Digitized companies are more likely to be internationalized and grow rapidly

URV-led research analyses the relationship between high-growth companies, internationalization and the impact of digital technologies in the 27 member states of the EU and the United Kingdom.

The interaction between internationalization policies and business growth is directly related to competitiveness and job creation, making them key to the economy of the European Union. This is why a research team led by the Universitat Rovira i Virgili University and involving the European Commission’s Joint Research Centre, the European Investment Bank and Waseda Business School has studied the relationship between high-growth companies (those that increase their number of employees by at least 20% for three consecutive years), internationalization and digital technologies. They concluded that digitalized companies are 17% more likely to be internationalized and, therefore, have episodes of rapid growth. More specifically, they have found that an exporting company is 22% more likely to grow very quickly.

Although recent studies have already shown the effects of exports on companies that are seeking to improve productivity, this team of researchers led by Mercedes Teruel, researcher at the Department of Economics and the ECO-SOS research centre of the URV, checked the relation between a period of high growth and a company’s decision to start international activities, the influence of international activities on growth and the role of new digital technologies in both of these processes.

They found that being a fast-growing company is positively associated with the likelihood of being engaged in international activities, especially direct foreign investment, production and supply activities in another country. However, the process of internationalization seems to trigger strong subsequent business growth only for foreign direct investment and not for exports.

The research also shows that companies that adopt new digital technologies are more likely to be internationalized. The results obtained from an econometric analysis highlight the complex influence of exports and foreign direct investment on the ability to become a high-growth company and the role of new digital technologies in this process.

The results are published in The Journal of Technology Transfer and provide several ideas that need to be taken into account when making decisions in the political arena, explained Mercedes Teruel. First, she pointed out, policies that encourage companies to internationalize must be accompanied by measures to increase competitiveness. Second, obstacles related to uncertainty about the future and demand for products and services need to be addressed. Third, policies should be implemented that simultaneously improve the adoption of new digital technologies and make it easier for companies to internationalize. Finally, the results suggest possible synergies between digitalization strategies, sector specialization, and internationalization strategy that lead to rapid growth.

Reference: Teruel, M., Coad, A., Domnick, C. et al. The birth of new HGEs: internationalization through new digital technologies. J Technol Transf (2021). https://doi.org/10.1007/s10961-021-09861-6

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