Tower of Babel effect still exists in cyberspace in such a way that cross-national
differences may prevent virtual communities from morphing people into a large global community. However, we find that virtual
communities are effective when economic distance is high. It provides some preliminary evidence that differences in languages,
culture, and religions may inhibit the formation of heterophilious virtual communities, while differences in economic prosperities
may create opportunities for heterophilious interactions. This finding is particularly interesting as there is an increased desire to
know which specific dimensions of cross-national differences play a key role in shaping cross-cultural interactions (Javidan et al.,
2006).
6.2. Implications for practice
We offer several recommendations to entrepreneurs for capitalizing on unprecedented internationalization opportunities in cy-
berspace. Given low foreign entry barriers in the virtual world, start-ups may be tempted to focus on developing technologically
advanced, exceptionally creative, and globally appealing innovations, such as “killer apps”, instead of paying attention to cross-
national differences. However, our results indicate, consistent with Ghemawat (2013), that in a global marketplace where businesses
and users can freely exchange value regardless of national borders, the international success is not yet a function of only technical
superiority and product quality. As cross-national differences may still prevent users from adopting foreign innovations, start-ups
must think beyond technical sophistication and account for cross-national distance to take advantage of the global opportunities in
cyberspace. Indeed, digital technologies may deepen cross-national differences through greater customization of products to unique
tastes of nations, racial groups, and even individuals. In this sense, technological advancements may intensify user adoption barriers,
instead of triggering the “death of distance”.
We also offer some demand-side strategies related to user co-creation, which may facilitate internationalization in the digital
world. While IE research largely emphasizes the importance of financial and technical resources for rapid internationalization (e.g.
Arenius et al., 2005; Cavusgil and Knight, 2015), we suggest that creatively using current users may also enable resource-constrained
entrepreneurs to accelerate the internationalization speed of their digital innovations. However, we also show that the effectiveness
of these strategies may vary across national contexts. Hence, we inform entrepreneurs about the pros and cons of demand-side
15
strategies, emphasizing the need for better aligning strategy with business objectives.
6.3. Limitations and future research
We also acknowledge some limitations of our study, which also provide venue for future research. Mainly, as we explore two
nascent topics, digital entrepreneurship and DSP, we face several challenges in terms of data availability and lack of relevant lit-
erature. For instance, despite using a large sample of 127 apps, our data is limited to only one category at Apple's app store. Although
we do not expect a substantial change in our results if the sample were drawn from different categories or app stores, we expect
scholars to extend research on digital internationalization using data on different app categories and other types of digital innova-
tions. Also, we limit our focus to only two demand-side strategies but we acknowledge the large variety of techniques for involving
users such as sharing economy and open innovation. Although these strategies are outside the scope of our current study, future
research may explore the implications of such strategies for international entrepreneurs.
In addition, our measures of cross-national distance were originally developed in the context of traditional internationalization
theories, with the objective of assessing the impact of distance on business decisions about foreign entries (Berry et al., 2010). While
similar measures have been utilized in studies on market penetrations and product takeoffs (e.g. Chandrasekaran and Tellis, 2008;
Kim and Jensen, 2014), we stress the need for developing new variables that could capture differences in user adoption patterns. Our
argument is further enforced by the strong impact of our virtual distance measure on digital internationalization. We expect scholars
to advance research in this domain by developing novel measures of user adoption barriers.
Further, the unique nature of start-ups in the digital world may provide an important venue for advancing the current cate-
gorization of entrepreneurial ventures. Scholars may evaluate whether these start-ups require creation of a new category of start-ups
or they fit in the existing categories of international new ventures (Oviatt and McDougall, 1994) or born global firms (Knight and
Cavusgil, 2004). Such categorization may reveal the distinctiveness of start-ups in cyberspace, providing theoretical grounding to
future research (Reuber et al., 2017).
Finally, our findings offer several interesting questions for further inquiry. Mainly, scholars may explore the exact mechanisms
behind the impact of geographic distance in cyberspace. Also, as we find substantial variation among start-ups in their pursuit of
different demand-side strategies, we emphasize the need for understanding entrepreneurial opportunity recognition (e.g. Ardichvili
et al., 2003; Shane, 2000) in digital contexts. Further, while there are multiple methods for establishing virtual communities (Hagel
and Armstrong, 1997), our data does not allow us to disentangle the impact of each method. Researchers may develop more fine-
grained theories by separately evaluating each of these methods. Scholars may also explore how various strategic actions, such as
restricting languages or limiting the geographical scope in virtual communities, may impact the effectiveness of virtual communities.
7. Conclusion
As digitization is offering novel opportunities for the internationalization of entrepreneurial ventures (e.g. Autio, 2017; Coviello
et al., 2017; Loane et al., 2004), there is an increased need for understanding the pace and process of digital internationalization. We
contribute towards this important research stream by evaluating the internationalization speed of digital innovations. We believe our
study provides a fresh perspective to current IE frameworks and also develops new knowledge for responding the challenges of a
virtual world. We hope our research will encourage scholars to further investigate this rising phenomenon.
Acknowledgement
We are grateful to CIBER for their grant which enabled us to acquire a proprietary dataset on mobile apps. We acknowledge the
valuable advice and feedback by the editor Nicole Coviello and three anonymous reviewers as well as by our colleagues, Liang Chen,
Alfonso Gambardella, Omrane Guedhami, Tatiana Kostova, Peter Liesch, Richard Priem, Rebecca Reuber, Andy Spicer, Alain
Verbeke, Chris Yenkey, Jingtao Yi, and Alex Zhang. We also appreciate the helpful suggestions received from session participants at
Academy of International Business, Academy of Management, The University of Sydney and Australian National University.
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Contents lists available at ScienceDirect

Journal of Business Venturing

The CAGE around cyberspace? How digital innovations

2.1. Internationalization in the digital world

2.2. Overcoming user adoption barriers through demand-side strategies

3.1. CAGE distances

3.2. Social sharing strategy and the CAGE distances

3.3. Virtual community strategy and the CAGE distances

4.1. Research context

4.2. Sample and data sources

4.3.1. Dependent variable

4.3.2. Independent variables

4.3.4. Control variables

4.4. Statistical approach

App price −0.02 −0.02 −0.03 −0.03 −0.03 −0.03

Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

Observations 5757 5757 5757 5757 5757 5757

Standard errors in parentheses.

0 50 100 150 200 250 300 350 400 450

Fig. 2. Impact of social sharing strategy on cross-national distance.

5.1. Robustness test

0 50 100 150 200 250 300 350 400 450

Fig. 3. Impact of virtual community strategy on cross-national distance.

6.1. Implications for theory

6.2. Implications for practice

6.3. Limitations and future research

Res. 19 (3), 273–290.

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