Born Global Firms: A New International Enterprise by Cavusgil S. Tamer & Knight Gary

Author:Cavusgil, S. Tamer & Knight, Gary [Cavusgil, S. Tamer]
Language: eng
Format: mobi
Tags: Business, Finance
ISBN: 9781606490136
Publisher: Business Expert Press
Published: 2009-08-05T16:00:00+00:00

A Challenge to Traditional Internationalization Theory?

The emergence of born globals has engendered a degree of tension in the field of international business, partly by highlighting the increasing prevalence of the global start-ups and partly by challenging established theories of internationalization. Two well-known schools of research—the Uppsala Model (Johanson & Vahlne, 1977) and the Innovation Model (Bilkey & Tesar, 1977; Cavusgil, 1980; Reid, 1981)—argue that internationalization is an incremental process, progressing through a series of stages. The Uppsala Model emphasizes incremental internationalization via the acquisition of experiential knowledge about, and gradually increasing commitment to, foreign markets (Johanson & Vahlne, 1977; 1990). According to this view, firms target culturally similar markets and will not commit additional resources until sufficient relevant knowledge is amassed. Because such learning takes time, internationalization is supposed to be a slow process. Then, as knowledge is acquired, resource commitments are said to increase almost ceaselessly, even in the absence of deliberate strategic intent (Johanson & Vahlne, 1977, 1990).

Like the Uppsala Model, the Innovation Model portrays internationalization as proceeding incrementally with the gradual acquisition of relevant knowledge and experience (Bilkey & Tesar, 1977; Cavusgil, 1980; Reid, 1981). The slowness reflects management’s inability to quickly acquire relevant knowledge and market information (Cavusgil, 1980). Both the Uppsala and Innovation Models imply that internationalization occurs as a succession of incremental stages. Both approaches are behaviorally oriented and attribute the slow, incremental nature of internationalization to two factors: (1) lack of market knowledge by the firm, especially regarding experiential knowledge; and (2) uncertainty associated with successive decisions to internationalize.

A number of studies have suggested that new ventures can internationalize rapidly after founding in a manner not consistent with the slow process described by the Uppsala School (e.g., Bell, 1995; Knight & Cavusgil, 1996; Madsen & Servais, 1997). Oviatt and McDougall (1994) reported that born global firms often possess an international vision from inception, offering innovative products or services marketed through strong networks, and tightly managed organizations focused on international growth. These scholars were among the first to suggest that traditional internationalization theories may not fully account for the emergence of born global firms. Bell (1995) concluded that traditional internationalization theories do not account for the early international expansion of born globals, and made a call for using the network approach for better explaining the frequently nonlinear foreign development of smaller firms. Knight and Cavusgil (1996) also argued that traditional internationalization theories do not adequately account for born global firms.

For many firms, the first step in internationalization may be one of several other international expansion modes (e.g., Nordstrom, 1991). For example, initial foreign sales may be generated via a joint venture or international network relationships. Companies may undertake foreign licensing, manufacturing, or assembly arrangements directly, without first becoming exporters (Knight & Cavusgil, 2004; Nordstrom, 1991; Reid, 1984). Many firms progress rapidly to direct investment abroad. Born globals show how foreign market expansion can progress very quickly.

While the Uppsala Model’s establishment chain assumes that internationalization evolves systematically—from no international involvement, to exporting, to local manufacturing—in reality, born globals may employ a range of entry options, often simultaneously.

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