A Study on Venture Companies ’ Decision-Making for Market Entry- Focusing on Entry Barrier in Internet Venture Business

It is widely known that first movers in any industry have absolute advantages, which are mainly caused by barriers to entry. However, the advent of Internet, which now is the center of economy and business, poses a significant counterargument. That is, Internet-related markets are almost free of an entry barrier as they become complete information markets. As a result, existing companies hardly have an upper hand in the competition. The survival rate of those start-ups, however, is fairly low. This indicates that entry barriers do exist in the Internet-related business as well as in other markets. The paper mainly deals with two questions regarding market entry barriers to venture companies. First, do market entry barriers exist in the Internet-related business? Second, if any, what kind of entry barrier exercises a bigger influence on new comers? Bain (1956) identified three main sources of entry barriers: economies of scale, product differentiation advantages, and absolute cost advantages. Since then, many scholars have added a number of sources as entry barriers. Yet, most of the researchers didn't factor in the Internet, failing to disprove the argument that entry barriers are meaningless now that the Internet enables a perfect competition (Bakos 1997). Therefore this paper selectively presented what is deemed significant as entry barriers in the Internet busines