Part III The New Forms of International Small Businesses

Transcription

1 Part III The New Forms of International Small Businesses Olli Kuivalainen and Simon Harris The chapters in this part focus on international new ventures (INVs) and socalled born-global firms. In their seminal article, Oviatt and McDougall (1994) define an INV as... a business organization that, from inception, seeks to derive significant competitive advantage from... the sale of outputs in multiple countries (p.49). What drives our interest in these types of firms? Born-global firms are a new breed of international organization. They are different from their earlier counterparts, having internationalized early and rapidly and having not stayed in the home markets for long before commencing international operations (for example, Cavusgil and Knight, 2009; Oviatt and McDougall, 1994). These firms, however, are extremely important from a public policy perspective in being a source of high value jobs, economic growth and exports (Wright et al., 2007). There is both academic and managerial interest in the phenomenon but the theories and frameworks for understanding it are still deficient or remain at an early phase of development (Keupp and Gassmann, 2009). The phenomenon of born-globals and INVs began to gain wider interest both in academia and in the business literature of the late 1980s. Jones, Coviello and Tang (2011) note that venture-type research is one of the oldest international entrepreneurship research streams. For example, McDougall (1989) distinguished between international and domestic new ventures, and other early scholars focused on the early and rapid internationalization of small and medium-sized enterprises (SMEs) (for example Jolly et al., 1992). A parallel track that labelled rapidly internationalizing firms as born-globals evolved over the subsequent decade (for example, Knight and Cavusgil, 1996, 2004; Rennie, 1993). These firms can be seen as more or less equivalent to the global start-ups which form one type of the INVs in the typology of Oviatt and McDougall (1994). This research has focused on issues such as the speed of their entry into international markets after their foundation, reflected in the growth of their foreign sales to total sales ratio and the scale and scope of their operations (see, 117

2 118 The New Forms of International Small Businesses for example, Jones et al., 2011; Kuivalainen et al., 2007; Zahra and George, 2002). It has also extensively studied determinants or drivers of these types of firm and of their early internationalization behaviour. Externally, for example, the development of communication and transportation technologies has facilitated the formation of born-global firms (see, for example, Knight and Cavusgil, 1996). Internally, these firms have been seen to be entrepreneurial, possessing a mindset and specific skills that help them address entry barriers such as liability of newness. Bell (1995) found that the commitment of management was important in the rapid process of internationalization and in their making important related strategic decisions, while Knight and Cavusgil (1996) propose that the most distinctive feature of born-global firms is that they are managed by entrepreneurial visionaries who do not care where their customers are located. Reflecting how these firms have tended to be defined, however, there are a number of important areas concerning the phenomenon that have remained under-explored. First, as Zahra and George s (2002) review of international entrepreneurship research argued, while we know a lot about the initial internationalization of INVs and born-global firms, we know little about what happens to them after the initial steps in the internationalization process. Even now, few studies have focused on this issue and this observation remains valid. There is very little empirical research to inform us whether early and rapid internationalization does, in fact, lead to long-term survival and success (see for example Kuivalainen et al., 2007; Wright et al., 2007). Secondly, research in this area has focused on the outward process of internationalization rather than the inward process that has often complemented it in practice although a few exceptions naturally do exist in the extant research (see, for example, Knudsen and Servais, 2007). One of the reasons for this situation is the way these firms have often been defined. The scale of the internationalization dimension in the widely-used INV or born-global firms definitions (see e.g. Knight and Cavusgil, 2004; Oviatt and McDougall, 1994 and as quoted above) can be implicitly found ( the sale of outputs, i.e. sales) but, unfortunately, this definition relates only to outward internationalization. Consequently, the focus of most of the born-global studies has been on the determinants behind the early internationalization, on the speed with which they commence international operations, and on the foreign sales to total sales ratio. Thirdly, we know little about how the external networks of these firms, or the international value chains that develop and evolve over time, despite the early advocacy of this by Oviatt and McDougall (1994). The development of entrepreneurial networks has been of great interest in entrepreneurship (e.g. Hite and Hesterley, 2001; Larson and Starr, 1993) but is only now coming to the attention of international business research (Kontinen and Ojala, 2010).

3 The New Forms of International Small Businesses 119 The fourth area, which we would especially like to highlight here, concerns our knowledge of the international management processes of the entrepreneurs and of their firms, and about the internal developments and changes in the operational modes within these businesses as they grow beyond their initial stages to become multinational enterprises in their own right. Here, the picture remains rather obscure to academics, managers and public policy makers alike. This is especially surprising because it is this, a priori, that would appear to be central to their success, and thereby to their performance in financial, business, growth and employment terms. There is therefore a strong argument that international entrepreneurship research interest should now turn to how these entrepreneurial firms are organized, managed and led as they eventually develop to become small multinational enterprises. The framework presented in Table III.1 looks at international entrepreneurship research by presenting questions to define what has been the main objective of each research sub-domain, to highlight those areas where we see the greatest gaps in our knowledge. We believe that the biggest gap is in the area of how INVs and born-global firms manage and structure their internationalization, and why they do it in the way they do. The reason why this gap may have arisen is that internationalization research, in each of the three streams of the internationalization process research, the network research, and the INV/bornglobal research, has mostly taken a perspective that is external to the firm, and has not seen the changes within these firms, when they operate internationally, to be within their focus. For example, while it has often been acknowledged that capabilities and resources are important, we know rather little about how entrepreneurs develop or acquire them, where they come from, and how they change as the firm grows. Here, the integration of theoretical frameworks from the rich heritage of strategic management research may help (see, for example, Verbeke, 2003; Rugman, 2008), where the resource-based view of the firm and its development and evolution into the knowledge-based view and the dynamic capability perspective may be of particular value (see e.g. Teece et al., 1997; Teece, 2007; Weerawardena et al., 2007). While recognizing the importance of networks of relationships, research has not been concerned with how entrepreneurs develop and use them, and what their strategies and actions are in doing so. So we advocate that international entrepreneurship research should now address the forms, strategies and operations of INVs in the future as well as their evolution (see also Jones et al., 2011; Zettinig and Benson-Rea, 2008). One way forward, as advocated in some chapters here, would be to study how strong customer and partner orientation shapes the development of firms and the value of their networks over the long run. Here one possible research interest could be micro-multinationals, internationalized SMEs operating with a number of complex entry modes and having different value chain activities in a number of

4 120 The New Forms of International Small Businesses Table III.1 The areas of focus of the international entrepreneurship research and the possible gaps which should be addressed Perspective Focus Who: Who the firms and the entrepreneurs are What: The conditions and contextual factors that lead to IE firms of different types How: How the firms internationalize Why: Why the firms do it the way that they do External business aspects perspective The early IE research: Oviatt and McDougall (1994); Knight and Cavusgil (2004); Johanson and Valhne (1977) etc. Much subsequent IE research (see Jones et al., 2011) Network approach / Uppsala linked internationalization process associated research / INV, bornglobal and born againglobal pathway research (e.g. Bell et al., 2003) Network approach / Uppsala linked internationalization process associated research and INV/BG research Johanson and Valhne (2009). Internal management aspects perspective Subsequent IE research and entrepreneurship research as well (e.g. Andersson & Flouren, 2011) More limited research but there is research about the determinants such as global mindset (e.g. Nummela et al., 2004). There are multiple studies which focus on capabilities needed to begin international operations rapidly (see e.g. Zahra et al., 2000; Karra et al., 2008). As yet research has paid little attention to the resources and capabilities that need to be accessed mobilized and coordinated to make internationalization work sustainably over time. As yet research has paid little attention to the internal aspects of firms that lead some firms to internationalize one way or another or not at all. countries (see, for example, Dimitratos et al., 2003). The entrepreneurs underlying motivations, particularly their resource combinations, specific contexts of experience, and management and decision processes influence how the firms configure their operations, choose the scale and scope of their ambitions, and define their internationalization strategy; but, here we have little knowledge. Further, it is important to know how entrepreneurial dynamism is maintained as the firms rapidly become larger multinational enterprises with more complex global operations. It is for this reason that we argue that a useful research focus now is in the management processes that are so important to making international entrepreneurial firms work effectively and develop. The chapters in this part provide a glimpse of how INVs grow and implement their strategies. Nummela and Saarenketo tell us how an international new venture changes its strategy and its form over time; and in this chapter they

5 The New Forms of International Small Businesses 121 focus on its operation mode change. The chapter provides us with important information about how the form of the INV changes in the course of time, and why these changes take place. Hagen and Zucchella investigate how two entrepreneurial ventures have grown internationally by utilizing the internet as a main sales channel in their operations. The key driver of their growth has been the set of organizational capabilities and the firms ability to exploit opportunities embedded in global e-business. McDonald and Park study the resources of the SMEs that were behind their early internationalization. The value of the value networks of the firms is proven in the development of their foreign knowledge competencies, for example. This result naturally supports the importance of networks in the internationalization of INVs (see e.g. Chetty and Campbell-Hunt, 2003; Coviello and McAuley, 1999). Finally, Sigfusson and Harris complement these chapters by focusing on why international entrepreneur managers might build and manage their relationships by utilizing the cyberspace and Web 2.0, and how this can enable them to conduct their international business successfully. For an INV, the internet offers various possibilities as a sales channel, marketing tool and information source and, as is emphasized here, as a networking tool that offers a vehicle for eventual internationalization (see e.g. Loane, 2006). In summary, the idea behind this part is to provide evidence especially on how international new ventures conduct international business successfully the gap in our research that Zahra and George (2002) highlighted. While not exhaustive, the chapters in this part offer both academics and business practitioners ideas about how to make the internationalization process a success after the initial internationalization and what kinds of resources and capabilities are needed to do this? References Bell, J. (1995) The Internationalization of Small Computer Software Firms: A Further Challenge to Stage Theories, European Journal of Marketing, 29(8), Bell, J., McNaughton, R., Young, S. and Crick, D. (2003) Towards an Integrative Model of Small Firm Internationalisation, Journal of International Entrepreneurship, 1, Cavusgil, S. T. and Knight, G. (2009) Born Global Firms: A New International Enterprise (New York, NY: Business Expert Press, LLC). Chetty, S. and Campbell-Hunt, C. (2003) Explosive International Growth and Problems of Success amongst Small to Medium-sized Firms, International Small Business Journal, 21(1), 5. Coviello, N. E. and McAuley, A. (1999) Internationalization and the Smaller Firm: A Review of Contemporary Empirical Research, Management International Review (MIR), 39(3), Dimitratos, P., Johnson, J., Slow, J. and Young, S. (2003) Micromultinationals: New Types of Firms for the Global Competitive Landscape, European Management Journal, 21(2),

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