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Sequencing the expansion of geographic scope and foreign operations by “born global” firms

Journal of International Business Studies volume 42, pages 995–1015 (2011)Cite this article

Abstract

“Born global” firms are not actually “born” global, but rather internationalize rapidly from their inception by expanding their geographic scope and extent of foreign operations. However, it remains unclear whether such firms: (1) simultaneously expand along both dimensions; (2) focus on expanding along a single dimension at a given time, and switch interchangeably between expanding geographic scope and extent of foreign operations in subsequent periods; or (3) stick solely to a specific internationalization path over several subsequent periods. This study theorizes and empirically demonstrates that born global firms stick to a dominant internationalization path over subsequent periods. Arguably, this phenomenon reflects managerial efforts to reduce the perceived risk of internationalization, and their preference to develop and leverage capabilities that are specific to either of the internationalization paths until the economies of further expanding this path are exhausted.

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Figure 1

Notes

  1. Alternative definitions often used in the literature are: entry mode, operation mode or business mode.

  2. Take, for example, the capability to deal with regulatory authorities, which is important both in foreign market entry and in the expansion of operations in an existing foreign country.

  3. Relaxation of this constraint by the recruitment of additional managers is often ineffective, owing to the time and attention that new managers require from current managers until they become effectively embedded in existing firm-specific routines (Penrose, 1959; Tan & Mahoney, 2005).

  4. To clarify this point, increasing returns in capability development imply that if a born global firm is able to reach a (conceptual) level of, say, ten when developing a single capability, it is expected to reach a level that is lower than five (for each capability) when developing two sets of distinct capabilities at once.

  5. This figure is consistent with extant literature that usually refers to “short-term” changes as changes occurring within a period of up to 6 years (Chatterjee & Wernerfelt, 1991; Kumar, 2009; Silverman, 1999).

  6. While formally this definition implies that several different subsidiaries may each be in charge of a specific value chain activity in a given country, in the current sample multiple value chain activities were always executed within a single subsidiary. This is probably the outcome of the relatively small size of the sampled firms (see Table 1).

  7. There were not enough observations in the dataset to allow longer lags.

  8. This result is consistent for the required conditions for using true change measures, as discussed in Bergh and Fairbank (2002).

  9. The firms were split according to median sales in 2006 (end of the last period) in order to avoid a situation in which firm-period observations of the same firm would be split between the two subsamples.

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Acknowledgements

I thank Christian Asmussen, Peter Buckley, Ohad Ref, Robert Salomon and Lawrence Welch for their insights and comments. The paper has benefited greatly from the comments and suggestions made by JIBS Area Editor Ulf Andersson and three anonymous JIBS reviewers.

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  1. Jerusalem School of Business Administration, The Hebrew University, Jerusalem, Israel

    Niron Hashai

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Correspondence to Niron Hashai.

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Accepted by Ulf Andersson, Area Editor, 6 July 2011. This paper has been with the author for four revisions.

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Hashai, N. Sequencing the expansion of geographic scope and foreign operations by “born global” firms. J Int Bus Stud 42, 995–1015 (2011). https://doi.org/10.1057/jibs.2011.31

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Keywords

  • born global
  • internationalization
  • foreign operations
  • geographic scope
  • foreign experience
  • technological intensity