Born local: toward a theory of new venture’s choice of internationalization Zoltan J. Acs • Siri Terjesen Accepted: 8 August 2012 Ó Springer Science+Business Media, LLC. 2012 Abstract This manuscript offers a theory regarding two distinct avenues to new venture internationaliza- tion: a direct path described in much of the extant literature and an intermediated one in which new ventures and multinational firms create symbiotic relationships in order to expand internationally. The term ‘‘born local’’, as opposed to ‘‘born global’’, describes how new ventures are created from knowl- edge spillovers and other resources in a geographically bounded environment. The theory suggests that the greater the number of value chain activities and the greater the number of countries involved, the more likely that the new venture will pursue the interme- diated mode of internationalization. We suggest that new ventures frequently specialize and use existing MNEs as conduits for international expansion; how- ever the greater the perceived ex-post costs of protecting intellectual property, transaction costs, and extraction costs related to hold-up, agency, and monopoly rents, the more likely the new venture will pursue a direct mode of internationalization. Keywords Intermediated internationalization Á Born local Á Born global Á Transaction costs JEL Classifications L26—Entrepreneurship Á L30—General Á N30—General, International, or Comparative 1 Introduction Traditional internationalization theories focused on large, established multinational firms’ foreign market entry and, with the exception of export theories, were less pertinent to new ventures at early stages in their life cycle. Whereas research on multinational enter- prises (MNEs) initially dominated international busi- ness studies, a growing literature has extended arguments relating to the entry mode, timing, and route of internationalization of new firms (Zahra et al. 2000; Keupp and Gassmann 2009). In one of the seminal articles, Oviatt and McDou- gall (1994) present a framework explaining how international new ventures (INVs) fit within the theory of the MNE. Whereas much attention has been given to Oviatt and McDougall’s (1994, 1997) argument about the theory of INVs, less attention has been devoted to how new ventures go overseas and the Z. J. Acs School of Public Policy, George Mason University, 4400 University Drive, Fairfax, VA 22030, USA e-mail: zacs@gmu.edu Z. J. Acs Imperial College Business School, London, UK S. Terjesen (&) Department of Management and Entrepreneurship, Kelley School of Business Indiana University, 1309 E. 10th St, Bloomington, IN 47405, USA e-mail: terjesen@indiana.edu 123 Small Bus Econ DOI 10.1007/s11187-012-9446-8