Born globals from emerging economies: Reconciling early exporting with theories of internationalization

Abstract

Research SummaryWhat explains born global firms who internationalize very early through exports, when theories of internationalization recommend they focus on domestic markets first? While prior research suggests a number of factors that enable exporting by new ventures, empirical tests of these theories have not evaluated if these factors uniquely explain new venture exporting. We propose and empirically test hypotheses that exporting by young (relative to established) emerging‐economy firms increases when they tap into the drivers of modern globalization (Internet technologies, global talent flows) and overcome home‐country institutional constraints (government inefficiencies, location), all of which have bigger impacts on exporting by young firms than established ones. Understanding these unique drivers of born global emerging‐economy firms is critical for reconciling this phenomenon with traditional theories of firm internationalization.Managerial SummaryOur research finds that exporting by young firms are enabled to a greater extent (than established firms) when they use Internet technologies and tap into mobile talent (such as cross‐national entrepreneurs and leaders with international experience), which helps to overcome key constraints in tapping into international markets. We also found that young firms overcome home‐country institutional and infrastructure deficiencies in emerging economies, specifically, by receiving efficient government services and strategically locating in well‐resourced centers such as capital cities, which helps them more in exporting as compared to established firms. Our findings help to explain the modern phenomenon of “born global” firms, who have broken away from the traditional path of focusing first on domestic markets and then engaging in incremental international expansion.A video abstract is available at https://youtu.be/QPIR0CRazgw.

How Does Managerial Experience Predict the Internationalization Type of a Young Firm?

“…Thus, entrepreneurial learning effects are specific, rather than general. This conclusion supports the findings of McCormick and Somaya [29] according to whom for young firms, managers' prior international experience is especially important as they have not had time to learn from their own activities. However, compared to their study that only used two indicators for measuring experienceexperience from exporting and experience from managing a foreign firmthis study selected a considerably wider variety of experience measures.…”

“…From these, "experience, knowledge, expertise are valuable, rare, inimitable and nonsubstitutable resources" [27, p. 351] that can affect firms' internationalization favorably [28]. Managers' and founders' prior experience from international operations is especially important for young firms as they have not had time to learn from their own activities [29]. Lack of experience can cause considerable uncertainty during firms' initial foreign market entries [30].…”

Female entrepreneurship in emerging markets: challenges of running a business in turbulent contexts and times

“…Emerging market companies are evolving as relevant global players, often growing faster than their counterparts in developed countries (BCG, 2016). Nevertheless, there are still many unresolved issues concerning these EMFs, especially regarding international entrepreneurship (McCormick and Somaya, 2020). EM research has focused mainly on Asian firms (China especially), with little research focusing on Latin American or MENA region countries (Cuervo-Cazurra, 2016; Hatem, 2012).…”

Incidence of cultural, economic, and environmental factors in the emergence of born‐global companies in Latin America

“…Consequently, policies that advance and align with the intentions and aspirations of entrepreneurs concerning their international involvement from their company's birth must be designed. The appearance of BG companies in emerging economies is associated with the efficiency of government services (McCormick & Somaya, 2020). Therefore, given the evidence that institutions affect the environment and economic growth (Aparicio et al, 2016;Bjørnskov & Foss, 2013;Nissan et al, 2011), policymakers should improve policy interventions to provide the breeding ground for the creation of new international companies through structural reforms that address aspects such as deregulation, improvement of the level of education, liberalization, adequate protection of intellectual property, access to credit, better functioning risk capital markets or improved openness, export promotion programs, and licensing (Aidis, Estrin, & Mickiewicz, 2012;Díaz Casero et al, 2013;Fuentelsaz et al, 2015;Fuentelsaz, González, & Maicas, 2019;Ribeiro, Figueiredo, & Forte, 2020;Stenholm et al, 2013).…”