Exporters are generally made up of two types of businesses: the ones that create a great product or service locally and decide to export overseas, and those born to be global from the beginning.
Jay Weerawardena and Peter Liesch take us through what it means to be born global.
Policy planners, business practitioners, and academics all agree on the important contribution made by small firms to the economy, particularly in employment generation. Small companies are also increasingly active in international markets with estimates of a 30 percent contribution to total Asia-Pacific Economic Cooperation (APEC) exports of US$3.1 trillion. However, their path to growth and expansion to international markets is littered with failures. A considerable number of small businesses fail in their infancy and some fail within a few years of inception.
A decade ago, researchers were preoccupied with determining the exact percentage of small business failure. Later, the emphasis shifted to the reasons for failure and identified resource poverty—which includes insufficient financial capital and managerial inadequacy—as the culprit. Over recent years, policy planners, academics, and small business operators have been interested in identifying strategies that can help small firms overcome these resource poverty constraints to growth and expansion.
In a landmark Australian research study by McKinsey and Company and the Australian Manufacturing Council in 1993, a new breed of small firms, termed ‘born globals’, was identified.
Born globals successfully overcome resource constraints. Despite lacking size and financial backing, they more than make up for limited resources with entrepreneurial spirit and highly developed business skills. Born globals have come of age and are now drawing increased attention from academics and the business community worldwide.
Born Globals
Born globals are highly entrepreneurial small firms that challenge the conventional wisdom that firms should master their domestic markets before venturing overseas. Instead, they directly enter global markets with cutting edge, innovative products, bypassing domestic markets altogether in some cases.
Born global businesses possess particular bundles of attributes, often uniquely configured, that are leveraged in and across foreign markets to produce returns that could not be earned in the domestic market.
They are leading examples of early-internationalising small and medium enterprises, and with these SMEs comprising the vast majority of firms in developed economies, they have a significant economic contribution to make. Their success is also important to the level of business confidence in an internationalised economy.
Researchers agree that the born global company is a universal phenomenon, with studies reporting such businesses in virtually all major trading countries and across many industry sectors. These companies are not exclusively in high technology sectors. In fact, they are increasingly represented in lower technology industries.
So, how do born globals go international so early and so successfully? While the born global phenomenon seems to be universal, there is apparent mystery surrounding the process of their rapid and early internationalisation. Traditional explanations of internationalisation suggest that prior business experience drives a firm’s internationalisation and suggests that it happens incrementally, like ripples spreading out from their initial foreign market entry.
However, these explanations fail to account for the speed with which they enter global markets. Little is known about the processes through which new firms move rapidly and sustainably into foreign markets. The early evolution of these enterprises goes unnoticed, until their success attracts widespread attention, such as Cochlear and ResMed (respiratory device manufacturer).
The internationalisation process seems to be driven by entrepreneurial owners and managers with a global mindset that enables them to not only be highly innovative, proactive and risk-taking, but also to direct their attention to global opportunities; given their previous experience, contacts and often broad international education.
Managing Born Globals
The owner or manager of a successful born global is able to integrate an international orientation, a geocentric mindset (an interest in international markets, regardless of their location) and prior international experience (of their target markets). Characteristics include:
• Resource constraints—like most SMEs, born globals are limited by their lack of size and financial backing.
• Vulnerability—born globals tend to be vulnerable because they are frequently dependent upon a single product that they commercialise in lead markets first, regardless of where their markets are situated geographically.
• Pervasive innovation in all processes of the business—contrary to popular thinking, born globals operate successfully in low-tech and no-tech sectors, they are not restricted to hi-tech industries. They find ways to innovate in all parts of their businesses and this allows them to build value. Owner/managers seem to apply distinctive, internationally focused learning capabilities.
• Successful partnering—these companies often seek partners who complement their own competencies in these lead markets. Hence, born globals must possess superior networking capabilities. This means the firm is skilled at acquiring knowledge through networks and developing complementary resources that are critical for rapid internationalisation.
• Sophisticated marketing—they also demonstrate sophisticated marketing skills, often positioning their highly customised products in niche markets.
• Cutting edge products or services—born globals develop highly innovative, knowledge intensive (but not necessarily hi-tech) products, both goods and services, that enable positional advantages in global markets. In order to survive and prosper, born globals must remain at the cutting edge of the developments of their product market or capability niche.
Current Research
Funded by an Australian Research Council grant and working with colleagues associate professor Gillian Sullivan Mort, Griffith University, and associate professor Gary Knight, Florida State University, we are currently investigating the capabilities that have been built and nurtured by owner/managers. We believe this to be a possible explanation of their firm’s rapid and early internationalisation.
The specific aims of the study are to:
• identify the key learning activities that enable these firms to rapidly and successfully internationalise;
• capture the evolution of distinctive capabilities in these firms;
• capture the critical role played by the born global owner or manager in building and nurturing these capabilities;
• develop and validate measures for learning, marketing and networking as capabilities in a born global firm;
• understand the role played by unique product in the success of born global firms;
• bring to the fields of international business, business strategy, and international marketing a comprehensive explanation of born global firm internationalisation;
• inform federal and state government policy planners about how to create policies that will facilitate SME internationalisation; and
• provide managers of small new ventures with recommendations in terms of overcoming their resource constraints to embark on rapid internationalisation.
Developing Born Globals
Even less well understood than the born global phenomenon and the process of ‘born globalness’ is the subsequent phase during which these firms manoeuvre themselves to estab
lish platforms for further and continuing international venturing.
With resource constraints characterising these firms, and because of their small size and lack of market recognition and the associated risks and uncertainties, further development beyond initial foreign market entry can be problematic and demands capabilities different from those needed at initial entry.
Critical mass for deepening internationalisation not only requires additional funding, but different strategies as the firm confronts new risks and uncertainties. The novel product or service may not be sufficient to carry the firm through this phase, beyond foreign market entry.
In our interviews with Australian born globals, we have identified firms that have successfully negotiated this next immediate phase, and have created platforms for further and deepened internationalisation.
After completing the current study, we hope to be able to conduct further research to investigate how and why some born globals are able to adapt their skills to suit the very different requirements of the next stage of business development.
Overall this project will be able to demystify the current controversies on rapid and early internationalisation. The findings of the study will be immensely useful to policy planners in designing appropriate policies to help small firms overcome their resource constraints to global market entry. The findings will also provide valuable insight to small firm practitioners in their efforts to overcome constraints to growth and expansion.
* Dr Jay Weerawardena and Professor Peter Liesch, professor of international business, are researchers at the University of Queensland Business School.
