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”