Academic journal article Entrepreneurship: Theory and Practice

The Accidental Internationalists: A Theory of Born Globals

Academic journal article Entrepreneurship: Theory and Practice

The Accidental Internationalists: A Theory of Born Globals

Article excerpt

The distinguishing characteristic of international new ventures/born globals (INVs/BGs) is that they have foreign sales from the outset, or very quickly afterward. I argue that this is due to their business model. INVs/BGs sell to spatially dispersed customers distinctive niche products that incur low communication, transportation, and adaptation costs. In contrast to the firms described by the Uppsala model, selling to foreign customers does not require additional time or effort for INVs/BGs. Thus INVs/BGs can be seen as accidental internationalists.

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Welch and Luostarinen (1988), Rennie (1993), Oviatt and McDougall (1994), and Knight and Cavusgil (2004) have observed that some firms internationalize very early in their life. Oviatt and McDougall have called such firms international new ventures (INVs), and Rennie, and later Knight and Cavusgil, born globals (BGs). While specific definitions vary--Chetty and Campbell-Hunt (2004, p. 65) set an INV/BG benchmark of 75% export intensity within 2 years of inception, while Evers (2010, p. 400) suggests 25% of total sales in foreign countries in the first year of trading--there is general agreement that INVs/BGs are firms that start international activities very early, at birth, or soon afterward, and subsequently sell a high share of their output abroad. One can also define INVs/BGs as firms that make foreign investments very early, either to serve customers or to procure inputs, but in this article I will follow Evers and Chetty and Campbell-Hunt in focusing on a firm's ability to sell early to a substantial number of foreign customers through exports or foreign production.

Why do some firms gain foreign customers so quickly? I argue that the main reason is their business model, that is, what they sell, how they sell it, and to whom. (1) INVs/BGs sell niche products at low information, transportation, and adaptation costs to expert customers dispersed throughout the world. Their quick expansion abroad shows that, contrary to what is assumed by proponents of the Uppsala internationalization process model (Johanson & Vahlne, 1977, 1990; Johanson & Wiedersheim-Paul, 1975), entering foreign markets is not necessarily a slow and laborious process. Compared with their Uppsala counterparts for which selling to foreign clients necessitates extra time and effort, acquiring foreign customers is for INVs/BGs no different than acquiring domestic ones. In that sense, INVs/BGs are accidental internationalists.

What Explains INVs/BGs?

In their seminal 1994 article and in later work (e.g., McDougall, Shane, & Oviatt, 1994), Oviatt and McDougall (1994) argued that INVs could not be satisfactorily explained by the two dominant theories in International Business at the time, the Uppsala internationalization process model and the internalization model of Buckley and Casson (1976) and Rugman (1981). Proponents of the Uppsala model describe a process by which market-serving firms expand their foreign sales abroad from a domestic base. International expansion is gradual and slow because firms have insufficient information on opportunities and risks in foreign markets and because such information can only be acquired by doing business there. With greater experience, the firm reevaluates opportunities in the foreign country, and this leads to an upward cycle of greater commitment and larger sales. The same cycle leads firms to first target countries on which they possess some information, and then to move to those about which less is known. Since knowledge is assumed to come from experience, and it takes time for the firm to digest information gained on the ground, internationalization progresses slowly. Oviatt and McDougall observed that, in contrast, INVs internationalize very quickly. Hence for them, the Uppsala model cannot explain INVs/BGs, and a new theory is needed.

Oviatt and McDougall further argued that INVs/BGs invalidate the predictions of internalization theory. …

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