The Internet and Foreign Market Expansion by Firms

The Internet has the potential to improve the efficiency of market transactions. By use of the Internet companies can reduce their search costs significantly and increase their ability to respond flexible to new market opportunities as a result of reduced sunk costs. On the basis of internationalization theory and agency /transaction cost theory the paper examines the effects of the Internet on foreign market expansion by firms. These theoretical issues and possible effects on internationalization are illustrated through the presentation of three general predictions regarding possible outcomes.