International Entrepreneurship Flashcards
What are the entry modes for entering foreign markets?
Small scale, non equity - exporting, licensing, franchising
Large scale, equity - joint venture, wholly owned subsidiary
What are the basic theoretical assumptions of the Uppsala Model of Internationalisation?
- Begin in home market
- Largest obstacle to internationalisation is lack of knowledge and resources
- Firms overcome this by incremental decision making and learning
- Start with small commitment non equity modes and increase over time
- Enter psychically close foreign markets first
How can the Uppsala model be applied in terms of entry modes?
1) Licensing
2) Export via agent or distributor
3) Export through own sales rep or subsidiary
4) Local packaging/assembly
5) FDI
What are real life examples of the Uppsala model?
Johnson and Johnson set up its first foreign subsidiary in Montreal in 1919, 33 years after its founding in 1886
Sony (1946) took 11 years to export its first product to the US
Gap (1969) opened its first overseas store in London in 1987
What is the story of Marco polo’s international expansion?
1949 - established in Brazil
1961 - exports to Uruguay
1964 - created its own export department
1990 - first FDI in Portugal
1992 - JV in Mexico
1997 - Acquisition in Argentina
2000 - Entered China via licensing
2005 - FDI in China
What are the criticisms of the Uppsala model?
- Not all firms follow this sequential model in terms of: levels of commitment and psychic distance
- They may engage several modes simultaneously
- Some firms follow lead firms e.g. services companies, suppliers
What is born global?
- Seeking superior business performance from founding
- Deriving significant competitive advantage from the use of resources and the sale of outputs in multiple countries from birth
- International origins
How do born global and traditional firms vary in terms of their average age of first export and % sales from overseas markets?
Average age of first export: 27 for traditional vs 2 for BG
% Overseas sales: 20% traditional, 76% BG (within 14 years)
What are some examples of Born Global firms?
Cochlear: hearing technology
Logitech
Skype
What are the different types of BG firms?
Export/import start up: few countries entered, few value-chain activities across countries
Geographically focused start-up: many value-chain activities, few value-chain activities across countries
Multinational trader:
many countries entered, few value-chain activities across countries
Global start-up:
many countries entered, many value-chain activities across countries
What are the drivers of BG firms?
- Globalisation: deregulation + economic liberalisation, homogeneity in tastes
- Small home markets: survival to internationalise
- Innovation: intangible knowledge capabilities, modern communication and transport infrastructure, technological competence, international entrepreneurial orientation
- Market knowledge: international, growth + proliferation of niche markets
- Ease of forming networks and alliances
What is the role of founders of BGs?
- Personal relationships and social capital
- Ability to recognise and exploit international opportunities
- Less risk averse and proactive
How do Governments Promote the Emergence of “Born Global” Firms?
- FTAs
- FDI policies: SEZs, subsidies
- IPRs
- Innovation hubs: resource linkages
- Capital market strengthening: financing schemes, venture capital provision
- Shaping entrepreneurial culture - awards
What is the European Institute of Innovation and Technology?
- 2008 EU initiative
- Principle of strength through diversity
- Supports pan-European partnerships between leading universities, research labs and companies
How do country institutions relate to born globals?
Regulatory - policies that provide support for new businesses
Cognition - knowledge and skills through education systems
Normative - celebration of innovative thinking
What are the developmental trends of BGs?
- Start in small countries - need bigger markets
- Initial scarcity of financial, human and tangible resources
- Flexibility to succeed in foreign markets due to newness and size
- Start by exporting or non equity entry modes
What are the different business strategies?
- Differentiation
- Cost leadership
- Focus
What are the distinctive features of BG strategy?
- Unique intangible knowledge to innovate and gain CA
- Distinctive product quality/customer service
- Minimum possible assets to delivery organisations outputs (asset parsimony)
- Proactive pursuit of global niches to get first mover advantage and niche leadership
- Network usage
What potential challenges to BGs face?
- Expropriation and opportunism - different governments, limited ownership of assets
- De-globalization: nationalism
- Disruptive innovation : Product obsolescence
What is an example of a technology hub (innovation hub) stimulating a BG?
Vevox - from Finnish tech hub scene, first ever phone-based polling tool, used on reality tv, mobile phone based polling
What is an example of BG acquisition?
Microsoftacquired Skypefor US$8.5 billion in 2011
Facebook bought WhatsApp for US$19 billion in 2014
Apple acquired Beats Audio for US$3 billion in 2014
Why sell your BG?
Cashing out: serial entrepreneur
Resources for upscaling: complementary capabilities
Protection: security from sharks, defending against disruptors
Avoidance of competition
What are born again global firms?
- Old firms that suddenly internationalised rapidly
- Internationalise within 2-5yrs of first international involvement
- Critical incidents incites change
Why the Emergence of “Born-again” Global Firms?
Change of ownership: change of priorities, takeover
Acquisitions: Inward technology transfers
and distribution rights, international connections
Client followership - Domestic client internationalises
