Skip to main content
SpringerLink
Log in

International new ventures: revisiting the influences behind the ‘born-global’ firm

  • Article
  • Published:
Journal of International Business Studies Aims and scope Submit manuscript

Abstract

There is a small but theoretically important literature on ‘born-globals’ or international new venture firms that positions itself in contrast to the more established sequential international entry literature. In this paper we examine the pattern of entry into international markets for a set of international new ventures and show that they need not be a distinct breed of firms, as previous research has portrayed. Absent a specific technological advantage, the decision for a new venture to internationalize at inception is influenced by the size of its home market and by its production capacity, as well as by cultural and economic forces that also influence other more traditional firms that stage their entry into international markets. Most importantly, we demonstrate that the decision to internationalize or not should be considered jointly with the capacity allocation decision to specific international markets, as analysing these separately may lead to biased results.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Figure 1
Figure 2

Similar content being viewed by others

Notes

  1. An implicit assumption we make is that the products of the new venture under investigation exhibit non-increasing marginal cost of production.

  2. The increasing prevalence of domain-specific knowledge in the international business arena would therefore make the traditional notion of cultural distance appear less relevant (e.g., Bell, 1995).

  3. This assumes that large population centres translate into large potential markets.

  4. This assumes that the unit revenue derived from selling the product elsewhere within the country and/or neighbouring countries is similar, suggesting a fairly homogeneous product.

  5. The mimetic effect will be greater for firms that are similar in size. However, for de novo new ventures, this size-relatedness is less relevant as their incumbents are often many times larger their size.

  6. Haveman (1993) estimated the inverted-U shape relationship based on entry rates. Our study deals with the pattern of market entry, and is hence subtly different from her hypothesis.

  7. Or, at least, similar technologies should be available to all firms – incumbents and new entrants alike.

  8. There are international gateway cities such as London and Frankfurt am Main, but passengers flying between, say, Lisbon and Copenhagen can probably enjoy non-stop service instead of having to connect via London or Frankfurt.

  9. A class of regional carrier exists in the EU with close operational and often financial ties to traditional flag-carriers (e.g., Crossair Europe/Europe Continental Airways was intended to be an EU arm of Crossair). We exclude these from our definition of independent, new entrants. We include, however, those carriers that operated as entities independent from their parent corporations, such as Go (initiated by British Airways) and Germanwings (by Eurowings-Lufthansa). Taking out the few independent offshoots of established carriers (such as Go and Germanwings) from the sample does not significantly change the result of the analysis.

  10. Since all the new carriers in our study face the same operational constraints at busy airports, the presence of this constraint does not place undue pressure for one carrier to internationalize at inception compared with another.

  11. Some new entrants positioned themselves to offer better service than the traditional flag-carriers.

  12. For instance, full-service carriers Swiss and Austrian Airlines at one point eliminated complimentary meal service in their intra-European operations and offered refreshments for sale in flight, resembling the offering of some of the budget carriers.

  13. Some, including Hofstede et al. (1990) and Mezias et al. (2002), suggest that culture at the national and organizational levels are different constructs entirely.

References

  • Autio, E., Sapienza, H. and Almeida, J. (2000) ‘Influences of age at entry, knowledge-intensity and imitability on growth’, Academy of Management Journal 43 (5): 909–924.

    Article  Google Scholar 

  • Barkema, H.G., Bell, J.H.J. and Pennings, J.M. (1996) ‘Foreign entry, cultural barriers, and learning’, Strategic Management Journal 17 (2): 151–166.

    Article  Google Scholar 

  • Bell, J. (1995) ‘The internationalization of small computer software firms: a further challenge to “stage” theories’, European Journal of Marketing 29 (8): 60–75.

    Article  Google Scholar 

  • Brett, J.M. and Okumura, T. (1998) ‘Inter- and intracultural negotiation: US and Japanese negotiators’, Academy of Management Journal 41 (5): 495–510.

    Article  Google Scholar 

  • Brouthers, K.D. and Brouthers, L.E. (2001) ‘Explaining the national cultural distance paradox’, Journal of International Business Studies 32 (1): 177–189.

    Article  Google Scholar 

  • Busenitz, L.W. and Barney, J.B. (1997) ‘Differences between entrepreneurs and managers in large organizations: biases and heuristics in strategic decision-making’, Journal of Business Venturing 12 (1): 9–30.

    Article  Google Scholar 

  • Caves, D.W., Christensen, L.R. and Tretheway, M.W. (1984) ‘Economies of density versus economies of scale: why trunk and local service airline costs differ’, Rand Journal of Economics 15 (4): 471–489.

    Article  Google Scholar 

  • Chang, S.J. (1995) ‘International expansion strategy of Japanese firms: capability building through sequential entry’, Academy of Management Journal 38 (2): 383–407.

    Article  Google Scholar 

  • Coval, J. and Moskowitz, T. (2001) ‘The geography of investment: informed trading and asset prices’, Journal of Political Economy 109 (4): 811–841.

    Article  Google Scholar 

  • Dunning, J.H. (1988) ‘The eclectic paradigm of international production: A restatement and some possible extensions’, Journal of International Business Studies 19 (1): 1–31.

    Article  Google Scholar 

  • Duranti, I., Ahearn, L., Cook-Gumperz, J., Gumperz, J., Darnell, R., Hymes D., Rumsey, A., Spitulink, D. and Van Dijk, T. (2003) ‘Language as culture in US anthropology: three paradigms’, Current Anthropology 44 (3): 323–348.

    Article  Google Scholar 

  • Eden, L. and Miller, S.R. (2004) ‘Distance matters: liability of foreignness, institutional distance and ownership strategy’, Advances in International Management 16: 187–221.

    Article  Google Scholar 

  • Erez, M. and Earley, C. (1993) Culture, Self-identity, and Work, Oxford University Press: New York.

    Book  Google Scholar 

  • Erramilli, M.K., Agarwal, S. and Kim, S.S. (1997) ‘Are firm-specific advantages location-specific too?’ Journal of International Business Studies 28 (4): 735–757.

    Article  Google Scholar 

  • Fan, T.P.-C. (2006) ‘Improvements in intra-European inter-city flight connectivity linking the United Kingdom and Ireland with continental Europe 1996–2004’, Journal of Transport Geography 14 (4): 273–286.

    Article  Google Scholar 

  • Fan, T.P.-C. and Leung, W.F.R. (2005) ‘Price disparity based on trip origins: evidence on dense nonstop intercontinental air routes’, Journal of Revenue and Pricing Management 4 (3): 252–269.

    Article  Google Scholar 

  • Ganitsky, J. (1989) ‘Strategies for innate and adoptive exporters: lessons from Israel's case’, International Marketing Review 6 (5): 50–65.

    Article  Google Scholar 

  • Greve, H.R. (1998) ‘Managerial cognition and the mimetic adoption of market positions: what you see is what you do’, Strategic Management Journal 19 (10): 967–988.

    Article  Google Scholar 

  • Grinblatt, M. and Keloharju, M. (2001) ‘How distance, language, and culture influence stockholdings and trades’, Journal of Finance 56 (3): 1053–1073.

    Article  Google Scholar 

  • Harveston, P.D., Kedia, B.L. and Davis, P.S. (2000) ‘Internationalization of born global and gradual globalizing firms: the impact of the manager’, Advances in Competitive Research 8 (1): 92–99.

    Google Scholar 

  • Haveman, H.A. (1993) ‘Follow the leader: mimetic isomorphism and entry into new markets’, Administrative Science Quarterly 38 (4): 593–627.

    Article  Google Scholar 

  • Heckman, J.J. (1979) ‘Sample selection bias as a specification error’, Econometrica 47 (1): 153–162.

    Article  Google Scholar 

  • Hedlund, G. and Kverneland, A. (1985) ‘Are strategies for foreign markets changing? The case of Swedish investment in Japan’, International Studies of Management and Organization 15 (2): 41–59.

    Article  Google Scholar 

  • Hofstede, G. (1980) Culture's Consequences, Sage: Beverly Hills, CA.

    Google Scholar 

  • Hofstede, G., Neuijen, B., Ohayv, D. and Sanders, G. (1990) ‘Measuring organizational cultures: a qualitative and quantitative study across twenty cases’, Administrative Science Quarterly 35 (2): 286–316.

    Article  Google Scholar 

  • Hymer, S.H. (1960) The International Operations of National Firms: A Study of Direct Foreign Investment, MIT Press: Cambridge, MA.

    Google Scholar 

  • Hymer, S. (1968) ‘La Grande Firme Multinationale’, Revue Economique 14 (6): 949–973.

    Article  Google Scholar 

  • Johanson, J. and Vahlne, J.-E. (1977) ‘The internationalization process of the firm: a model of knowledge development and increasing foreign market commitments’, Journal of International Business Studies 8 (1): 23–32.

    Article  Google Scholar 

  • Johanson, J. and Vahlne, J.-E. (1990) ‘The mechanism of internationalization’, International Marketing Review 7 (4): 11–24.

    Article  Google Scholar 

  • Johanson, J. and Wiedersheim-Paul, F. (1975) ‘The internationalization of the firm: four Swedish cases’, Journal of Management Studies 12 (3): 305–322.

    Article  Google Scholar 

  • Jolly, V.K., Alahuta, M. and Jeannet, J.-P. (1992) ‘Challenging the incumbents: how high technology start-ups compete globally’, Journal of Strategic Change 1 (2): 71–82.

    Article  Google Scholar 

  • Kandasaami, S. (1998) ‘Internationalisation of small- and medium-sized born-global firms: a conceptual model’, Graduate School of Management, University of Western Australia.

  • Kandasaami, S. and Huang, X. (2000) ‘International marketing strategy of SMEs: a comparison of born-global vs non born-global firms in Australia’, Presented at the 45th International Conference on Small Business, Brisbane, Australia.

  • Knight, G.A. (1997) ‘Emerging Paradigm for International Marketing: The Born Global Firm’, Ph.D Thesis, Department of Marketing and Supply Chain Management, Michigan State University: Michigan.

  • Knight, G.A. and Cavusgil, S.T. (1996) ‘The Born Global Firm: A Challenge to Traditional Internationalization Theory’, in T.K. Madsen (ed.) Advances in International Marketing, Vol. 8, New York: JAI Press, pp: 11–26.

    Google Scholar 

  • Knight, G.A. and Cavusgil, S.T. (2004) ‘Innovation, organizational capabilities, and the born-global firm’, Journal of International Business Studies 35 (2): 124–141.

    Article  Google Scholar 

  • Kogut, B. and Singh, H. (1988) ‘The effect of national culture on the choice of entry mode’, Journal of International Business Studies 19 (3): 411–432.

    Article  Google Scholar 

  • Lummaa, H.J. (2002) ‘Internationalization behaviour of Finnish-born global companies, Unpublished Master's Thesis, Helsinki University of Technology.

  • Luo, Y. and Peng, M.W. (1999) ‘Learning to compete in a transition economy: experience, environment and performance’, Journal of International Business Studies 30 (2): 269–296.

    Article  Google Scholar 

  • Madsen, T.K. and Servais, P. (1997) ‘The internationalization of born globals: an evolutionary process?’ International Business Review 6 (6): 561–583.

    Article  Google Scholar 

  • Madsen, T.K., Rasmussen, E. and Servais, P. (2000) ‘Differences and similarities between born globals and other types of exporters’, in A. Yaprak and H. Tütek (eds.) Globalization, the Multinational Firm, Vol. 10, JAI Press: Amsterdam, pp: 247–265.

    Google Scholar 

  • McDougall, P.P., Shane, S. and Oviatt, B.M. (1994) ‘Explaining the formation of international new ventures: the limits of theories from international business research’, Journal of Business Venturing 9 (3): 469–487.

    Article  Google Scholar 

  • McKinsey and Co. (1993) Emerging Exporters: Australia's High Value-Added Manufacturing Exporters, McKinsey and Company and the Australian Manufacturing Council: Melbourne.

  • Melin, L. (1992) ‘Internationalization as a strategy process’, Strategic Management Journal 13 (Special Issue): 99–118.

    Article  Google Scholar 

  • Meyer, J. and Rowan, B. (1977) ‘Institutionalized organizations: formal structure as myth and ceremony’, American Journal of Sociology 83 (2): 340–363.

    Article  Google Scholar 

  • Mezias, S.J., Chen, Y.-R., Murphy, P., Biaggio, A., Chuawanlee, W., Hui, H., Okumura, T. and Starr, S. (2002) ‘National cultural distance as liability of foreignness: the issue of level of analysis’, Journal of International Management 8 (4): 407–421.

    Article  Google Scholar 

  • Morosini, P., Shane, S. and Singh, H. (1998) ‘National cultural distance and cross-border acquisition performance’, Journal of International Business Studies 29 (1): 137–158.

    Article  Google Scholar 

  • Neter, J., Wasserman, W. and Kutner, M.H. (1985) Applied Linear Statistical Models: Regression, Analysis of Variance and Experimental Design, Richard D Irwin: Homewood, IL.

    Google Scholar 

  • Ochs, E. and Schieffelin, B. (1984) ‘Language acquisition and socialization: three developmental stories and their implications’, in R. Shweder and R.A. LeVine (eds.) Culture Theory: Essays on Mind, Self, and Emotion, Cambridge University: New York, NY, pp: 276–320.

    Google Scholar 

  • Oviatt, B.M. and McDougall, P.P. (1994) ‘Toward a theory of international new ventures’, Journal of International Business Studies 25 (1): 45–64.

    Article  Google Scholar 

  • Park, S.H. and Ungson, G.R. (1997) ‘The effect of national culture, organizational complementarity and economic motivation on joint venture dissolution’, Academy of Management Journal 40 (2): 279–307.

    Article  Google Scholar 

  • Phan, P. (2004) ‘Entrepreneurship theory: possibilities and future directions’, Journal of Business Ventures 19 (5): 617–620.

    Article  Google Scholar 

  • Rennie, M.W. (1993) ‘Global competitiveness: born global’, McKinsey Quarterly 4: 45–52.

    Google Scholar 

  • Rialp, A., Rialp, J. and Knight, G. (2005) ‘The phenomenon of early internationalizing firms: what do we know after a decade (1993–2003) of scientific inquiry?’ International Business Review 14 (1): 147–166.

    Article  Google Scholar 

  • Saky-Addo, K. (2003) ‘US Socks made in Africa’, BBC News, [www document] http://news.bbc.co.uk/go/pr/fr/-/2/hi/africa/3143354.stm. (accessed 11 November 2005).

  • Schwartz, S.H. (1999) ‘A theory of cultural values and some implications for work’, Applied Psychology: An International Review: 48 (1): 23–47.

    Article  Google Scholar 

  • Shrader, R.C., Oviatt, B.M. and McDougall, P.P. (2000) ‘How new ventures exploit trade-offs among international risk factors: lessons for the accelerated internationalization of the 21st century’, Academy of Management Journal 43 (6): 1227–1247.

    Article  Google Scholar 

  • Silverstein, M. (2004) ‘“Cultural” concepts and the language-culture nexus’, Current Anthropology 45 (5): 621–652.

    Article  Google Scholar 

  • Stinchcombe, A.L. (1965) ‘Organizations and social structure’, in J.G. March (ed.) Handbook of Organizations, Chicago: Rand-McNally, pp: 148–150.

    Google Scholar 

  • Tihanyi, L., Griffith, D.A. and Russell, C.J. (2005) ‘The effect of cultural distance on entry mode choice, international diversification, and MNE performance: a meta-analysis’, Journal of International Business Studies 36 (2): 270–283.

    Article  Google Scholar 

  • Young, S. (1987) ‘Business strategy and the internationalization process: recent approaches’, Managerial and Decision Economics 8 (1): 31–40.

    Article  Google Scholar 

  • Zaheer, S. and Mosakowski, E. (1997) ‘The dynamics of the liability of foreignness: a global study of survival in financial services’, Strategic Management Journal 18 (6): 439–464.

    Article  Google Scholar 

  • Zahra, S.A. (1996) ‘Technology strategy and financial performance: Examining the moderating role of the firm's competitive environment’, Journal of Business Venturing 11 (3): 189–219.

    Article  Google Scholar 

  • Zahra, S.A. (2005) ‘A theory of international new ventures: a decade of research’, Journal of International Business Studies 36 (1): 20–28.

    Article  Google Scholar 

  • Zahra, S.A. and George, G. (2002) ‘International entrepreneurship: the current status of the field and future research agenda’, in M. Hitt, D. Ireland, D. Sexton and M. Camp (eds.) Strategic Entrepreneurship: Creating an Integrated Mindset, Strategic Management Series, Blackwell: Oxford, pp: 255–288.

    Google Scholar 

Download references

Acknowledgements

We are grateful for the invaluable research and computing support of the Lee Kong Chiang School of Business at Singapore Management University, as well as the methodological advice offered by Paul Vaaler at the University of Illinois at Urbana-Champaign. The excellent research assistance of Benjamin Jin-Ming Tan is graciously acknowledged. We acknowledge financial support from the John H. Broadbent Endowment for Research in Entrepreneurship in the Lally School of Management and Technology at Rensselaer Polytechnic Institute. Finally, we thank Henk W. Volberda and three very helpful anonymous reviewers, as well as participants at the Pre-conference Development Workshop of the Annual Conference for Corporate Strategy in 2006, for their invaluable advice and suggestions. Omissions and errors are our responsibilities alone.

Author information

Authors and Affiliations

  1. Lee Kong Chian School of Business, Singapore Management University, Singapore, Singapore

    Terence Fan

  2. Lally School of Management & Technology, Rensselaer Polytechnic Institute, Troy, USA

    Phillip Phan

Authors
  1. Terence Fan
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Phillip Phan
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Terence Fan.

Additional information

Accepted by Henk W Volberda, Guest Editor, 8 June 2007. This paper has been with the authors for three revisions.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Fan, T., Phan, P. International new ventures: revisiting the influences behind the ‘born-global’ firm. J Int Bus Stud 38, 1113–1131 (2007). https://doi.org/10.1057/palgrave.jibs.8400308

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/palgrave.jibs.8400308

Keywords

Search

Navigation