IBUS 412:Special Topic

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IBUS 412 Special Topic

• Special Topic
• Dynamic perspective on the globalisation of firms

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IBUS 412 Special Topic
Globalisation of Traditional SMEs
Principle Globalisation as rings in the water
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IBUS 412 Special Topic
Globalisation of born globals
Globalisation as global emergence
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IBUS 412 Special Topic
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IBUS 412 Special Topic
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IBUS 412 Special Topic
1st Lecture Born globals and international new
ventures Reading Knight, G.A./Cavusgil (1996)
The born global firm a challenge to
traditional internationalisation
theory Case Rindova, V.P./Kotha, S.
(2001) Continuous morphing competing through
dynamic capabilities, form, and function.
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IBUS 412 Special Topic

• Born global
• small, technology-oriented companies that
  operate in international markets from the
  earliest days of their establishment
  (Knight/Cavusgil 1996)
• International new venture (INV)
• business organisation that, from inception,
  seeks to derive significant competitive advantage
  from the use of resources and the sale of outputs
  in multiple countries (Oviatt/McDougall 1994)
• Born globals have existed for most time of
  economic globalisation.
• Examples East India Company, chartered in
  London 1600
• Ford Motor Company founded in 1903.
• ? Since the late 1980s their number has been
  continuously increasing.

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IBUS 412 Special Topic

• Challenge to traditional, incremental view of
  internationalisation based on
• ? gradual process of learning and resource
  commitment
• ? sequence of stages
• ? slow unfolding of international activities
• Weaknesses of the incremental view
• conceptually deterministic, blind spots, no
  market-, firm-specific characteristics
• empirically small empirical basis, leapfrogging
  of stages, international from inception

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IBUS 412 Special Topic
Characteristics of born globals         
Management views the world as its marketplace
from the outset of the firms founding unlike
traditional firms, they do not see foreign
markets as simple adjuncts to the domestic
market.         Born globals begin exporting
one or several products within two years of
their establishment and tend to export at least
a quarter of total production.         They
tend to be small manufacturers, with average
annual sales usually not exceeding 100 million.
        The majority of born globals is formed
by active entrepreneurs and tends to emerge as a
result of a significant breakthrough in some
process or technology.         They may apply
cutting edge technology to developing a unique
idea or to a new way of doing business.        
The products that born globals sell typically
involve substantial value adding the majority
of such products may be intended for industrial
uses
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IBUS 412 Special Topic

• Facilitating factors for the emergence of born
  globals
• advances in process technology and flexible
  production
• inherent advantages of SMEs
• increase in innovations of information and
  communication technologies
• decrease in global information, communication,
  and transport costs
• shrinking of global economic space. For
  information-based products it leads even to an
  economic space with zero-time distance.
• emerging network economy
• increasing homogenisation of many markets
• increasing numbers of business executives and
  entrepreneurs have been exposed to international
  business
• international financing opportunities are
  increasingly available
• human capital is more internationally mobile

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IBUS 412 Special Topic
Characteristics of successful global
start-ups           A global vision exists from
inception.         Managers are internationally
experienced.         Global entrepreneurs have
strong international business networks.        
Pre-emptive technology or marketing is
exploited.         A unique intangible asset is
present.         Product or service extensions
are closely linked. The organisation is
closely co-ordinated worldwide.
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IBUS 412 Special Topic

• Case study
• Organisation in stable environments
• Organisational inertia is efficient as it
  stabilises organisational practices and
  structures after their institutionalisation and
  diffusion
• Organisation in dynamic environment
• Organisational inertia inhibits change and
  adaptation
• Effectiveness and efficiency through dynamic
  capabilities, form, and function
• Continuous morphing

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IBUS 412 Special Topic

• Continuous morphing
• profound transformations
• significant and ongoing nature of changes in
• - the ranges of products and services offered
• - reconfigurations of resources, capabilities,
  and structures.

• focus on simultaneous understanding of changes
  in function (products) and form (structures,
  routines, resources, and capabilities)

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IBUS 412 Special Topic
Case studies Starting point emergence of
Internet search engines as a new organisational
form Firms Yahoo! (founded April 1994) Excite
(founded at the end of 1993) ? Both firms
closely matched as to starting conditions and
milestones of new venture development. Phases
in transformation 1. Search engines (providing
navigational tools) 2. Destination sites
(providing content) 3. Web portals (providing
broad based interactive services)
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IBUS 412 Special Topic
Phase 1 The emergence of search engines ?
Strategic thrust to compete through superior
search capability Yahoo! Surfer-based,
content-based directory, client focus Excite
Software-based focused computer-research,
technology focus ? Organisational
evolution Yahoo! Surfers as backbone (50),
conversion of founders knowledge into
OS Excite Focus on technological assets and
know-how Result Shifting base of competitive
advantage as the firms offer similar services and
the entry of new competitors erodes the
competitive advantage.
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IBUS 412 Special Topic
Phase 2 Morphing into destination sites ?
Strategic thrust to compete through image-based
differentiation Yahoo! Successful establishment
of Yahoo! as a consumer brand, cool
image Excite Brand-building strategy less
successful ? Strategic thrust to compete
through differentiated content Both firms
integrate content and branded properties by
topic and location, initiating numerous
partnerships ? Organisational
evolution Yahoo! Reconfiguring and leveraging
internal capabilities (marketing focus),
structural change (e.g. producer teams),
simple principles of partnering Excite External
focus in acquisition of new assets and
capabilities lay offs
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IBUS 412 Special Topic
Phase 3 Morphing into Portals ? Strategic
thrust for competing through interactive
services Both firms add new interactive services
and a full range of Web-based functions ?
Organisational evolution Yahoo! - acquisition
of firms with capabilities in the provision of
interactive services - intentional development
of acquisition and integration capability Excite
- addresses increasing complex demands by
searching for a merger partner - acquired by
_at_Home, loosing identity, competitive position,
profitability, and management staff
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IBUS 412 Special Topic

• Organisational mechanisms facilitating continuous
  morphing
• dynamic capabilities
• strategic flexibility
• Self-fuelling and recursive process of continuous
  morphing and regeneration of competitive
  advantage
• Migration into new strategic and competitive
  domains induces the regeneration of competitive
  advantages in these new domains.
• This change fuels the continuous morphing
  again.
• Resembles the general process of
  differentiation and integration in global
  competition.

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IBUS 412 Special Topic

• Organisational characteristics facilitating the
  development of dynamic capabilities
• decentralised structures (self-organisation)
• local autonomy
• learning routines
• Conclusions - Dynamic capabilities are emergent
  and evolving, resting on open- ended
  organising principles.
• - Dynamic capabilities depend on emergent
  learning processes and simple organising
  principles
• - Dynamic capabilities are supported by an
  evolutionary management orientation and
  leadership
• - Human and organisational assets (as compared
  to technological assets) are central in
  developing strategic flexibility