Small firm performance in online markets

Gary Madden, Md. Shah Azam and Thomas Beard

Economics of Innovation and New Technology, 2013, vol. 22, issue 1, 99-111

Abstract: Firms which enter the online marketplace do so for a variety of reasons. The effects of the motive for entry on the ultimate success of entry, for both online and ‘blended’ firms, are largely unknown. This study utilises a unique data set of small Australian firms and examines the relationship between the strategic motivation for entry and the actual results of entry. Utilising a trivariate probit model with exogenous ‘reason for entry’ dummy variables, estimates of aftermarket business performance are obtained. The study finds that the entry goal materially affects subsequent performance: firms entering to expand their market size ordinarily succeed, but those entering to reduce costs are often disappointed. Blended firms enjoy no strong advantages over pure online entrants.

Date: 2013
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DOI: 10.1080/10438599.2012.706062

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