Abstract
New types of companies have emerged, known as “Born Globals” (BGs), transitioning and internationalizing early and rapidly. They have attracted scholarly interest because their involvement in international sales from the moment of inception contradicts the more traditional perspectives on internationalization. This chapter explores a gap in the literature on BG micro-enterprises' behavior on their internationalization trajectory. It analyzes the case of a micro-company based in Aveiro, Portugal that follows a passive internationalization path to embrace a BG's typical behavior. The behavior of this micro-company is examined to illustrate how a BG can find new opportunities abroad and take advantage of them, the main entry modes and marketing strategies adopted in the early and rapid internationalization process, the importance of networking and growth strategies, and the role of the CEO in the internationalization process. This chapter adds value by explaining how a micro-enterprise manages to overcome its passive behavior and evolve into a BG company.
TopIntroduction
Businesses have evolved over time to adapt their international competitive behaviors to the external environment (Ietto-Gillies, 2012; Ribau et al., 2015). There have been several different frameworks, theories, interpretations and basic assumptions relating to globalization and growing international competition. The traditional Uppsala theory, which argues that a company internationalizes only slowly and gradually through the progressive accumulation of resources, knowledge and capabilities, has been called into question (Johanson & Vahlne, 2009; Maciejewski & Wach, 2019; Stanisauskaite & Kock, 2016). Several other models and theories of internationalization have been used to categorize companies, especially small and medium-sized enterprises (SMEs), according to their internationalization behavior.
With rapid internationalization, young, resource-constrained small companies, known as “born globals” (BGs), have emerged, exporting soon after their inception, entering both geographically and psychically distant markets, despite their limited resources and lack of organizational learning (Lopez, Kundu, & Ciravegna, 2008). This phenomenon goes against the assumptions of traditional theory, generating new perspectives on the behavior of companies.
In the literature on international entrepreneurship, Rennie (1993) first used the term “born global” to refer to companies that internationalize early and rapidly (Jones, Coviello, & Tang, 2011). However, similar new terms have emerged and are wrongly used as synonyms of BG, among which the term “International New Ventures” (INVs) stands out (Coviello, 2015). There is no clear definition of a BG company in the literature (Lopez et al., 2009). Another concept related to the rapid internationalization of SMEs is “born regionals” (BRs), which differ from BGs in the scope of their internationalization (Lopez et al., 2009). Despite the definitional problems, the widespread emergence of such companies around the world indicates that this is an important phenomenon that deserves further study (Knight & Cavusgil, 2004; Kraus et al., 2017).
Although other definitions of BGs have been suggested, in this chapter the definition of Knight et al. (2004) is used: exporting SMEs focused on a global niche market, with a specialized but narrow range of products, which internationalize up to three years after their inception, generating at least 25% of their total sales from foreign markets. There is no consensus about the percentage of foreign sales that a BG needs; and some authors mention the need to adapt the figure to the European reality, especially in small countries where it is easier to achieve a significant export rate.
All studies of this type of small and medium-sized companies assume that they have resource constraints (Hånell & Nordman, 2019), but that these do not prevent their founders from using their knowledge, experience and networking to enhance the internationalization process of their companies (Lopez et al., 2008; Maciejewski & Wach, 2019). The manager and / or founder plays an indispensable and dominant role in networking (Lopez et al., 2008; Maciejewski & Wach, 2019; Jones et al., 2011; Mort & Weerawardena, 2006; Englis & Wakkee, 2015), in strategy formulation (Jones et al., 2011; Knight, 2000; Knight & Cavusgil, 2004; Englis & Wakkee, 2015; Franco & Haase, 2016) and, consequently, in the rapid internationalization process. Studies show that companies with an international entrepreneurial orientation seek international markets by adopting risky, innovative and proactive behaviors that are essential for rapid internationalization (Mort & Weerawardena, 2006; Jones et al., 2011; Coviello, 2015; Maciejewski & Wach, 2019; Knight & Cavusgil, 2004). They use interorganizational networks to leverage their lack of internal resources (Lopez et al., 2008; Maciejewski & Wach, 2019; Hånell & Nordman, 2019; Sasi & Arenius, 2008; Coviello, 2006; Jones et al., 2011; Coviello & Munro, 1997; Mort & Weerawardena, 2006; Englis & Wakkee, 2015).
A literature review on BGs found many studies on the topic as it relates to SMEs and large firms (Maciejewski & Wach, 2019; Luostarinen & Gabrielsson, 2006), but there are still gaps, especially in relation to how resource-constrained micro-enterprises can successfully internationalize early in their development. Based on a case study of a micro-company, this chapter seeks to address the following research question: Can a resource-constrained micro-enterprise behave as a BG or is it just another micro-enterprise seeking the traditional internationalization path to survive in the international business arena? To answer this question, the following objectives are defined:
Key Terms in this Chapter
Uppsala Model: It has been one of the most discussed dynamic theories in Nordic School and International Business Studies. It explains the process of internationalization of companies. It explains how organizations learn and the impact of learning on the companies’ international expansion. This theory defends that the companies’ internationalization process is carried out in stages, from non-regular exports to the establishment of companies abroad.
Internationalization Process: It involves the emphasis of a trajectory of a company in its transition from a national market to a particular foreign market. It normally involves several entry modes (exports, FDI, franchising, etc.) that exert a critical influence on the subsequent trajectory, as well as on cost related to the internationalization process. The two most important theories that explain the internationalization process are the Uppsala model and the network-based approach.
Internationalization: It is the process of increasing involvement of enterprises in international markets. It involves a strategy carried out by firms that decide to compete in foreign markets. It involves cross-border transactions of goods, services, or resources between two or more firms or organizations that belong to two different countries.
Case Study: It is a qualitative methodology, normally used in social sciences, that seeks to interpret a reality through a particular perspective. It is normally used to answer questions like “how” and “why.” It is commonly used to address constructivist research processes.
International New Venture: it is a business organization that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries.
Globalization: It is a worldwide movement toward economic, financial, trade, and communications integration. It is normally envisaged as a lack of trade barriers between nations, which are removed through free trade agreements throughout the world and between nation states. It implies the opening of local and nationalistic perspectives to a broader outlook of an interconnected and interdependent world with free transfer of capital, goods, and services across national frontiers, in which investment opportunities soar.
Born Global: It is a type of company that, from its inception, seeks to compete in many countries. It normally pursues a vision of becoming global and globalizes rapidly without any preceding long term domestic or internationalization period or experience. Usually born globals are small, technology-oriented companies that operate in several international markets.