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sivmarina-karlsen

sivmarina-karlsen

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Published by: Asif Shaikh on Jun 20, 2011
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The Pace of Internationalization of SMEs – BornGlobal vs. Gradual Global 
Work in Progress
Siv Marina Karlsen
PhD-candidateDepartment of MarketingNorwegian School of Management BIElias Smiths vei 15, Box 580N-1302 SANDVIKA, NORWAYPhone + 47 67 55 73 43Fax + 47 67 55 76 76E-mail:siv.marina.karlsen@bi.no
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Abstract
 The objective of this study was to describe the process ointernationalization of SMEs and to explore/explain why some becomemore gradual global and some are born global. This is due to the factthat increasing evidence shows that in spite of small size andinexperience in international transactions, high value-addingmanufacturing firms are capable of outperforming their larger, moreresourceful counterparts in foreign markets. The aim was to get moreknowledge about this new type of firm – what characterizes Born Globalsand the internationalization process?
Introduction
Background 
 The objective of this study is to describe the process ointernationalization of SMEs and to explore/explain why some becomemore gradual global and some are born global. Empirical evidence frommany countries support the notion that firms often internationalize like“rings in the water”; their market knowledge increases gradually andhence uncertainty as well as risk is reduced over time for each countrymarket. However, in 1988 Johanson & Mattson pointed out that somefirms follow other internationalization patterns. They argued that thedegree of internationalization of markets (i.e. the frequency, intensity,and integration of relationships across borders in the particular industrymarket) has an impact on the internationalization process of theindividual firm. In highly internationalized markets, firms may leapfrogsome of the stages or rings in the water. More recently many authors,(f.ex. Oviatt & McDougall, 1994; Knight & Cavusgil, 1996; Madsen et al,1999), have found empirical evidence of yet another type of exportersoften labeled “born globals” (BGs), which aim at the internationalmarkets or even the global market right from their birth and do notseem to follow any kind of stages e.g. they go beyond leapfrogging.
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Knight & Cavusgil (1996) believe that the slowness of the processdescribed in traditional internationalization literature, may be anindication of management’s aversion to risk-taking and their inability toacquire relevant knowledge and information. The fact that the processseems to be speeded up now, may partly be explained by the so calledborn globals’ management being less risk-averse and/or they havingeasier access to relevant information. The environment has changed alot since the “traditional internationalization theories” were developedf.i. the increased level of globalization in many industries, may make outpart of an explanation for the observed increase in pace ointernationalization of firms. This increased globalization, which isbelieved to lead people to perceive the world as smaller, may thus alsomake the manager perceive the risk of entering foreign markets, assmaller. One driver of globalization is believed to be the development of advanced communication technology i.e. an industry described ashaving high degree of globalization will by definition be characterized byhaving information transferred easily and faster than in industries lessglobalized. This increased access to information may decrease thepsychic distance between countries, which have previously been seen asa major obstacle for international expansion of firms (e.g. Johanson &Vahlne, 1977).Oviatt & McDougall (1994) state that recent technological innovationand the presence of increasing numbers of people with internationalbusiness experience have established new foundations for MNEs. Traditionally these were developed from large, mature, domestic firms,but the facile use of low-cost communication technology andtransportation means that the ability to discover and take advantage of business opportunities in multiple countries is not the preserve of large,mature corporations anymore. Crick & Jones (2000) for instance, foundthat several firms were set up by managers with experience, operatingin international markets from previous firms in which they wereemployed. Thus, they have got experience in dealing with the
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