Born globals have various characteristics, summarized in Exhibit 1. These firms exist in most industries and tend to be formed by entrepre- neurs with a strong international outlook.
Managers tend to see the world as their marketplace, often emphasizing strong international marketing skills. To the extent this breed of enterprise can be an engine of growth for global product-market innovations and economic development, the emergence of born global firms is an important trend. Historically, it was believed that companies had to build a strong domestic base before venturing into foreign markets. One reason was the high fixed costs of entering a new market at a distance, including the costs of gaining market information and of managing agents or representatives to establish effective sales organizations.
However, dramatic changes in recent years are facilitating the ability of companies to compete in inter- national business from the earliest days after the founding of the firm. Most born globals rely on exporting as their main foreign market entry mode e. OECD, Born globals begin exporting their products or services within a couple of years after their founding and may export a quarter or more of their total production.
Most advance through subsequent stages of internationalization, collaboration with foreign partners, and even undertaking of foreign direct investment. Many born globals operate in dozens of countries throughout the world. Characterized by limited financial and tangible resources. Given their youth, born globals tend to be relatively small firms. Most are SMEs. Being smaller organizations, born globals have far fewer financial, human, and tangible resources than the large MNEs that have long been the dominant force in global trade and investment.
Historically, international business was beyond the reach of most smaller firms. However, various trends have made doing international business a viable option for all firms. As a result, companies that internationalize at or near their founding—born globals— have been emerging in substantial numbers worldwide. Found across most industries. Some scholars believe that the born global phenomenon is concentrated in high-technology industries. However, there is substantial evidence to suggest that the phenomenon is more widespread e.
Managers have a strong international outlook and international entre- preneurial orientation. Unlike many traditional companies, managers typically do not see foreign mar- kets as simple adjuncts to the domestic market. Many born globals are formed by proactive managers with a strongly entrepreneurial mind- set. An entrepreneurial orientation reflects substantial proactiveness and aggressiveness in the pursuit of international markets.
It is associated with managerial vision, proclivity for risk taking, and proactive competi- tive posture. Often emphasize differentiation strategy. Many born globals target relatively dis- tinctive products to niche markets that may be too small to interest large firms. When using differentiation strategy, the firm stimulates customer loyalty by uniquely meeting a particular need. Differentiation strategy may be especially appropriate for born globals because their resources are relatively specialized and they typically target niche markets.
People and firms increasingly demand specialized and customized products, and niche markets have become an important source of opportunities for small firms. Often emphasize superior product quality. Born globals are often at the leading technological edge of their industry or product category.
Technological prowess confers significant advantages for pursuing markets around the world. Rather, they are likely to target niche markets, to which they offer superior quality products. In fact, the founding of born globals is often associated with the develop- ment of new products or services.
Leverage advanced communications and information technologies. Infor- mation and communications technologies allow smaller firms to process information efficiently and communicate with partners and customers worldwide at practically zero cost.
Advances in communications have practically eliminated boundaries between firms and help companies of any size manage business systems spread all around the world. Many born globals leverage the technologies to segment customers into narrow global market niches and skillfully serve highly specialized buyer needs.
Typically use external, independent intermediaries for distribution in for- eign markets. Given their smaller size and limited resources, most born glo- bals expand internationally via exporting e. Thus, they engage in direct international sales or leverage the resources of independent intermediaries located abroad. Many born globals rely on external facilita- tors, such as FedEx and DHL, to organize international shipments.
The low-cost, low-risk nature of export- ing, combined with the ability to leverage foreign partners, makes export- ing especially suitable for young companies. Evidence On Born Global Firms Since the widespread appearance of born globals, numerous scholars have sought to shed light on this fascinating phenomenon.
Research suggests that born globals are emerging throughout the world e. The Japanese have reported in various pub- lications on the widespread emergence of born globals e. In Taiwan, Chang and Grub described how most of the companies in their sample of firms in the information technology industry had expanded abroad by pursuing narrow market niches.
The Taiwanese firms began selling to foreign markets shortly after their founding to target markets as diverse as Spain, Scandinavia, and the former Soviet Union. For example, born globals in Den- mark often confine themselves to other countries in the European Union. Many of these firms are regionally based, while their competitors in Japan and the United States often build up substantial global operations.
As the feasibility of protecting their competitiveness and regional performance is eroded by economic integration and worldwide globalization, the competi- tive position of regionally based firms can deteriorate over time.
The young firms did not slowly build their way into international business; rather, they internationalized at or near their founding.
Cochlear specializes in high-tech ear implants for the deaf. The firm owes much of its success to strong links with hospitals and research units around the world, as well as collaborative research with a network of institutions worldwide.
In his study of firms, Rennie found that Australian born globals began exporting, on average, only two years after founding and obtained about three-quarters of their revenues from export sales. He noted that born globals account for a growing share of exports in other countries as well. SMEs account for more than one-third of world manufactured exports, and over one million of these firms are very active in interna- tional trade OECD, In fact, SMEs now comprise the majority of firms doing international business.
Many of these SMEs are born globals. Most are young firms that are internationalizing earlier than ever before. SMEs were responsible for nearly a third of merchandise exports from the United States in SMEs are more active in international business than ever before e. They are often the backbone for entrepreneurship and innovation in national economies. In Eastern Europe, the development of emerging market countries is driven increasingly by the rise of small and midsize fast-growth firms.
Governments sponsor trade fairs and trade missions that connect SMEs with distributors and other facilitators in promising foreign markets. The World Bank assists SME exporters from emerging markets by increasing access to capital and developing their international business skills. While most SMEs export to advanced economies, an increasing number target emerging markets, such as China and Mexico.
For example, Pharmed Group, based in Florida, is a full-line distributor of medical, surgical, and pharmaceutical supplies. Hoping to expand export sales, the firm signed a deal with Drogao, a major drug store chain in Bra- zil. These efforts increase the flow of medical supplies and eyeglasses to the poor in Latin America and Africa Neupert et al. Why and how do born globals internationalize early, with some going international within the first year of their operations?
We describe several explanatory factors below. Export pull. In most countries, there exists substantial demand for a broad mix of products and services. In the absence of competent local suppliers, export pull describes how local buyers satisfy their prod- uct needs by sourcing from abroad.
In response to this demand, many born globals market products that occupy narrow, cross-national market niches. The pull effect may be initiated by local intermediaries who per- ceive a specific product-market opportunity, or it may be initiated by end users themselves who become aware of a given foreign supplier. Export push.
Many born globals are managed by internationally ori- ented entrepreneurs who possess a powerful drive to sell their products abroad. As demonstrated by early commitment of financial, human, and other resources to generating foreign sales, such managers may view much of the world as their marketplace.
They apply a push strategy of actively promoting their offerings to foreign intermediaries, who in turn promote the products to final buyers e. Alterna- tively, many born globals undertake extensive advertising and develop their own sales organizations to promote products directly to foreign buyers.
Modern business infrastructure and advanced technologies in commu- nications and transportation facilitate the ability of any firm to target markets outside the home country. For example, AntiTox Corporation, a manufacturer of products that kill toxins in stored grains and other crops, found numerous markets in Latin America.
Worldwide monopoly position. Some companies are lucky enough to have developed a monopoly or near-monopoly position in a given product, and this advantage, even in the face of small size, translates into competi- tive advantages in international business.
Monopoly power can derive from tacitly owned knowledge, proprietary products or processes, or other assets that are relatively inseparable from the controlling firm. Finally, companies can obtain a degree of monopoly power to the extent they can convince buyers, through marketing and other means, that theirs is the only product of its kind Porter, Product-market conditions necessitating international involvement.
Young firms may produce products, components, or parts so specialized that domestic demand proves insufficient. The small size of the domes- tic market forces such companies to begin selling in foreign countries. For example, this is a common driver of early internationalization among firms founded in small countries in Europe. In other cases, some businesses set up operations abroad in order to obtain resources that are in short sup- ply or of inappropriate quality at home e.
Management at many born globals are driven to amortize quickly the development costs associated with new and improved products. This is accomplished by selling these goods into as many markets as pos- sible, an approach that necessitates internationalization. In Japan, capital markets for young companies are not as well developed as they are in other countries, and consequently, some born globals establish a presence in the United States to access funding from such sources.
Other companies move offshore to access cheap factors of production such as labor. Superior product offerings. Many born globals emerge initially as product-process based firms that subsequently emerge as international marketers, based on the strength of a superior product that gains accep- tance worldwide. Early internationalization may be associated with a significant product breakthrough or innova- tion. The products may feature advanced technology, substantial added value, superior quality, or unique characteristics.
Many of the products offered by born globals have universal appeal. These attributes are conducive to expanding into foreign markets shortly after company founding. Global network relationships. The existence of significant global network relationships is another early internationalization trigger.
An industrial net- work is an organizational structure in which a large number of intercon- nected actors firms and individuals are involved in economic activities production and marketing that convert resources inputs to finished goods, semi-finished goods, and services for consumption by end-users retails consumers, intermediaries, and other firms. Scholars highlight the critical role played by network relationships in born global interna- tionalization e.
Early foreign expansion may be facili- tated through network linkages with foreign distributors, trading com- panies, strategic alliance partners, as well as more traditional buyers and sellers and other entities located abroad.
Networks develop through for- eign business activities, government intervention, or personal contacts of management and comprise inward e. Such relations also provide invaluable knowledge to the born global regarding international business methods and opportunities e. Network relation- ships allow born globals to obtain advantages abroad that are relatively unattainable in the absence of such linkages.
Global niche markets. Narrow market segments that occur in numerous countries simultaneously are also a factor driving the internationalization of born global firms. Technology facili- tates greater specialization and the emergence of small firms that supply products that occupy narrow, cross-national niches. Indeed, with height- ened competition in many industries and advances in production tech- nologies, small entrepreneurs are able to leverage specialized knowledge bases to define and serve market segments small enough to go unnoticed by larger rivals.
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Enviado por Business Expert Press. C 1 a Cavusgil, S. Tamer Cavusgil, Gary Knight. They internationalize rapidly--the period from domestic establishment to initial foreign market entry is often three or fewer years.
Born globals are emerging in sizable numbers worldwide. Until recently, international business was mainly the domain of large, well-resourced multinational enterprises MNEs. The appearance of large numbers of born global firms is revolutionizing the traditional character of international business and helping reshape the global economy. This book helps managers and scholars understand the born global phenomenon. We offer a comprehensive treatment of born globals, from distinctive features of these companies, to strategies that they use for international success, to implications of the phenomenon for international small- and medium-sized enterprises.
We review useful theories and frameworks and introduce a new field based on the born global phenomenon--international entrepreneurship. We provide a comprehensive literature review and an explanation of major theories that explain the born global firm. This complete guide to born global firms was written by leading experts in the field. C Ask Us: Live Chat. Cavusgil, S. BEPress online. Knight, Gary A.
International business collection,.
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