Market Entry and Priority of Small and Medium-Sized Enterprises in the Software Industry: An Empirical Analysis of Cultural Distance, Geographical Distance, and Market Size

Abstract

This paper investigates the influence of cultural distance, geographical distance, and three market size variables to the target country preference of SMEs in the software industry. In addition, we examine the shift of priorities in SMEs’ country selection by analyzing how these factors impact the selection of the first, second, and third target countries. Empirical findings of this study suggest that almost 70% of country choices can be explained by software market size and geographical distance alone. The findings adduced also that entry priority of SMEs shifts very fast from countries within a short geographical distance to countries with high purchasing power and within a greater geographical distance. Relations of these macro-level factors are discussed and compared to earlier qualitative and conceptual studies in this field. Implications for managers are also provided.