This is “From Entrepreneurship to Born-Global Firms”, section 11.4 from the book Challenges and Opportunities in International Business (v. 1.0). For details on it (including licensing), click here.
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More and more firms—even very small ones—have operations that bridge national borders soon after their founding. Thanks to the Internet and related information technologies (IT) that enable many of them, this new breed of firms began emerging in the 1990s and is dubbed “born-global” because their operations often span the globe early in their existence. A born-global firmAlso commonly called a global start-up, 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., also commonly called a global start-upA business organization that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries., is “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.”Benjamin M. Oviatt and Patricia Phillips McDougall, “Toward a Theory of International New Ventures,” Journal of International Business Studies, First Quarter 1994, 47, accessed December 24, 2010, http://aib.msu.edu/awards/25_1_94_45.pdf. A common characteristic of such firms is that their offerings complement the products or capabilities of other global players, take advantage of global IT infrastructure, or otherwise tap into a demand for a product or service that at its core is somewhat uniform across national geographic markets. While many firms may fall into this category by virtue of their products, the operations and customers of born-global firms do actually span the globe—exploiting a combination of exporting and foreign direct investment.
The born global firm is defined 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. In due course, these distinctive firms are gradually becoming the norm among companies that do international business. The distinguishing feature of born global firms is that their origins are international, as demonstrated by management’s global focus and the commitment of certain types of resources to international activities. Here we emphasize not the size, but rather the age by which the firm ventures into foreign markets. In contrast to the traditional pattern of businesses that operate in the home country for many years and gradually evolve into international trade, born globals begin with a “borderless” view of the world and develop the strategies needed to expand abroad at or soon after the firm’s founding. The focus is on the phenomenon of early internationalization and the approaches that companies leverage for achieving superior performance in international business from the inception of the firm.S. Tamer Cavusgil and Gary Knight, Born Global Firms: A New International Enterprise (New York: Business Expert Press, 2009), 1.
Logitech, the computer peripherals company, is perhaps one of the best early examples of a successful born-global firm.Benjamin M. Oviatt and Patricia Phillips McDougall, “Global Start-Ups: Entrepreneurs on a Worldwide Stage,” Academy of Management Executive 9, no. 2 (1995): 30–44. Focusing first on the PC mouse, the company was founded by two Italians and a Swiss. The company’s operations and research and development were initially split between California and Switzerland, and then it expanded rapidly with production in Ireland and Taiwan. With its stylish and ergonomic products, Logitech captured 30 percent of the global computer mouse business by 1989, garnering the start-up a healthy $140 million in revenues.
Its innovative and stylish products have made Logitech a global leader in computer peripheral devices.
Courtesy of Logitech Inc.
Today, Logitech is an industry leader in the design and manufacture of computer peripheral devices; has manufacturing facilities in Asia and offices in major cities in North America, Europe, and the Asia-Pacific region; and directly employs more than 6,000 people worldwide.Logitech website, accessed November 1, 2010, http://www.logitech.com.
Skype Limited is a more recent born-global firm. You may already have its software on your laptop or desktop computer to take advantage of this free Internet phone technology, called voice-over Internet protocol, or VoIP.Skype website, accessed November 1, 2010, http://www.skype.com. At any point in time, there are millions of users logged in on Skype; the program and service has made such a strong impression that the term “Skype me” has replaced “call me” in some circles. Niklas Zennstrom and Janus Friis, the same two entrepreneurs who invented KaZaA (one of the most popular Internet file-sharing software programs in the world) also developed Skype. Initially founded in Sweden as Tele2, Skype is now headquartered in Luxembourg and has offices in Europe, the United States, and Asia. Skype and has received significant funding from some of the largest venture-capital firms in the world.“Where Is Skype?,” Skype, accessed December 27, 2010, http://about.skype.com/where-is-skype. Both Logitech and Skype share certain characteristics—ripe conditions for global start-ups, what it takes to build them, and what it takes to make them succeed.
Skype’s video calling capabilities have enabled businesses to connect with team members around the world economically and efficiently.
Courtesy of Skype Limited 2011.
Global start-ups need to pass through two phases. If you can answer yes to all or most of the questions from Phase 1, then you need to be sure that you can quickly build the resources and capabilities identified in Phase 2. Research has shown that firms unable to connect the dots in Phase 2 are forced to cease operations after a short, but lively, period of time.Benjamin M. Oviatt and Patricia Phillips McDougall, “Global Start-Ups: Entrepreneurs on a Worldwide Stage,” Academy of Management Executive 9, no. 2 (1995): 30–44.
Phase 1: Should my firm be a global start-up?
Phase 2: Now that you have committed to going global, here is what you need:
So why is the introduction of global start-ups important at this point in your international business education? One reason is the increasing prevalence of global start-ups, driven in part by globalizing consumer preferences, mobile consumers, large global firms, and the pervasiveness of the Internet and its effects. The other is that global start-ups are very relevant to the subject of intrapreneurship, which you will learn about in Section 11.5 "From Entrepreneurship to Intrapreneurship".
(AACSB: Reflective Thinking, Analytical Skills)