Born global companies use the Internet for rapid internationalization

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  • Posted in Online internationalization
  • March 23, 2015
Born global companies use the Internet for rapid internationalization

The term “born global” was coined by Rennie (1993), who used it in his empirical study on Australian ventures to describe young SMEs which engage in export activities early on in their corporate life.

Oviatt and McDougall (1994, p. 49) define born globals as firms that “from inception, seek to derive significant competitive advantage from the use of resources and the sales of outputs in multiple countries”. McDougall, Shane, & Oviatt (1994) defined born global or international new venture as firms which generate 25% sales form export activity, which serve at least five markets and internationalize within two years (McKinsey & Co., 1993), Knight and Cavusgil (2004) claim three years after their creation. This suggests that a definition is more a matter of degree than an absolute number (Freeman et al., 2006; McKinsey & Co., 1993; McDougall et al., 1994).

The significant innovations of the last decade included open source architecture and open-innovation strategies which have led to the occurrence of a “new wave” of global firms (Rennie, 1993), born global (McKinsey & Co., 1993), “committed internationalists” (Bonaccorsi, 1992), or “international new ventures” (INVs) (McDougall, Shane & Oviatt, 1994). These companies are designed for rapid internationalization from the beginning (Oviatt & McDougall, 1994) and the key element for them is the Internet (Bell & Loane, 2010).

According to Halldin (2012) there are several reasons which led to the emergence of born global firms:

  1. In order to have success in niche markets, companies had to grow their number of customers by going global.
  2. Advances in technology regarding production and transportation.
  3. Advances in communication technology.
  4. Advantages of small firms in terms of quicker response time, higher flexibility, adaptability, etc.
  5. Globalization itself in terms of knowledge, decreased trade barriers and facilitating institutions.
  6. Trends towards global networks which are facilitated by advances in information technology.

According to Bell, McNaughton, Young and Crick (2003) one of the most important reasons behind becoming a born global firm is to keep new customers and quickly exploit proprietary knowledge as the main source of competitive advantage.

Thanks to their characteristics and business design, born global companies ignore the national boundaries, exceeding both time and geography.

To be able to survive in a dynamic environment (Gabrielsson and Kirpalani 2004), born global SMEs have to adapt very fast. They have to use the opportunities of Internet in order to maximize their strategic advantages (Freeman et al., 2006), compared with classic SMEs which in general are still at the beginning of this road. For this reason, born global SMEs are considered among the pioneers in developing innovative online applications (Bell and Loane, 2010) and integrating them on the market.

Weerawardena, Mort, Liesch, & Knight (2007) claim that born global firms develop superior routines to acquire, disseminate and integrate knowledge, directly impacting on the firm’s ability to develop knowledge-intensive products. In addition, Loane and Bell (2006) suggest that innovation in new-wave global firms is fuelled by user-generated content activities, mass co-creation, and knowledge acquired across fuzzy firm boundaries. It would also appear that these firms display superior networking capabilities, which allow them to develop resources and knowledge from a community of experts or from what may be termed as “partner clients”. Like other rapidly internationalizing firms, they also strategically build appropriate B2B networks to augment their knowledge and capability base.

The efficiency of the business model, together with premium marketing skills, may also allow such ventures to “bootstrap” into international markets without recourse from external funding.

According to Johanson and Wiedersheim-Paul (1975), knowledge of foreign markets has always been integral to internationalization theories; including the work of the early seminal Uppsala theorists who argued that a firm’s market knowledge, in terms of knowledge of local business counterparts and their relations, as well as an understanding of social values and business cultures, determines its internationalization trajectory.

Equally important is the technical knowledge base or intensity of the firm. Some of the authors in this area, like for example Bell et al. (2003) argue for the notion that knowledge based and knowledge intensive firms internationalize earlier in their histories than more traditional firms. Nevertheless, the degree of utility of the knowledge and information accessible via internet depends on the skills of the entrepreneur(s) to use it effectively. Nguyen, Nigel and Barrett (2006) propose a term for the process, “Internet infusion”, how firms are capable to garner knowledge and information suitable to their own specific internationalization needs, to be able to reduce traditional information barriers to internationalization.

According to Knight and Cavusgil (2004) globalization is the main economic driver for the emergence of born-global firms. High-tech markets are considered dynamic and this characteristic influences the speed to internationalization of high-tech SMEs (Crick and Spence, 2005). Because of this, SMEs may not have time to include prior knowledge and develop their international strategies (Johanson and Vahlne, 1990), in order to respond rapidly, to take advantage of opportunities quickly and deploy resources in a very short time (Freeman et al., 2006).

The elements detected as contributing to born-global firms include the characteristics of a top management team (Bloodgood, Sapienza, and Almeida, 1996), international proactive, risk taking and innovative culture, technical knowledge (Knight and Cavusgil, 2004) and diversified international networks (Oviatt and McDougall, 1995). According to Young, Dimitratos and Dana, (2003) these organizational resources enable SMEs to overcome constraints to early, rapid internationalization associated with limited financial and human resources.

The apparition of these firms is closely connected with the globalization trends which bring in action a new way of business activity, but also because the new process and communication technologies (Knight, & Cavusgil, 2004) are made possible through internet. The reason and the speed of internationalization of these companies are influenced by the major changes on internet due to the apparition of Web 2.0.

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