A Cost-based Explanation of Gradual, Regional Internationalization of Multinationals on Social Networking Sites

This paper examines firm internationalization on social networking sites (SNS). It systematically examines costs faced by an internationalizing firm and how firms react to these costs according to “distance-dependent” (gradual and regional) and “distance-invariant” (born-global) explanations of internationalization. Data on 5827 country pages of 240 multinational firms on Facebook, the most popular SNS today, is used. Creating a foreign country-specific Facebook page is considered the SNS equivalent of opening a physical subsidiary in that country. The data show that multinationals exhibit internationalization behavior described by distance-dependent explanations, rather than the distance-invariant view, despite seemingly lower internationalization costs. Specifically, firms start internationalizing to institutionally closer countries, and gradually expand to more institutionally distant countries. They also tend to internationalize within their home region. The results point to the relevance of distance-dependent explanations of internationalization even in a seemingly low-friction environment of SNS, and the importance of explicitly accounting for internationalization costs in studies of cross-border expansion.