Expert: Marcello EUSANI

The Born Global concept:The rise of a new regime in trade, commerce & internationalization of firms?

DEFINITIONS

PROPOSALS

CONCLUSIONS

BORN GLOBALSBORN GLOBALS

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DEFINITIONSDEFINITIONS

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History of the Born Global conceptHistory of the Born Global concept

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The ‘Born Global’ concept was coined in a survey for The Australian Manufacturing Council by the McKinsey Consultants

In Australia, a new breed of exporting companies, which contributed substantially to the nation's export capital, was then emerging. The creation of these exporters though not unique to the Australian economy, reflects 2 fundamental phenomena of the 1990s:

1.Small is beautiful 2.Gradual internationalization is dead

BORN GLOBALBORN GLOBAL

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The Australian project consisted of an analysis of new exporters amongst the small and medium sized manufacturing firms. This meant that the focus was not on new – entrepreneurial – firms as shown in other researches

but on firms, which have recently begun to export

the focus was on companies with growing export within the last 5 years before the survey was conducted: the so-called emerging exporters

BORN GLOBALBORN GLOBALthe Australian casethe Australian case

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Amongst the Born Global firms, in Australia, there are several high-tech firms, but the typical firm uses well-known technology

These firms have experienced higher growth rates than other industries in Australia and a large growth in their export compared to their home-market sales

A major factor in the explanation of the Born Global phenomenon (McKinsey & Co., 1993) is the management’s commitment to internationalization

Another major factor is the firm’s ability to standardize production, marketing, etc. in a global niche instead of developing customized products

Outdated internationalization pathOutdated internationalization path

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new types of international firms: export behavior and internationalization processes of firms

firm is assumed to build a stable domestic position before starting international activities

Causes of new regimeCauses of new regime

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• Dramatic increases in speed, quality and efficiency of international communication and transportation have reduced the transaction costs of multinational interchange

• Increasing homogenization of many markets in distant countries has made the conduct of international business easier to understand by everyone

• Upshot of business executives and entrepreneurs exposed to international business

• International financing opportunities are increasingly available• Human capital is internationally mobile• Internationally sustainable advantage is increasingly recognized to

depend on the possession of unique assets• Valuable unique assets permit firms with more constrained resources

to enter the international arena• Rush to emerging markets

New wave of globalizationNew wave of globalization

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- Firms are often reported to start international activities right from their birth, to enter very distant markets right away, to enter multiple countries at once, to form joint ventures without prior experience

- High risk, high-potential economies

- SMEs that have provided much growth in international trade and investment:

• Middle class owned businesses• Family conglomerates• Formidable incumbents or powerful partners

- The explanation for this new picture of internationalization of firms is claimed to be more global market conditions, new developments in transportation and communication technologies, and the rising number of people with international experience

BORN GLOBALSBORN GLOBALS

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We define an international new venture as 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

The distinguishing feature of these start-ups is that their origins are international, as demonstrated by observable and significant commitments of resources (e.g. material, people, financing, time) in more than one nation

BORN GLOBALSBORN GLOBALS

consequences for the management of the consequences for the management of the internationalization of small firmsinternationalization of small firms

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export promotion policy development towards new organizational forms the rapid internationalization of new firms (as we see in the Born

Globals, the International New Ventures, etc) is just a part of changed management discourse due to changed environmental settings

PROPOSALSPROPOSALS

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BORN GLOBALSBORN GLOBALStheir identificationtheir identification

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categorize such firms as something unique from a managerial point of view

see the issue with regard to governmental support programs

include infant multinationals with lack of long-standing administrative heritage

BORN GLOBALSBORN GLOBALS

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“…when studying a Born Global firm, the time perspective should be extended beyond its birth

Probably, many of its ”genes” have roots back to firms and networks in which its founder(s) and top managers gained industry experience

Basically, in many instances it may be doubtful whether a Born Global can be considered a new company

In a legal sense the company may be new, but were its skills and capabilities not often born and matured prior to its legal birth?”

BORN GLOBALSBORN GLOBALSnowadaysnowadays

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A large and increasing number of firms can be classified as Born Globals

The Born Global phenomenon presents an important next challenge to traditional internationalization theory

Newly established firms are important in terms of generating innovation and developing competitive economies

CONCLUSIONSCONCLUSIONS

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INNOVINT & BGINNOVINT & BG

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• Born globals are growth-oriented

• Potential for extreme high growth

• Managers of such firms face challenges related to the development of products, recruitment, finance and international sales within a short period of time

• Policy regarding export promotion initiatives may have significant influence upon the development of born globals

Why should we studyWhy should we study

Born Global firms?Born Global firms?

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1. to learn how to manage the internationalization of a small firm, e.g. cross-cultural problems, market expansion and export mode

2. to understand the societal aspect of internationalization – often raised as a question of export promotion programs

3. to realize that gradual internationalization is dead

Born Global & INNOVINTBorn Global & INNOVINT

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1. Why do we suddenly find a large group of firms, which are highly internationally active right from the foundation of the firm?

2. How is the Born Global phenomenon connected to other trends in the international business environment, e.g. the rapid internationalization of markets, hypercompetition and the change to an information intensive economy?

Which public tools?Which public tools?

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National or European innovation or SME supporting measures don’t address the needs of high growth firms in general

Newly established, internationally focused firms are an important target group

What kind of support schemes for born globals as many important variables change fast in global markets

Born global firms point to marketing competence as a major competitive weakness

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