Foreignness Liability of Mobile App Startups: Examining Performance in the Context of Consumer and Investor Cultural Distances

ABSTRACT

Mobile platforms provide important entrepreneurial opportunities by facilitating access to a global market composed of more than a hundred countries. These opportunities are crucial for mobile app startups as they seek to reach a wider audience and accelerate growth. Nevertheless, performing in foreign countries is challenging as mobile app startups face a “foreignness liability” since they are competing against complementors (i.e., app developers) who have experience in their domestic market. We offer a research model that assesses the impact of cultural distance on the app-level performance of mobile app startups in foreign countries. We hypothesize the moderating effects of investor-consumer cultural distance and environmental characteristics within foreign countries. We test the model using a dataset of over 550 mobile app startups operating on the iOS platform. Our findings support our hypotheses and provide insights into whether mobile platforms are level playing fields. Our study sheds light on the interactions between a startup and its investors’ cultural distances highlighting configurations of cultural distance that are beneficial for app performance in foreign countries when the environment is stable or uncertain.

KEYWORDS:

• Mobile platforms
• startups
• IT investors
• internationalization
• cultural distance
• competitive environments
• online platforms

Supplemental data for this article can be accessed at www.tandfonline.com/mmis.

Disclosure Statement

No potential conflict of interest was reported by the authors.

Notes

^1. In this study, internationalization through the mobile platform does not imply a physical presence in the foreign country. It only refers to the fact that the apps are accessible in the foreign country. Thus, our study differs to prior studies on firm internationalization as they imply foreign direct investments (e.g., acquisition of foreign assets) in the foreign countries.

^2. Data about ranking can be found on AppAnnie.com

^3. Below are some characteristics that distinguish mobile platforms from other types of digital platforms (e.g., online content platforms such as online course platforms).

• •<BL>Platform users and content readers are not comparable as a platform user needs to purchase a device to access the platform’s apps as well as complementors’ apps.

• •Although an app and an online course are two digital goods, they are not comparable. For example, an app needs to be installed. Users have to learn how to use the app as features in two different apps may not work in the same way. Apps constantly evolve over time through versioning (release of minor and major updates). Apps are not one-time use as online courses. These constraints do not apply to online courses.

• •The role of a mobile platform owner and an online course platform owner may not be the same. For example, the platform owner provides the digital infrastructure, i.e., a device with hardware and software capabilities upon which complementors’ apps will run. A mobile platform owner needs to make its devices accessible globally for complementors to be able to access global markets. This constraint does not apply to an online course marketplace. Moreover, mobile platform owner releases global toolkits and regulations to facilitate the creation of complements. Furthermore, the platform owner gives complementors access to its large user base.

^4. https://www.marketingfuture.com/china-internet-news/why-wechat-failed-in-us-market/

^5. The arguments proposed may apply to firms that require a physical presence in foreign country. These arguments are not novel in the firm internationalization literature but have yet to be tested for mobile app startups wherein physical presence in foreign country is not required.

^6. www.hofstede-insights.com/product/compare-countries/

^7. Our sample does not suffer from threats of selection censorship because we keep the data that are relevant to our study. We remove data (e.g., apps no available in foreign countries, inactive apps, etc.) that do not apply to our study, and when possible, we do a random sampling to ensure that the final sample is still representative of the population.

^8. App consumer demand is used to measure app performance.

^9. We access App Store data through appfigures.

Additional information

Notes on contributors

Franck Soh

Franck Soh ([email protected]) is an Assistant Professor of Information Systems at Bryan School of Business and Economics, The University of North Carolina at Greensboro. He received his PhD degree in Information Systems from Sam M. Walton College of Business at the University of Arkansas. His research interests include the business value of IT, competition in mobile platform ecosystems, healthcare IT, customer service performance, open source, and social media. Dr. Soh has published in the Journal of Management Information Systems, Journal of the Association for Information Systems, Journal of Strategic Information Systems, and Journal of Computer Information Systems, and has presented his research at several conferences and symposiums including International Conference on Information Systems, Conference on Information Systems & Technology, Americas Conference on Information Systems, Interdisciplinary Symposium on Decision Neuroscience, and Big XII.

Varun Grover

Varun Grover ([email protected]) is George and Boyce Billingsley Endowed Chair and Distinguished Professor of Information Systems (IS) at the Walton School of Business, University of Arkansas. He has published extensively in the IS field, with over 400 publications, 250 of which are in major refereed journals. Dr. Grover’s current work focuses on the impacts of digitalization on individuals and organizations. His h-index is 98, with some 48,000 citations in Google Scholar. He is a member of the Editorial Board of the Journal of Management Information Systems, Senior Editor of MISQ Executive, Editor of the Journal of the AIS Section on Path Breaking Research, and served as Senior Editor of MIS Quarterly and the Journal of the AIS. He is recipient of numerous awards for his research and teaching, and a LEO Awardee and Fellow of the Association for Information Systems. Dr. Grover served as Co-Chair of numerous doctoral consortia at both the International Conference on Information Systems and Americas Conference on Information Systems. offered numerous keynote addresses at various institutions and forums around the world.