Home Market Competitive Pressure and the Tendency to Internationalise
An Inverse U-shape

Pascal Mayer/ Thomas Schäper
November 2024

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Abstract

Firm internationalisation has been a central topic of scholarly interest in international business for decades. However, the role of competitive pressure in firms’ home markets for firm internationalisation has not been investigated for the full variety of market types, despite the central role of competition in firm strategy. In this study, we examine the relationship between home market competitive pressure, operationalised by the concept of market concentration, and firm internationalisation, and propose an inverted U-shape. We find evidence for our hypothesis based on longitudinal data from more than 27,000 firm-year observations between 2007 and 2019. Our results suggest that internationalisation increases with increasing market concentration up to a certain peak, after which internationalisation declines. Moreover, managerial ability and market fluidity intensity are two important contingencies that intensify this relationship and steepen the inverted U-shape. In revealing this non-linear relationship between home market competitive pressure and firm internationalisation, we contribute to the literature on firm strategy and international business.