Small, technology-based and global An organizational learning perspective on early-stage internationalization of small European exporters

Transcription

1 Small, technology-based and global An organizational learning perspective on early-stage internationalization of small European exporters Lars Bengtsson Department of Business Administration School of Economics and Management Lund University PO Box Lund Sweden Tel: Int Fax Int Abstract: The aim of this paper is to suggest a development of the traditional internationalization model based on organizational learning theory and a case study of a small European technology-based firm in order to explain internationalization processes of so called born globals. In the new internationalization model that is proposed here the propensity, speed, intensity and direction of internationalization of firm will be determined both by the context, the internationalization actions of other firms, and by the firm s ability to learn from direct personal experience as well as from the founders and other persons and firms prior internationalization experience. Key words: born global, internationalization process, organizational learning, knowledge acquisition Paper to be presented at the SNEE conference at Grand Hotel, Mölle, th of May

2 Introduction In the last decade the literature on the internationalization process of firms has given more attention to the phenomena of born globals or international new ventures [1, 2], i.e., firms that from inception, seeks to derive significant competitive advantage from the use of resources from and the sale of outputs in multiple countries [3, p.49]. It has been shown that born globals are a quite common and growing phenomena especially in the high-tech sector. Lindmark et al [4] stated that almost 50 % of high-tech start-ups in the Nordic countries began exporting within two year of their founding. In a survey study Moen [1] reports that more than half of their sample (small and medium-sized exporting firms in Norway and France) could be classified as born globals, i.e., firms were less than ten years of age and had more than 25 % of sales from abroad. Traditional internationalization models have however difficulties of explaining the existence of born globals [1, 2]. The perhaps most widely used and accepted internationalization model, the Uppsala internationalization model, asserts that internationalization is a rather slow and incremental process whereby lack of market knowledge and uncertainty is reduced in an experiential learning process resulting in a gradual increase of activity in terms of foreign sales and foreign direct investments [5, 6]. Knight and Cavusgil [7, p. 17) states that the Born global phenomenon present an important new challenge to traditional internationalization theory. Similar concerns are voiced by McDougall, Shane and Oviatt [8] as well as Madsen and Servais [9]. Much of the criticism against the traditional internationalization models concerns the assumption that lack of market knowledge and uncertainty in the decision process always is present, except when market conditions are stable and homogenous and/or when the firm has considerable experience from markets with similar conditions [5, 6]. Many writers, e.g., [9, 2

3 10] suggest that internationalization of markets, advances in information and production technology, reduction of trade barriers and other general developments have reduced uncertainty and the increased availability of market knowledge. Thus firms may internationalize and commit resources much faster and not in an incremental fashion. Hence we would expect born globals to become more common. Another type of criticism is directed towards the concept of psychic distance. The internationalization model holds that the choice of foreign markets will be chosen according to closeness in psychic distance, i.e., similarity in language, culture, political systems etc between the home and foreign market [5, 6]. Several researchers maintain that firms may choose to enter foreign markets more strategically than proposed by the traditional internationalization theory [11, 12]. That may especially be the case for small and mediumsized technology-based firms that often choose an international niche focus strategy [1]. Most critics recognize that the traditional internationalization models still is valid in many cases but that the general trend towards a more global world and the existence of born globals makes the theory less and less valid in the future in understanding and explaining the internationalization process. However, no theoretical alternative seems to have emerged to explain internationalization process better than the existing theory. Madsen and Servais [2] propose that research in this area turn to network theory and evolutionary economics for better explanations. The researchers making the original contribution to the traditional internationalization model [5] also suggest an extension of the model using network theory [6]. 3

4 The author of this paper recognizes and shares the critic against the traditional internationalization models that has been discussed above, especially concerning the phenomenon of born globals. As discussed above this seems to be especially common among small and medium-sized technology-based firms. Thus it is important to suggest theoretical alternatives that may explain the existence of born globals better than at present. The author will here suggest an alternative theoretical direction than the network theory-direction proposed by Madsen and Servais [2] and by Johanson and Vahlne [6] themselves. The author suggests that the model is revised using organizational learning theory. To the author s knowledge no one has questioned the view on knowledge acquisition inherit in the traditional internationalization model. This view builds on Penrose [13] distinction on objective knowledge (which can be taught) and experiential knowledge (that can only be acquired through personal experience). This distinction is similar to the distinction of explicit and tacit knowledge [14, 15]. According to the traditional internationalization model market knowledge and reduction of market uncertainty are primarily acquired through personal experience from current business activities in the market [5, 6]. Experience generates not only more market knowledge but also business opportunities. There are two problems with this view on knowledge acquisition. First, experiential knowledge might become available to the firm not only through business activities in one firm but also through business activities in other or prior firms. Individuals with prior experiential knowledge may start a new firm or they might be recruited to the firm from other firms. Second, it is generally accepted that experiential or tacit knowledge can be transferred between individuals as well as become shared knowledge in an organization [16], e.g., through socialization in the firm. Thus first-hand experience about a foreign market is not 4

5 always necessary in order to gain market knowledge and reduce market uncertainty. In sum the view on knowledge acquisition processes are too limited to be able to explain internationalization behavior like born globals demonstrate. The aim of this paper is to suggest a development of the traditional internationalization model in order to better explain for the internationalization processes of born globals. This will be done by developing the view on the knowledge acquisition processes using organizational learning theory. A case study of a born global, the case of Decuma, will be used to illustrate the discussion in the paper. The case is based on case study of Decuma s internationalization process [17] and a personal interview with a one of the founders in May The remainder of the paper has the following structure. First, a discussion of traditional internationalization model and the critique it has received. Thereafter a discussion of the born global phenomena will follow. In the third section different types of knowledge acquisition processes using organizational learning theory is presented. In the fourth section the case of a born global, Decuma, will be presented. This will be followed with a set of propositions based on a developed internationalization model and illustrated with examples from the case. The paper ends with some concluding remarks. The traditional internationalization model The Uppsala internationalization model [5] and also sometimes called stages theory, hereafter referred to as the traditional internationalization model, is based on the behavioral theory of the firm [18, 19] assuming decision makers with bounded rationality and a firm that 5

6 is internally loosely coupled because of differing interests of the organizational actors. Moreover, the model also bases their reasoning on Penrose s [13] theory of the growth of the firm, viewing internationalization as a gradual involvement process. The distinction between objective and experiential knowledge has also been borrowed from Penrose [13]. The process evolves as market knowledge is learned primarily through first-hand experiential learning when conducting business activities in the foreign market. With increasing foreign market knowledge and reduction of uncertainty (and of course favorable outcomes), the management makes decisions to commit more and more resources to the foreign market. Thus the model describes a gradual commitment from the firm to the foreign market. A similar model, referred to as the innovation-related internationalization model [20], does also exist describing internationalization as an innovation to the firm [21]. The two models are closely related and have similar views of the internationalization process [20]. In this paper we will focus on the traditional internationalization model as it explicitly has a knowledge acquisition perspective on internationalization. Johanson and Vahlne [5, 6] make a distinction between state and change aspects are made. State aspects are market commitment and market knowledge. Change aspects are current business activities and commitment decisions. The state aspects are assumed to affect the business activities and the commitment decisions (the change aspects), and in turn the change aspects are assumed to affect the market knowledge and market commitment (the state aspects) in a cyclical process. The model can explain two patterns [5, 6]. First it can explain the establishment chain of international operations in a specific foreign market, i.e., starting with no export activities, moving to export through independent representatives and then to sales through own representatives and sales subsidiaries, ending with manufacturing in the foreign market. Second it can also explain the order in which the foreign markets are entered. 6

7 The foreign markets are entered according to closeness in psychic distance, i.e., similarity in language, culture, political systems etc. For example Swedish firms will enter other Scandinavian countries first, then Northern and Western European countries and so on. Here uncertainty is low and market knowledge is relatively easy to obtain. Johanson and Vahlne [6] states that the model was developed using case research from Swedish firms. The model has however been supported in many studies using data from several other countries including the U.S. [e.g., 22, 23], Japan [24], and Turkey [25]. Johanson and Vahlne [6, p.14] conclude the model has gained strong support in studies of a wide spectrum of countries and situations. The empirical research confirms that commitment and experience are important factors explaining international business behaviour. In particular, the model receives strong support regarding export behaviour, and the relevance of cultural distance has also been confirmed. Various forms of critique have been directed towards the model. Turnbull [26] shows that many British exporters do not follow the expected sequence of stages of entrance into a foreign market. Thus he finds the internationalization model too deterministic and argues for a model recognizing the strategic choice of the firms. Hedlund and Kvaerneland [10] find in their empirical study also diverging internationalization patterns compared to the predictions of the traditional internationalization model. They conclude that in a more internationalized world where market knowledge has increased and uncertainty been reduced the traditional internationalization would have less and less explanatory value. Another type of criticism is that the model only says something important about the very early stage of internationalization process and has less value in the later internationalization stages 7

8 [2]. Most of the empirical studies supporting the model have only concerned early stages of internationalization. Johanson and Vahlne [6] recognize this critique but note this has to do with the range of the validity of the theory, thus indicating that the model probably has its most explanatory power in the early internationalization stages. However, the critique against the model concerning its inability to explain born globals concerns precisely the early stages of internationalization. The phenomena of born globals Oviatt and McDougall [3] studied newly created firms and found that many of them exhibited a rapid and strong internationalization process. They called them international new ventures and defined them as a business organization that, from inception, seeks to derive significant competitive advantage from the use of resources from and the sale of outputs in multiple countries [3, p.49]. In a study of 24 of these international new ventures Mcdougall, Shane and Oviatt [8] they conclude that start-up firms have a very different resource situation compared to established firms, causing the former firms to rely on less costlier ways to internationalize, e.g., personal relationships, joint ventures. In a study of small computer software firms Bell [27] show similar findings. He finds little support for a systematic progression of internationalization from exports to foreign direct investments. He also shows that some firms start to export directly before establishing themselves on the home market. Bell [27] concludes that the internationalization process is influenced much more by targeting of niche markets, industry specific conditions and relationships with important customers than the internationalization models reflect. It has been shown that born globals are a quite common and growing phenomena especially in the high-tech sector. Lindmark et al [4] stated that almost 50 % of high-tech start-ups in the 8

9 Nordic countries began exporting within two year of their founding. In a survey study Moen [1] reports that more than half of their sample (small and medium-sized exporting firms in Norway and France) could be classified as born globals, i.e., firms were less than ten years of age and had more than 25 % of sales from abroad. In studies of established small and medium-sized exporters in some European countries Moen [1] and Moen and Servais [2] have shown that internationalization in terms of export intensity, forms for distribution and market selection is strongly influenced by decisions and actions taken in the firms first years after founding. Moen [1] concludes that firms tend either to be born global, i.e., to start internationalize very early, or be born local, i.e., to stay domestic. According to Moen [1] and Moen and Servias [2] the firm s early internationalization process is either swift or not happening at all, thus questioning the gradual process put forward by the traditional internationalization models. Traditional internationalization models have also been criticized for not accounting for small, technology-based firms, that focus their activities on small international niche with a single product [11, 12]. These firms tend to focus their attention on a group of homogenous customers with minimal demand on changes in the marketing mix, perhaps located in a few countries in the world. Certain markets may be key to broad and rapid market access. The firm may also be using very specialized marketing and distribution networks only reaching to certain countries. Because of the limited resources, financial and other, of the small technology-based firm they need to strategically choose their initial foreign markets [11]. 9

10 Knowledge acquisition processes according to organizational learning theory The traditional internationalization model [5, 6] holds that foreign market knowledge primarily is a product of experiential learning. Experiential market knowledge reduces uncertainty, reveals business opportunities and in the case of positive feedback increases the firms commitment to the market. This is a critical assumption in the traditional internationalization model [6]. Organizational learning theory deals with several learning and knowledge development processes in the firm from a behavioral perspective [28, 29]. In this paper we will focus on the knowledge acquisition process of a firm as this is of primary concern in the traditional internationalization model. In a review of the organizational learning literature Huber [28] identifies five different knowledge acquisition processes in the organizational learning literature. These five are: congenital learning, experiential learning, vicarious learning, grafting and searching and noticing. Congenital learning occurs when the creators of the firm has prior relevant experience and knowledge from similar business activities. The creators of the firm may also acquire additional business knowledge in the time interval between the conception of the firm and the actual founding or birth of the firm. Several writers on organizations hold the view that the founders and the founding greatly influence the nature and subsequent development of the firm [30, 31, 32]. Congenital learning would here refer to prior foreign market knowledge acquired by the founders of a firm or other key persons in relation to the conception and subsequent birth of the firm. 10

11 Experiential learning occurs after the birth of the firm and through direct experience. While Huber [28] distinguishes between several types of experiential learning it is in this context sufficient to note that experiential learning does not have to be intentional. Processes of serendipitous nature are also included here. Nevertheless, experiential learning is, as discussed above, at the heart of the traditional internationalization model. Vicarious learning refers to knowledge acquired by the firm when attempting to learn about for instance strategies, practices and technologies of other firms, i.e., to acquire second-hand experience. The firm may intentionally gather intelligence or make benchmarking studies or unintentionally come across interesting information about other firms internationalization strategies and practices. The firm may then subsequently decide to imitate, directly or in a modified form, other firms internationalization strategies and practices. Grafting refers to firms acquiring knowledge through new members of the firm not previously available to the firm. This could be done in the form recruiting new personnel with special knowledge about certain foreign markets, co-operating with other firms, e.g., in the form of joint ventures in a foreign market, or through acquiring whole firms with knowledge about specific foreign markets. Just as vicarious learning, searching and noticing refers to learning from others. Vicarious learning refers primarily to imitation processes of other firms practices and strategies, in this case internationalization practices and strategies. Searching and noticing refers to knowledge acquisition about internationalization not necessarily tied to specific firms and it might be both intentional in the form of scanning and focused search, and unintentional in the form of noticing. 11

12 In comparison to the traditional internationalization model the organizational learning literature recognizes several other types of knowledge acquisition processes than experiential learning. Congenital learning and grafting are imported into the firm at the start and during the firm s existence. Experiential learning occurs during the firm s business activities. All of these three forms of learning may in whole or in part be based on direct personal experience. In contrast to these three forms vicarious learning and searching and noticing are based entirely on second-hand experience, e.g., the experience of other firms. This will probably primarily be what Penrose [13] would label objective knowledge, i.e., knowledge available to any firm. However, while this might have implications for the possibilities to develop unique knowledge and subsequent competitive advantages [cf. 33], vicarious learning and searching and noticing might have important effects on the propensity to, direction of and commitment to internationalization. In sum organizational learning theory proposes that knowledge acquisition might take place in several other forms than proposed by the traditional internationalization theory. Thus, it is here proposed that experiential foreign market knowledge might be acquired by the firm through three different learning processes; through congenital learning, experiential learning and grafting. Moreover, it is proposed that objective foreign market knowledge is acquired through the process of vicarious learning and through searching and noticing, i.e., learning from other firms internationalization experiences. /Insert figure 1 about here/ 12

13 The case of Decuma a small European technology-based firm Decuma is a small European technology-based firm established in November 1999 and based in Ideon Science Park in Lund, Sweden. It is a software firm developing and marketing software for hand writing recognition on mobile devices like laptops, pocket and handheld pcs and mobile phones. The software recognizes handwriting that is made on for instance pocket pc-screen and translates it momentarily into a typewritten text. It has developed and successfully marketed handwriting recognition software for Western European, Japanese and Chinese characters. Three mathematicians employed at Lund University founded Decuma. In their research they had developed an algorithm that together with knowledge in computer science and linguistics made it possible to develop this software. The three founders had no previous experience of starting firms or doing business. However, through student projects and their own research projects they had many contacts in the IT industry in Lund and elsewhere. As academics they were also used to international contacts and to market their research internationally. With the assistance of local public organizations supporting and assisting in start-up of new firms, they managed to set up and start Decuma and get initial founding to further develop their product. However, more capital was needed than could be acquired through public grants and loans. Thus, the founders were advised to seek venture capital. The public assistance organization set up meetings with several venture capitalists and two of them, active in the IT industry, decided to invest in Decuma. However, the venture capitalists demanded among other things that a professional manager was recruited to the firm. One of the venture capitalists recommended a person who became the CEO of the Decuma. The CEO had previous experience of the IT industry and also of doing international business. 13

14 The software was partly developed in projects together with two neighboring established firms in Lund; Ericsson developing mobile phones and Anoto developing other types of hand writing recognition products like seeing pens. However, even if these two firms were obvious first customers they did not become so. A letter of intent was signed with Anoto already in 1999 but failed to materialize in any actual sales until two years later. Ericsson has so far chosen to not become a customer to Decuma. In the early contacts with potential customers in Sweden, like Ericsson and Anoto, and the Finnish mobile phone firm Nokia, it was suggested that Decuma developed software not only for Western European characters but also for Chinese and Japanese characters. According to these firms the use and potential for handwriting recognition was very large in countries with non-linear sign languages like Chinese and Japanese. Decuma decided to do so and developed software for Western European characters as well as for Japanese and Chinese characters. A year later, in the end of 2000, Decuma needed more capital. More venture capitalists were approached. One of them, a neighbor to Decuma s CEO, decided to step in and invest in the firm. This venture capitalist had made his money on starting and running a successful IT firm in Lund, the firm later on becoming a publically listed firm. This firm had over the years managed to develop many business relations with Japanese IT firms. The venture capitalist himself had personally developed many of these relations and had a personal network in Japan as well as a very good understanding of how to do business in Japan. In conjunction with the investment in Decuma the venture capitalist became a member of the board. As the Swedish and Nordic market failed to produce any deals Decuma turned their attention to the market were many firms developing laptops, pocket pcs and mobile phones are located, 14

15 Japan. This was done on the initiative from the new venture capitalist and also using his personal network to get appointments with the right firms and persons in Japan. Decuma had now also recruited a professional sales force, several of them coming from the multinational company Ericsson. These sales persons had experience from doing international business and also from far away markets like Japan. After some months marketing work, the Japanese electronics firm Casio, signed a contract with Decuma in the summer of The first Casio handheld pc with the Decuma hand writing recognition software was launched in late Thus less than two years after start Decuma had managed to close its first major export contract. This was also Decuma s first major contract, thus in terms of sales Decuma was born Japanese. The Casio contract attracted attention from other Japanese electronics firms. It opened the doors to many other Japanese firms as one of Decuma s founder put it. Decuma opened a sales and support office in Japan to handle the contacts and growing interest in the Japanese market. Several other firms in Japan followed Casio s example and signed contracts with Decuma. The most important contracts were with Hewlett Packard in Japan (in February 2002) and Sony (in May 2003). The contacts with Japanese firms made Decuma aware that while Japanese firms were strong on handheld pcs they were not particularly strong on so called smart phones, i.e., mobile phones with some pc capabilities and writing and touching screens. The development of smart phones was instead strong in China with several strong firms in the product area. Decuma then decided to start marketing in China and set immediately up a sales office in Beijing. However, so far this has not resulted in any business in China. 15

16 In September 2003 Decuma managed to get more venture capital as the business was still not profitable despite the good business made in Japan. This time one of the Japanese customers, Sony, invested money into Decuma, through its subsidiary Sony Venture Capital Europe. The general manager of Sony Venture Capital Europe was also appointed as a member of the Decuma board. The general manager of Sony Venture Capital Europe announced that they expected to use Decuma s software in more of the Sony products. The CEO of Decuma commented Sony s investment with that this would help Decuma to develop and expand into the Asian and US market. In sum the Decuma case tells about a small technology-based start-up firm that has managed to become a born global or rather born Japanese in a very short time. The second market they have approached is China, however with no contracts closed yet. Almost all their revenue today (2003) comes from exports to Japan some four years after the firm s birth. The founders had an international orientation however not from business activities. The local area, the Ideon Science Park in Lund, Sweden, is an area which houses many new and small technology-based firms as well as more established firms like the multinational firm Ericsson. Many of the small and new firms as well as the established firms are highly internationalized. Thus it is common to export and to have a lot of international contacts. The original intent was to first develop the local Swedish and Nordic market. Development was very slow so instead foreign markets became the target. However, instead of approaching nearby opportunities in the rest of Europe like Germany, the Netherlands, the UK, or even the U.S., Decuma choose to go to Japan and then China, markets that are at large psychic and geographical distance relative to Sweden. From a strategic point view it was probably a wise choice since many of the world s largest and most important makers of mobile devices are 16

17 localized in Japan and China. This move became possible in part because of a venture capitalist s, and a board member of Decuma, prior personal experience of the Japanese market. Decuma could also utilize an experienced sales force that had been recruited from other international firms like Ericsson. After the initial customer was won a sales office in Japan was opened to handle interest from other Japanese firms. While in Japan Decuma realized that China also was an interesting market as several firms developing smart phones were placed there. Propositions derived from a new internationalization model In order to explain the internationalization process of born globals like Decuma the traditional internationalization needs to be revised. It is here proposed that organizational learning theory can serve as a base for the development of the traditional internationalization model. In relation to the traditional internationalization model two changes are suggested. 1) Experiential foreign market knowledge might become available to the firm not only through direct personal experience (experiential learning) during the firm s business activities, but also through the founders and other key persons prior market knowledge (congenital learning), as well as through other persons and firms experiences that the focal firm might recruit, co-operate with or acquire (grafting). 2) Second-hand experiences, learning from others (vicarious learning and searching and noticing), provides the firm mainly with objective foreign market knowledge that generally inspire, stimulate and create pressures to internationalize. In the new internationalization model that is proposed here the propensity, speed, intensity and direction of internationalization of firm will be determined both by the context (the internationalization actions of other firms) and by the firm s ability to learn from direct 17

18 personal experience as well as from the founders and other persons and firms internationalization experience. Formally this could be expressed in a number of propositions. 1) The more internationalized context of the firm (e.g., industry, local area), the more vicarious learning and searching and noticing concerning internationalization in the firm, and the higher the propensity for the firm to internationalize. 2) The more internationalized the context of the firm, the more vicarious learning and searching and noticing concerning internationalization in the firm, the faster and more committed the internationalization process. When it is highly visible that many firms in the industry and/or in the local area internationalize this provides the individual firms with inspiration and pressures to internationalize. In the Decuma case the highly internationalized science park, the presence of multinational firms, a highly internationalized industry, and the cosmopolitan atmosphere of the university created such forces. Also, the noticing of the strength of the Chinese industry in smart phones, while doing business in Japan, directed Decuma to approach China as their second market. 3) The more congenital foreign market knowledge in the firm, the higher the propensity to internationalize. 4) The more congenital foreign market knowledge in the firm, the faster and more committed the internationalization process. 5) The specific congenital market knowledge will influence the initial direction of internationalization. 18

19 If a firm inherits experiential foreign market knowledge from its founder and from other key persons in the founding process this will make it more likely for the firm to become internationalized as well as with higher speed and intensity. If the founder or other key persons have specific knowledge of a particular or some particular foreign markets, this knowledge is likely to influence which foreign markets to approach initially. Even though the Decuma case does not provide very good illustrations for these propositions, one of the early venture capitalists and his experiential knowledge of doing business in Japan, could be thought of as congenital knowledge, as it became available to the firm very early in the firm s life. 6) The more experiential learning of foreign markets, relative to congenital learning and grafting, the slower and less committed the internationalization process. If a firm develops its market knowledge only or almost only on direct personal experience during its business activities, the internationalization process will follow the slow and stepwise fashion predicted by the traditional internationalization model. Earlier acquired experiential foreign market knowledge in the form of congenital learning and grafting may be faster applied in the new firm and thus speed up the internationalization process. 7) Foreign market knowledge based on grafting will make the internationalization process faster and more committed. 8) Foreign market knowledge based on grafting will influence the direction of the internationalization. 19

20 Grafting in the form of recruitment of key personnel with general and specific market knowledge, and joint ventures or acquisitions of firms with general and specific foreign market knowledge will speed up the internationalization process and more committed. It will also influence the direction of the internationalization, i.e., the selection of foreign markets to approach. The Decuma case illustrates how trained and experienced sales people were recruited from a nearby multinational firm, thereby acquiring knowledge about international marketing and sales operation. The specific knowledge about marketing and sales practices in Japan, previously acquired by a board member in his former firm, is an example of how the direction of the internationalization was influenced by grafting on this experiential knowledge. Concluding remarks The aim of this paper has been to suggest a development of the traditional internationalization model based on organizational learning theory in order to explain internationalization processes of so called born globals. Organizational learning theory provides a broader perspective on knowledge acquisition processes compared to the current internationalization model. While the traditional internationalization model primarily recognize personal experience as the dominant knowledge acquisition process, organizational learning theory also recognizes knowledge acquisition processes before the founding of the firm (congenital learning), in other firms (vicarious learning and searching and noticing), knowledge recruited from or acquired from other firms (grafting). Congenital learning and grafting constitutes experiential foreign market knowledge but developed before the founding of the firm or in other firms and consequently imported into the firm. It is proposed that congenital learning and grafting increases the propensity, and influences the speed, the commitment and the direction of internationalization. Thus, firms that acquire knowledge about foreign markets 20

21 through their founders, through other knowledgeable key persons, and from other internationalized firms, may internationalize much faster and commit large resources in early phases than predicted by the traditional internationalization model. Congenital learning and grafting might concern far away and strategic markets causing the firm to internationalize in a pattern not consistent with the principle of closeness in psychic distance. It has also been proposed that the internationalized contexts in many firm environments, earlier observed by for instance Hedlund and Kvaerneland [10] and Madsen and Servais, [2], influences the firms internationalization process through the knowledge acquisition processes of vicarious learning and searching and noticing. These processes provide the firm mainly with objective foreign market knowledge. However these processes are important as they stimulate, inspire as well as create pressures for internationalization and thus increases the propensity, speed, commitment and direction of the firm s internationalization. A case study of a science park firm, a true born global, the Swedish software firm Decuma, a start-up which has internationalized in a fast and committed manner, primarily entering the Japanese market, has been provided for illustration. Even though the case provides some evidence for the developed model it is of course necessary to make further empirical studies in order to test the developed model. Acknowledgement: I would like to thank the Swedish Research Council for financial support of the research project on which this paper is based. 21

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25 Figures Type of knowledge Objective foreign market knowledge Corresponding learning process Searching and noticing Vicarious learning Experiential foreign market knowledge Congenital learning Grafting Experiential learning Figure 1. Type of foreign market knowledge and corresponding types of learning processes. 25