In My Humble Opinion
When Business Goes Global By Gary Knight
Thanks to technological advances and globalization, the world is changing — and so is the world of business. For the past 20 years, I’ve been researching a special breed of company: the “born global” firm. Springing up all over the world, these entrepreneurial endeavors break the traditional mold in that they begin doing international business at or near their founding. Historically, global commerce has been the domain of large multinational corporations. Although small- and medium-sized enterprises make up more than 90 percent of all companies, they have far fewer of the financial, human and tangible resources needed to venture abroad. Yet, despite such scarce resources, managers in born globals see the world as their marketplace. Often, the companies enter the foreign market within three years of being founded — and they may provide products or services to a dozen or more countries. Youth and smaller size provides flexibility, which helps them serve their foreign customers better. One such company is Lattice Semiconductor, based in Hillsboro, Oregon, which makes and sells high-performance programmable electronic components used in laptops, flat-panel televisions and similar products. Going global soon after its founding, Lattice today generates more than 60 percent of its sales in Asia and about 20 percent in Europe. Early internationalization was possible due to the superior quality of Lattice products, strong demand in foreign markets, management’s international orientation and network of relationships abroad, and the flexibility of being a young company. Like Lattice, many born globals are concentrated in high-tech industries. However, others exist in industries such as furniture, processed foods and machinery. Salem’s Kettle Foods, founded in 1978, was selling potato chips in Europe by the mid-1980s. Thousands of born globals operate in Europe and the United States. In the U.S., many are concentrated in cutting-edge industrial areas, such as California, Massachusetts, Washington and Oregon. In Europe, an estimated one-fifth of young enterprises are born global — and in Romania, Belgium and Denmark, they comprise up to 50 percent of young firms. Such companies also appear in large numbers in Australia, Canada, Japan and New Zealand, and they’re arising increasingly in emerging markets such as China, India and Brazil. Beyond the usual hazards involved in launching business ventures, such firms also face unique challenges. With their
limited resources, they can be more affected by the risks of international business, such as cross-cultural missteps, fluctuating exchange rates and political upheaval. Such problems are even worse in countries with substantial bureaucracy or government intervention. Simply launching global ventures is an ambitious undertaking. Young companies must find skilled personnel who understand international business; the capital to finance exports; information on foreign markets and business opportunities; and managerial time to deal with internationalization. To succeed, they need to acquire key competitive advantages as quickly as possible — distinctive, high quality products or services; networks of current or potential international customers; and superior international marketing skills, including personnel with language skills. To take advantage of the exciting career opportunities presented by such companies, Willamette students should develop skills in technology and in business areas including management, entrepreneurship, finance and marketing. Ideally, they’d learn one or two of the foreign languages especially useful for global commerce, such as Chinese (especially Mandarin), Spanish, French or Japanese. Plus, they should try to acquire awareness of global issues, do international travel or study abroad, or work overseas. Twice a year, the Atkinson Graduate School of Management takes students and alumni on trips to see international business in action — most recently to India and Japan, with future visits planned to Brazil and Germany. For MBA and other students, the widespread emergence of born globals is an optimistic, contemporary trend. The phenomenon is important because it implies that any company — regardless of its size, age or resource base — can participate actively in global commerce. In this way, the emergence of born globals is leveling the playing field in international business. It’s also significant in a different way. The internationalization of countless entrepreneurial firms contributes enormously to raising living standards around the world. By creating or supporting new industries, born global firms help create new, higher-wage jobs and boost national economic growth. The rise of such companies coincides with rising prosperity in emerging markets and developing economies. The kind of entrepreneurship represented by born global firms holds perhaps the best promise for raising billions of people out of poverty worldwide.
Gary Knight is professor of global management and Helen Simpson Jackson Chair in International Management at Willamette University. His research emphasizes born global firms, international strategy and emerging markets.
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FALL 2015