Start-up patterns of internationalization: A framework and its application in the context of knowledge-intensive SMEs

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Summary

The already well-documented emergence of born globals, or international new ventures, has created a demand for new approaches to internationalization. The main models challenging the ‘traditional’ process identified in the literature are the born-global and ‘born-again’ global internationalization patterns, which differ in terms of pace and degree of internationalization with regard to antecedents and firm characteristics, respectively. In contributing to this discussion we are especially focusing on the early phases of firms’ internationalization, i.e. start up patterns of internationalization. We take a close look at the three start-up patterns available to knowledge intensive SMEs and provide a framework to analyze these patterns and their outcomes. The framework is tested with results from a research project focusing on the start-up patterns and outcomes of internationalization of 78 Finnish SMEs.

Highlights

► We provide a framework to study born globals and other internationally active SMEs. ► We contribute to the discussion what happens after initial internationalization. ► We explain possible outcomes for being so-called born global firm. ► We utilize the sample of 78 knowledge-intensive SMEs to test the framework. ► We suggest that ‘true born-globals’ are more likely to sustain their global position.

Introduction

The internationalization patterns of small and specialized knowledge-intensive firms are often different from those of larger companies operating in more mature service or manufacturing industries. Indeed, over the past decade, several studies have questioned the traditional internationalization models (for incremental models see e.g., Johanson & Vahlne, 1977), which have mostly focused on large multinational corporations (MNCs; on critiques, see e.g., Coviello and Munro, 1995, Knight, 1997, Knight and Cavusgil, 2004, McDougall et al., 1994, Moen and Servais, 2002). The already well-documented emergence of born globals (BGs), or international new ventures (INVs) – there are various names for firms aiming at international markets straight from their foundation – has created a demand for new approaches to internationalization: consequently, even the research stream labeled as ‘international entrepreneurship’ has emerged (cf. e.g., Zahra & George, 2002).

Based on our analysis of the extant research it seems that small knowledge-intensive firms vary widely in their international patterns (see e.g., Jones, 1999), and it appears that the main models challenging the ‘traditional’ internationalization route identified in the literature are those describing the BG (see e.g., Knight and Cavusgil, 2004, Rennie, 1993) and the ‘born-again’ global (BAG) patterns (see Bell et al., 2001, Bell et al., 2003). In contributing to this discussion we are especially focusing on the early phases of firms’ internationalization, i.e. start up patterns of internationalization. We take a close look at the three start-up patterns available to knowledge-intensive SMEs and provide a structure to analyze these patterns. We highlight the importance of conducting longitudinal studies – our aim is to find out ‘what happens after the first steps have been taken in the internationalization process’. There is a scarcity of empirical research on whether accelerated internationalization does, in fact, lead to long-term survival, success and/or growth. Zahra and George (2002), for example, in their review focusing on international entrepreneurship, posed this question in arguing that only a few studies had focused on it. The few studies that have been conducted report findings that are contradictory or ambiguous: for example, the results of a survey on US ventures conducted by Bloodgood, Sapienza, and Almeida (1996) do not prove that rapid internationalization leads to better performance, but they do not prove the converse either.

Our study is both conceptual and exploratory in nature; our aim is to provide propositions and a framework (a typology or a model) for further investigation of the internationalization patterns and differences in the outcomes of various start-up patterns of internationalization, as well as to contribute to the discussion on whether it is worthwhile for SMEs to choose a BG or a BAG pattern by presenting an empirical example of these internationalization start-up patterns. Here we do not focus on the actual financial outcomes but on some of the more general effects of internationalization: does a firm that originally embarked upon a course of rapid internationalization still exist, or has it withdrawn from international markets, or is it still operating in many foreign countries? And what is the role of originally chosen internationalization pattern in this?

The article continues with a brief introduction of the dimensions and indicators that could be used to differentiate the three main internationalization patterns, following which the conceptual model of internationalizing SMEs is presented. The aim of the model is to clarify diversity surrounding the phenomenon of rapid internationalization. In support of our call for longitudinal studies we use a sample of knowledge-intensive SMEs to illustrate potential development paths after initial internationalization. More specifically, we take a closer look at the results from the research project focusing on the long-term development of 78 Finnish SMEs from the domain of information and communication technology (ICT) and study their development using two points in time. The role of this empirical part is mainly descriptive; our specific aim is to provide a framework for further study in this field. We also test the robustness of the presented framework with a cluster analysis, however. The article ends with our conclusions and a discussion of future research possibilities.

Section snippets

The development of the conceptual framework

Internationalization can be defined as “the process of adapting firms’ operations (strategy, structure, resource, etc.) to international environments” (e.g., Calof & Beamish, 1995, p. 116). In the literature there are various terms with which entrepreneurial firms’ and/or SMEs’ internationalization process is described. For example, Bell et al. (2003) use various terms such as “patterns”, “pathways” and “trajectories” to describe internationalization behavior of small firms. Although these

Sample and data collection

Research on BGs concentrates heavily on small and medium-sized knowledge- or technology-based firms (cf. e.g., Bell et al., 2003, Rennie, 1993). The development of information and communications technologies has enabled the foundation and subsequent internationalization of a host of knowledge-intensive SMEs, many of which, it can be assumed are actually BG firms. Hence, to be able to draw some comparisons, the population of interest was defined as small and medium-sized (less than 500

Discussion and conclusions

The question of what internationalization framework is best suited to describing and predicting the growth, development and even survival of certain types of knowledge-intensive SMEs in the early phases of internationalization has not been studied comprehensively. From the above analysis it could be concluded that there are many and various possible international patterns for knowledge-intensive firms.

One of the main problems on which this paper was based is that there have been no strict

OLLI KUIVALAINEN, D.Sc. (Econ.) is professor in international marketing at School of Business at Lappeenranta University of Technology, Finland. His research interests are in the areas of international entrepreneurship, and strategic management, marketing and internationalization of knowledge-intensive firms, the focus especially being on firms operating in the domains of media and information and communication technologies. He has published articles in Journal of World Business, Journal of

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    OLLI KUIVALAINEN, D.Sc. (Econ.) is professor in international marketing at School of Business at Lappeenranta University of Technology, Finland. His research interests are in the areas of international entrepreneurship, and strategic management, marketing and internationalization of knowledge-intensive firms, the focus especially being on firms operating in the domains of media and information and communication technologies. He has published articles in Journal of World Business, Journal of International Marketing, Technovation, International Journal of Production Economics and Journal of International Entrepreneurship, among others.

    SAMI SAARENKETO, D.Sc. (Econ.), is professor in international marketing and vice dean at the School of Business at Lappeenranta University of Technology, Finland. His primary areas of research interest are internationalization, international marketing and entrepreneurship in knowledge-intensive small firms. He has published on these issues in e.g. Journal of World Business, International Business Review, European Journal of Marketing, Technovation, International Journal of Production Economics and Journal of International Entrepreneurship.

    KAISU PUUMALAINEN, D.Sc. (Tech.), is professor in technology research at School of Business at Lappeenranta University of Technology, Finland. Her primary areas of research interest are innovation, international marketing, and small business. She has published on these issues in International Journal of Research in Marketing, Journal of the Academy of Marketing Science, Journal of Business Research, European Journal of Marketing, R&D Management, Technological Forecasting and Social Change, Journal of International Entrepreneurship and International Journal of Production Economics, among others.

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