Advertisement

International New Ventures: Revisiting the Influences Behind the ‘Born-Global’ Firm

  • Terence Fan
  • Phillip Phan
Chapter
Part of the JIBS Special Collections book series (JIBSSC)

Abstract

There is a small but theoretically important literature on ‘born-globals’ or international new venture firms that positions itself in contrast to the more established sequential international entry literature. In this paper we examine the pattern of entry into international markets for a set of international new ventures and show that they need not be a distinct breed of firms, as previous research has portrayed. Absent a specific technological advantage, the decision for a new venture to internationalize at inception is influenced by the size of its home market and by its production capacity, as well as by cultural and economic forces that also influence other more traditional firms that stage their entry into international markets. Most importantly, we demonstrate that the decision to internationalize or not should be considered jointly with the capacity allocation decision to specific international markets, as analysing these separately may lead to biased results.

Keywords

International new ventures Entrepreneurship Strategy Born-globals 

Notes

Acknowledgements

We are grateful for the invaluable research and computing support of the Lee Kong Chiang School of Business at Singapore Management University, as well as the methodological advice offered by Paul Vaaler at the University of Illinois at Urbana-Champaign. The excellent research assistance of Benjamin Jin-Ming Tan is graciously acknowledged. We acknowledge financial support from the John H. Broadbent Endowment for Research in Entrepreneurship in the Lally School of Management and Technology at Rensselaer Polytechnic Institute. Finally, we thank Henk W. Volberda and three very helpful anonymous reviewers, as well as participants at the Pre-conference Development Workshop of the Annual Conference for Corporate Strategy in 2006, for their invaluable advice and suggestions. Omissions and errors are our responsibilities alone.

References

  1. Autio, E., Sapienza, H., & Almeida, J. (2000). Influences of age at entry, knowledge-intensity and imitability on growth. Academy of Management Journal, 43(5), 909–924.CrossRefGoogle Scholar
  2. Barkema, H. G., Bell, J. H. J., & Pennings, J. M. (1996). Foreign entry, cultural barriers, and learning. Strategic Management Journal, 17(2), 151–166.CrossRefGoogle Scholar
  3. Bell, J. (1995). The internationalization of small computer software firms: A further challenge to “stage” theories. European Journal of Marketing, 29(8), 60–75.CrossRefGoogle Scholar
  4. Brett, J. M., & Okumura, T. (1998). Inter- and intracultural negotiation: US and Japanese negotiators. Academy of Management Journal, 41(5), 495–510.CrossRefGoogle Scholar
  5. Brouthers, K. D., & Brouthers, L. E. (2001). Explaining the national cultural distance paradox. Journal of International Business Studies, 32(1), 177–189.CrossRefGoogle Scholar
  6. Busenitz, L. W., & Barney, J. B. (1997). Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decision-making. Journal of Business Venturing, 12(1), 9–30.CrossRefGoogle Scholar
  7. Caves, D. W., Christensen, L. R., & Tretheway, M. W. (1984). Economies of density versus economies of scale: Why trunk and local service airline costs differ. RAND Journal of Economics, 15(4), 471–489.CrossRefGoogle Scholar
  8. Chang, S. J. (1995). International expansion strategy of Japanese firms: Capability building through sequential entry. Academy of Management Journal, 38(2), 383–407.CrossRefGoogle Scholar
  9. Coval, J., & Moskowitz, T. (2001). The geography of investment: Informed trading and asset prices. Journal of Political Economy, 109(4), 811–841.CrossRefGoogle Scholar
  10. Dunning, J. H. (1988). The eclectic paradigm of international production: A restatement and some possible extensions. Journal of International Business Studies, 19(1), 1–31.CrossRefGoogle Scholar
  11. Duranti, I., Ahearn, L., Cook-Gumperz, J., Gumperz, J., Darnell, R., Hymes, D., et al. (2003). Language as culture in US anthropology: Three paradigms. Current Anthropology, 44(3), 323–348.CrossRefGoogle Scholar
  12. Eden, L., & Miller, S. R. (2004). Distance matters: Liability of foreignness, institutional distance and ownership strategy. Advances in International Management, 16, 187–221.CrossRefGoogle Scholar
  13. Erez, M., & Earley, C. (1993). Culture, self-identity, and work. New York: Oxford University Press.CrossRefGoogle Scholar
  14. Erramilli, M. K., Agarwal, S., & Kim, S. S. (1997). Are firmspecific advantages location-specific too? Journal of International Business Studies, 28(4), 735–757.CrossRefGoogle Scholar
  15. Fan, T. P.-C. (2006). Improvements in intra-European inter-city flight connectivity linking the United Kingdom and Ireland with continental Europe 1996–2004. Journal of Transport Geography, 14(4), 273–286.CrossRefGoogle Scholar
  16. Fan, T. P.-C., & Leung, W. F. R. (2005). Price disparity based on trip origins: Evidence on dense nonstop intercontinental air routes. Journal of Revenue and Pricing Management, 4(3), 252–269.CrossRefGoogle Scholar
  17. Ganitsky, J. (1989). Strategies for innate and adoptive exporters: Lessons from Israel’s case. International Marketing Review, 6(5), 50–65.CrossRefGoogle Scholar
  18. Greve, H. R. (1998). Managerial cognition and the mimetic adoption of market positions: What you see is what you do. Strategic Management Journal, 19(10), 967–988.CrossRefGoogle Scholar
  19. Grinblatt, M., & Keloharju, M. (2001). How distance, language, and culture influence stockholdings and trades. Journal of Finance, 56(3), 1053–1073.CrossRefGoogle Scholar
  20. Harveston, P. D., Kedia, B. L., & Davis, P. S. (2000). Internationalization of born global and gradual globalizing firms: The impact of the manager. Advances in Competitive Research, 8(1), 92–99.Google Scholar
  21. Haveman, H. A. (1993). Follow the leader: Mimetic isomorphism and entry into new markets. Administrative Science Quarterly, 38(4), 593–627.CrossRefGoogle Scholar
  22. Heckman, J. J. (1979). Sample selection bias as a specification error. Econometrica, 47(1), 153–162.CrossRefGoogle Scholar
  23. Hedlund, G., & Kverneland, A. (1985). Are strategies for foreign markets changing? The case of Swedish investment in Japan. International Studies of Management and Organization, 15(2), 41–59.CrossRefGoogle Scholar
  24. Hofstede, G. (1980). Culture’s consequences. Beverly Hills, CA: Sage.Google Scholar
  25. Hofstede, G., Neuijen, B., Ohayv, D., & Sanders, G. (1990). Measuring organizational cultures: A qualitative and quantitative study across twenty cases. Administrative Science Quarterly, 35(2), 286–316.CrossRefGoogle Scholar
  26. Hymer, S. H. (1960). The international operations of national firms: A study of direct foreign investment. Cambridge, MA: MIT Press.Google Scholar
  27. Hymer, S. (1968). La Grande Firme Multinationale. Revue Economique, 14(6), 949–973.CrossRefGoogle Scholar
  28. Johanson, J., & Vahlne, J.-E. (1977). The internationalization process of the firm: A model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8(1), 23–32.CrossRefGoogle Scholar
  29. Johanson, J., & Vahlne, J.-E. (1990). The mechanism of internationalization. International Marketing Review, 7(4), 11–24.CrossRefGoogle Scholar
  30. Johanson, J., & Wiedersheim-Paul, F. (1975). The internationalization of the firm: Four Swedish cases. Journal of Management Studies, 12(3), 305–322.CrossRefGoogle Scholar
  31. Jolly, V. K., Alahuta, M., & Jeannet, J.-P. (1992). Challenging the incumbents: How high technology start-ups compete globally. Journal of Strategic Change, 1(2), 71–82.CrossRefGoogle Scholar
  32. Kandasaami, S. (1998). Internationalisation of small- and medium-sized born-global firms: A conceptual model. Crawley: Graduate School of Management, University of Western Australia.Google Scholar
  33. Kandasaami, S., & Huang, X. (2000). International marketing strategy of SMEs: A comparison of born-global vs non born-global firms in Australia. Presented at the 45th international conference on small business, Brisbane, Australia.Google Scholar
  34. Knight, G. A. (1997). Emerging paradigm for international marketing: The born global firm. Ph.D. thesis, Department of Marketing and Supply Chain Management, Michigan State University, Michigan.Google Scholar
  35. Knight, G. A., & Cavusgil, S. T. (1996). The born global firm: A challenge to traditional internationalization theory. In T. K. Madsen (Ed.), Advances in international marketing (Vol. 8, pp. 11–26). New York: JAI Press.Google Scholar
  36. Knight, G. A., & Cavusgil, S. T. (2004). Innovation, organizational capabilities, and the born-global firm. Journal of International Business Studies, 35(2), 124–141.CrossRefGoogle Scholar
  37. Kogut, B., & Singh, H. (1988). The effect of national culture on the choice of entry mode. Journal of International Business Studies, 19(3), 411–432.CrossRefGoogle Scholar
  38. Lummaa, H. J. (2002). Internationalization behaviour of Finnishborn global companies. Unpublished Master’s thesis, Helsinki University of Technology.Google Scholar
  39. Luo, Y., & Peng, M. W. (1999). Learning to compete in a transition economy: Experience, environment and performance. Journal of International Business Studies, 30(2), 269–296.CrossRefGoogle Scholar
  40. Madsen, T. K., & Servais, P. (1997). The internationalization of born globals: An evolutionary process? International Business Review, 6(6), 561–583.CrossRefGoogle Scholar
  41. Madsen, T. K., Rasmussen, E., & Servais, P. (2000). Differences and similarities between born globals and other types of exporters. In A. Yaprak & H. Tütek (Eds.), Globalization, the multinational firm (Vol. 10, pp. 247–265). Amsterdam: JAI Press.Google Scholar
  42. McDougall, P. P., Shane, S., & Oviatt, B. M. (1994). Explaining the formation of international new ventures: The limits of theories from international business research. Journal of Business Venturing, 9(3), 469–487.CrossRefGoogle Scholar
  43. McKinsey and Co. (1993). Emerging exporters: Australia’s high value-added manufacturing exporters. Melbourne: McKinsey and Company and the Australian Manufacturing Council.Google Scholar
  44. Melin, L. (1992). Internationalization as a strategy process. Strategic Management Journal, 13(Special), 99–118.CrossRefGoogle Scholar
  45. Meyer, J., & Rowan, B. (1977). Institutionalized organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83(2), 340–363.CrossRefGoogle Scholar
  46. Mezias, S. J., Chen, Y.-R., Murphy, P., Biaggio, A., Chuawanlee, W., Hui, H., et al. (2002). National cultural distance as liability of foreignness: The issue of level of analysis. Journal of International Management, 8(4), 407–421.CrossRefGoogle Scholar
  47. Morosini, P., Shane, S., & Singh, H. (1998). National cultural distance and cross-border acquisition performance. Journal of International Business Studies, 29(1), 137–158.CrossRefGoogle Scholar
  48. Neter, J., Wasserman, W., & Kutner, M. H. (1985). Applied linear statistical models: Regression, analysis of variance and experimental design. Homewood, IL: Richard D Irwin.Google Scholar
  49. Ochs, E., & Schieffelin, B. (1984). Language acquisition and socialization: Three developmental stories and their implications. In R. Shweder & R. A. LeVine (Eds.), Culture theory: Essays on mind, self, and emotion (pp. 276–320). New York, NY: Cambridge University.Google Scholar
  50. Oviatt, B. M., & McDougall, P. P. (1994). Toward a theory of international new ventures. Journal of International Business Studies, 25(1), 45–64.CrossRefGoogle Scholar
  51. Park, S. H., & Ungson, G. R. (1997). The effect of national culture, organizational complementarity and economic motivation on joint venture dissolution. Academy of Management Journal, 40(2), 279–307.CrossRefGoogle Scholar
  52. Phan, P. (2004). Entrepreneurship theory: Possibilities and future directions. Journal of Business Ventures, 19(5), 617–620.CrossRefGoogle Scholar
  53. Rennie, M. W. (1993). Global competitiveness: Born global. McKinsey Quarterly, 4, 45–52.Google Scholar
  54. Rialp, A., Rialp, J., & Knight, G. (2005). The phenomenon of early internationalizing firms: What do we know after a decade (1993–2003) of scientific inquiry? International Business Review, 14(1), 147–166.CrossRefGoogle Scholar
  55. Saky-Addo, K. (2003). US socks made in Africa. BBC News. [www document]. Retrieved November 11, 2005, from http://news.bbc.co.uk/go/pr/fr/-/2/hi/africa/3143354.stm
  56. Schwartz, S. H. (1999). A theory of cultural values and some implications for work. Applied Psychology: An International Review, 48(1), 23–47.CrossRefGoogle Scholar
  57. Shrader, R. C., Oviatt, B. M., & McDougall, P. P. (2000). How new ventures exploit trade-offs among international risk factors: Lessons for the accelerated internationalization of the 21st century. Academy of Management Journal, 43(6), 1227–1247.CrossRefGoogle Scholar
  58. Silverstein, M. (2004). ‘“Cultural” concepts and the language culture nexus. Current Anthropology, 45(5), 621–652.CrossRefGoogle Scholar
  59. Stinchcombe, A. L. (1965). Organizations and social structure. In J. G. March (Ed.), Handbook of organizations (pp. 148–150). Chicago: Rand-McNally.Google Scholar
  60. Tihanyi, L., Griffith, D. A., & Russell, C. J. (2005). The effect of cultural distance on entry mode choice, international diversification, and MNE performance: A meta-analysis. Journal of International Business Studies, 36(2), 270–283.CrossRefGoogle Scholar
  61. Young, S. (1987). Business strategy and the internationalization process: Recent approaches. Managerial and Decision Economics, 8(1), 31–40.CrossRefGoogle Scholar
  62. Zaheer, S., & Mosakowski, E. (1997). The dynamics of the liability of foreignness: A global study of survival in financial services. Strategic Management Journal, 18(6), 439–464.CrossRefGoogle Scholar
  63. Zahra, S. A. (1996). Technology strategy and financial performance: Examining the moderating role of the firm’s competitive environment. Journal of Business Venturing, 11(3), 189–219.CrossRefGoogle Scholar
  64. Zahra, S. A. (2005). A theory of international new ventures: A decade of research. Journal of International Business Studies, 36(1), 20–28.CrossRefGoogle Scholar
  65. Zahra, S. A., & George, G. (2002). International entrepreneurship: The current status of the field and future research agenda. In M. Hitt, D. Ireland, D. Sexton, & M. Camp (Eds.), Strategic entrepreneurship: Creating an integrated mindset, strategic management series (pp. 255–288). Oxford: Blackwell.Google Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Terence Fan
    • 1
  • Phillip Phan
    • 2
  1. 1.Lee Kong Chian School of BusinessSingapore Management UniversitySingaporeSingapore
  2. 2.Lally School of Management & Technology, Rensselaer Polytechnic InstituteTroyUSA

Personalised recommendations