Reprint: Innovation, Organizational Capabilities, and the Born-global Firm

Abstract

We investigate born-global firms as early adopters of internationalization—that is, companies that expand into foreign markets and exhibit international business prowess and superior performance, from or near their founding. Our explication highlights the critical role of innovative culture, as well as knowledge and capabilities, in this unique breed of international, entrepreneurial firm. Case studies are analyzed to better understand the early internationalization phenomenon and reveal key orientations and strategies that engender international success among these innovative firms. Case findings are then validated in a survey-based study. Despite the scarce resources typical of young firms, our findings reveal that born-global firms leverage a distinctive mix of orientations and strategies that allow them to succeed in diverse international markets. Findings have important implications for the internationalization of contemporary firms.

Knight, G., Cavusgil, S. Innovation, organizational capabilities, and the born-global firm. J Int Bus Stud 35, 124–141 (2004). https://doi.org/10.1057/palgrave.jibs.8400071

Appendix: Measurement scales

Construct (composite reliability, CR_η)

Item (standardized coefficient loading from CFA analyses in LISREL8)

(Source)

International Entrepreneurial Orientation (CR_η = 0.80)

Top management tends to see the world, instead of just the USA, as our firm’s marketplace (0.92)

The prevailing organizational culture at our firm (management’s collective value system) is conducive to active exploration of new business opportunities abroad (0.89)

Management continuously communicates its mission to succeed in international markets to firm employees (0.95)

Management develops human and other resources for achieving our goals in international markets (0.89)

Our top management is experienced in international business (0.73)

Over the past 5 years, our firm has marketed very many products in foreign markets*

In international markets, our top managers have a proclivity for high-risk projects (with chances for high returns)*

When confronted with international decision-making situations, we typically adopt a cautious, ‘wait-and-see’ posture in order to minimize the chance of making costly mistakes^#*

Management communicates information throughout the firm with respect to about our successful and unsuccessful customer experiences abroad*

Management believes that, owing to the nature of the international business environment, it is best to explore it gradually via conservative, incremental steps^#*

Top management is willing to go to great lengths to make our products succeed in foreign markets*

Vision and drive of top management are important in our decision to enter foreign markets*

(Covin and Slevin 1989; Khandwalla 1977; Miller and Friesen 1984)

International Marketing Orientation (CR_η = 0.85)

(In international markets, own firm rating relative to main competitors; 1 = much worse than main competitors; 7 = much better than main competitors)

Knowledge of customers and competitors (0.80)

Marketing planning process (0.82)

Development or adaptation of the product (0.68)

Effectiveness of pricing (0.62)

Advertising effectiveness (0.70)

Effectiveness of distribution (0.77)

Image of your firm (0.88)

Locations of sales outlets*

Ability to work well with distributors*

Ability to respond quickly to developing opportunities*

Skill to target and segment individual markets*

Ability to use marketing tools (product design, pricing, advertising, etc.) to differentiate this product (0.81)

Control and evaluation of marketing activities (0.80)

(Adapted from McKee et al. 1992)

Global Technological Competence (CR_η = 0.72)

Our firm is at the leading technological edge of our industry in this market (0.75)

We invented a lot of the technology imbedded in this product (0.94)

Compared with local competitors, we’re often first to introduce product innovations or new operating approaches (0.91)

We are recognized in our main export market for products that are technologically superior*

Our firm is highly regarded for its technical expertise among our channel members in this market*

In the design and manufacture of this product, we employ some of the most skilled specialists in the industry*

Unique Products Development (CR_η = 0.78)

Our primary export product caters to a specialized need that is difficult for our competitors to match (0.88)

In our industry, this product represents a new, innovative approach to addressing the customer’s basic need (0.85)

Compared with our main competitors’ offerings, this product is unique with respect to design (0.81)

Compared with our main competitors’ offerings, this product is unique with respect to technology (0.97)

Compared with our main competitors’ offerings, this product is unique with respect to performance (0.75)

(Miller 1988; Porter 1980; Roth and Morrison 1992)

Quality Focus (CR_η = 0.72)

Emphasizing quality customer service is important to our firm’s strategy in this market (0.46)

Emphasizing product quality is important to our firm’s strategy in this market (0.41)

For us, success in this market is driven by truly satisfying the needs of our customers there (0.59)

The performance of this product truly meets the expectations of customers in this market (0.53)

The service and support provided with this product truly meet the expectations of customers in this market (0.79)

(Buzzell and Gale 1987)

Leveraging Foreign Distributor Competences (CR_η = 0.92)

(Extent to which foreign distributor meets expectations with respect to the following; 1 = falls very short of expectations; 7 = meets expectations very well)

Setting local prices (0.78)

Local selling (0.93)

Local advertising (0.98)

After-sales service (0.89)

Collecting local market information (0.72)

Liaison with local government (0.79)

Cultivating new business/expansion (0.81)

Product modification (if any)*

Arranging international shipping*

Arranging local shipping*

Local public relations*

Customer technical support/training*

Translation of sales literature, usage instructions, or labels*

(Adapted from McKee et al. 1992; Daniels and Radebaugh 1998)

Performance in International Markets (CR_η = 0.86)

(1 = very unsatisfied; 7 = very satisfied)

Relative to prior expectations, how satisfied have you been over past 3 years with product’s performance regarding:

Market share in this market (0.87)

Sales growth in this market (0.85)

Pre-tax profitability in this market (0.97)

Compared with your main competitor(s), sales growth of this product in its main export market has been: substantially lower 1 2 3 4 5 6 7 substantially higher (0.78)

On a scale from 1 to 10, how would you rate the success of this product in its main export-market over the past 3 years? unsuccessful 1.10 successful (0.92)

Gaining new knowledge/technology in this market*

Compared with your domestic business, the total return on your investment (ROI) of this product in its main export market has been… substantially lower 1 2 3 4 5 6 7 substantially higher*

(Adapted from Cavusgil and Zou 1994)

Notes

Except as noted, a seven-point ordinal scale was used where 1 = not at all and 7 = to an extreme extent.

All standardized coefficient loadings are significant at p<0.01.

*Indicates item that was dropped in the scale purification process.

# Indicates reverse-polarity item.