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International New Ventures: Revisiting the Influences Behind the ‘Born-Global’ Firm

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International Entrepreneurship

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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.

Journal of International Business Studies (2007) 38, 1113–1131. https://doi.org/10.1057/palgrave.jibs.8400308

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Notes

  1. 1.

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

  2. 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. 3.

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

  4. 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. 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. 6.

    Haveman (1993) e stimated 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. 7.

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

  8. 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. 9.

    A class of regional carrier exists in the EU with close operational and often financial ties to traditional flagcarriers (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. 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. 11.

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

  12. 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. 13.

    Some, includin g Hofstede, Neuijen, Ohayv, and Sanders (1990) an d Mezias et al. (2002), suggest that culture at the national and organizational levels are different constructs entirely.

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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.

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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, MI, USA

    Phillip Phan

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  1. Terence Fan
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Editors and Affiliations

  1. Rotman School of Management, University of Toronto, Toronto, ON, Canada

    A. Rebecca Reuber

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

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Fan, T., Phan, P. (2018). International New Ventures: Revisiting the Influences Behind the ‘Born-Global’ Firm. In: Reuber, A. (eds) International Entrepreneurship. JIBS Special Collections. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-74228-1_5

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