International Entrepreneurship and International New Ventures
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Transcript of International Entrepreneurship and International New Ventures
International Entrepreneurshipand International New Ventures
Arild Aspelund, PhD
Senter for entreprenørskap – Truls Erikson
Outline
• A presentation of a traditional internationalization models– The Uppsala Model– The Innovation-Related Model
• Characteristics of International New Ventures– Or also frequently called Born Globals
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Traditional models of incremental internationalization
• Traditional models of internationalization view the internationalization process as a slow, incremental process where the firms spreads it activities like ‘rings in the water’
• Increased international commitment can be observed through three dimensions– Resource commitment– Market spread– Product sophistication
• Internationalization is initiated after domestic establishment
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The Uppsala Internationalization Model (1)
• The core of the Uppsala Internationalization Model is the ‘Experiential learning – Commitment’ interplay
• Experiential learning refers to the process of accumulating experiential market knowledge in foreign markets
State Aspects Change Aspects
Market Commitment
Market Knowledge
Commitment Decisions
Current Activities
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The Uppsala Internationalization Model (2)
• Other distinguishing features of the Uppsala Model comprise – The establishment chain– Psychic distance– Path dependency
• All in all these features results in a slow, incremental internationalization process of the firm
• The process is slow and incremental primarily due to the need of internalizing new knowledge from foreign markets before committing more resources for further expansion
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The Innovation-Related Internationalization Model (1)
• Looks upon the internationalization process as an innovation to the firm
• The reason for this rationale is that turning an established domestic organization into an international actor represents a challenging change process
• External network ties, organizational routines, capabilities and skills needs to be changed in order to meet the new demands of international customers
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The Innovation-Related Internationalization Model (2)
• The resulting internationalization process becomes a slow and gradual process due to the organization’s need to change routines, build new capabilities and internalize new resources
• The process is most often initiated by unsolicited orders from abroad and internationalization is seldom initiated from strategic intent
• The process is often directed by a ‘firm champion’; an internal entrepreneur that guides the firms towards its internationalization
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Some critique of the ‘stage models’
• Both models assume domestic maturation
• Both models also assumes internationalization as a strategic option
• The models might be criticized for being tautological
• They fail to explain the rapid and extensive internationalization of firms that has become the rule among Norwegian international firms
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Do these models seem to be good explanations of Norwegian international firms?
Share of Foreign Sales
Time to Internationalization
100%
Born Global40%*
Early International45%*
Late International12%*
Late Global2%*
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Differences in the Typology
• Demographics– Age– Size– Turn over
• Competitive profile• International activities
– Number of foreign markets– Market selection
• International Strategy– Niche orientation– Differentiation– Quality
T
% Born Global
Early International
Late International
Late Global
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Similarities in the Typology
• Demographics– Business sector– Location
• Entry modes– Export sales– Agents/distributors
• Performance!
T
% Born Global
Early International
Late International
Late Global
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Why Do They Internationalize?
• Born Globals – Need!– Pushed by need for growth– Also tempted by high demand
• Early Internationals and Late Internationals – Domestic factors– Reduce dependency– Excess capacity
• Extremely low score on governmental encouragement!
T
% Born Global
Early International
Late International
Late Global
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What Inhibits Further International Growth?
• Late Globals – Internal factors predominantly related to organizational inertia
• Late Internationals – Incremental internationalization, process slowed down by lack of experiential market knowledge
• Born Globals and Early Internationals – Rapid internationalization inhibited by various resource constraints. Especially in terms of human and financial capital
T
% Born Global
Early International
Late International
Late Global
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Theoretical Implications
• The distribution suggests that we need to take a step away from the slow, incremental models of internationalization
• It also suggests that different models might apply for firms in different clusters
• It also underlines the heterogeneity of internationalizing firms, which in turns suggests holistic models with idiosyncratic internationalization patterns
• Effects of newness also underlines problems related to resource gaps and strategic management in order to fill these
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Managerial Implications
• Early and rapid internationalization might not be an economic gold mine, but it might be necessary!
• Early internationalization is often advantageous in order to avoid painful internationalization processes at later stages
• In case of internationalization of established organizations, international spin-offs might be a good option
• Strategic planning and partnering through hybrid structures might be necessary in early stages, but do not give up your independence!
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Summary and Conclusions
• We have presented the traditional view of firm internationalization and it’s counterpart the INVs
• These firms differentiate themselves from traditional exporter in many ways and represents a challenge to existing internationalization theories
• Early internationalization have become the rule rather than the exception in many small and open economies
• It follows from this fact that the theoretical focus has shifted from models of “knowledge accumulation” to entrepreneurial models of “resource acquisition”